I'm so impressed I want to pay you less(buffered.io)
buffered.io
I'm so impressed I want to pay you less
http://buffered.io/2010/03/02/im-so-impressed-i-want-to-pay-you-less/
11 comments
Job security is a myth. You can get fired/laid off at any time, whether you're full time or not. In a few states they don't even need a reason to get rid of you (at-will employment).
I have seen this happen at least twice in the last 5 years. Company runs out of money, a bunch of people get cut. I've seen pretty high level people cut for political reasons. Of course, officially they would never admit that, but they don't need to. As a full time employee you might get a severance package, if the company doesn't feel like dealing with you, but it's completely optional. The only real advantage of being full time is COBRA when you get laid off. Still, it's not worth the salary difference.
I completely agree with the author of the article, being a contractor is totally worth it. I'm in a position right now where my contract is running out, and the company offered me a full time position. I will not take it. I'd rather be unemployed (and motivated to find a better deal) than working for less. Never take a pay cut. Always ask for promotions. (That's if you want your salary to grow consistently).
A word of advice to contractors: DO NOT fall for the daily rate. Hourly is the only fair game. Everything else will land you long unpaid hours. I absolutely love my hourly rate, and if you can get increased overtime rate, even better.
I have seen this happen at least twice in the last 5 years. Company runs out of money, a bunch of people get cut. I've seen pretty high level people cut for political reasons. Of course, officially they would never admit that, but they don't need to. As a full time employee you might get a severance package, if the company doesn't feel like dealing with you, but it's completely optional. The only real advantage of being full time is COBRA when you get laid off. Still, it's not worth the salary difference.
I completely agree with the author of the article, being a contractor is totally worth it. I'm in a position right now where my contract is running out, and the company offered me a full time position. I will not take it. I'd rather be unemployed (and motivated to find a better deal) than working for less. Never take a pay cut. Always ask for promotions. (That's if you want your salary to grow consistently).
A word of advice to contractors: DO NOT fall for the daily rate. Hourly is the only fair game. Everything else will land you long unpaid hours. I absolutely love my hourly rate, and if you can get increased overtime rate, even better.
Assuming of course that you live in the US. In the UK it's relatively difficult to get rid of people - sacking is very difficult and likely to end up in court (you need a bulletproof reason for doing it) and the redundancy process is quite complex (with guaranteed payments if you've been there more than 2 years, etc).
Looks like the blog article was written by an Australian - their level of job security falls somewhere between the UK and the US.
EDIT: Also, I believe, in the UK you can't make permanent staff redundant if you've got temporary staff - so the contractors are first out of the door.
Looks like the blog article was written by an Australian - their level of job security falls somewhere between the UK and the US.
EDIT: Also, I believe, in the UK you can't make permanent staff redundant if you've got temporary staff - so the contractors are first out of the door.
Correct mate, I am an Australian. I would say that our job security level is closer to that of the USA than the UK, but I don't think it's exactly the same.
On the whole I've seen way too many good people let go from permy positions while other plebs are retained. In same cases there doesn't appear to be any rhyme or reason to who gets culled and when. To me that's a real sign that the "important" differences between permy and contractor are well in favour of the latter.
Cheers!
On the whole I've seen way too many good people let go from permy positions while other plebs are retained. In same cases there doesn't appear to be any rhyme or reason to who gets culled and when. To me that's a real sign that the "important" differences between permy and contractor are well in favour of the latter.
Cheers!
Actually, the Australian redundancy route is closer to the UK than to the US (we usually have 4 week notice period etc etc).
But Australia has such low unemployment at the moment that it doesn't really matter - forced redundancies are pretty uncommon at the moment.
I agree about the contractor thing regardless though - the difference in rates make permanent employment a pretty hard sell.
(I'm Australian if it matters)
But Australia has such low unemployment at the moment that it doesn't really matter - forced redundancies are pretty uncommon at the moment.
I agree about the contractor thing regardless though - the difference in rates make permanent employment a pretty hard sell.
(I'm Australian if it matters)
Conditions aren't the important bit imho mate. The important bit is that you can still be got rid of fairly easily (unless you work in the public service, which seems almost impossible to be fired from). In that regard we are quite diff to the UK and more like the USA.
Forced redundancies are indeed uncommon at the moment, but I think that'll change. They weren't too uncommon just a few short years ago either.
Forced redundancies are indeed uncommon at the moment, but I think that'll change. They weren't too uncommon just a few short years ago either.
Yeah, but an employee might get 'laid off' (and have to look for a new job) at most, say once every 3 years. It's possible it could be more often, but over the course of your career the average probably doesn't exceed once every 3 years (unless you're particularly poor).
A contractor, on the other hand, has to look for new work every few months, at least.
If I hate looking for new work, then being an employee might make sense.
A contractor, on the other hand, has to look for new work every few months, at least.
If I hate looking for new work, then being an employee might make sense.
The contracts I usually see are at least 6 months, and I've never, ever seen a case where it wasn't extended (not just for me, but for anyone I've worked with - including some "programmers" who simply couldn't program).
The few shorter contracts that are around pay have to pay extra to make it worthwhile - I've seen a few 3 month contracts that pay around 25% more.
Funny story: there is a large government department here that was famous for hiring people on 3 month contracts, but keeping the people there for years. It turned out that the reason for this was that the expense for a contractor for 3 months was around $50,000 (including agent fees and the 25% loading for a short term contract), and $50,000 was the limit for that the department managers could sign off on without going through a long, expensive procurement process.
The few shorter contracts that are around pay have to pay extra to make it worthwhile - I've seen a few 3 month contracts that pay around 25% more.
Funny story: there is a large government department here that was famous for hiring people on 3 month contracts, but keeping the people there for years. It turned out that the reason for this was that the expense for a contractor for 3 months was around $50,000 (including agent fees and the 25% loading for a short term contract), and $50,000 was the limit for that the department managers could sign off on without going through a long, expensive procurement process.
My last two contracts were 1 year and 1½ years. There are short term contracts out there, and they usually pay much more per hour, so I'd actually prefer them. Most companies want you for at least 6 months.
It takes getting used to, but at least I don't have that terrible feeling of being afraid to lose my job. Many people are scared into being "loyal", and it really costs them.
Consider how much your average raise as a full time employee is. I'd say most people get 5%/yr if they are lucky.
By going from contract to contract, my salary grows much faster than that. I'd say 30%/yr for the last few years (on average).
It takes getting used to, but at least I don't have that terrible feeling of being afraid to lose my job. Many people are scared into being "loyal", and it really costs them.
Consider how much your average raise as a full time employee is. I'd say most people get 5%/yr if they are lucky.
By going from contract to contract, my salary grows much faster than that. I'd say 30%/yr for the last few years (on average).
You can get fired/laid off at will, but it's usually for a reason (poor performance of the employee or the company), and people think twice before doing it. Whereas terminating contractors is a matter of course and is no more an event than buying a printer for the office.
COBRA's not the only advantage of employment. Unemployment, too.
Contractors generally aren't eligible. Laid off employees are.
Contractors generally aren't eligible. Laid off employees are.
Job security is a myth, sure. But that doesn't mean that contracting carries the same risk; the risk is greater.
Meanwhile, as an FTE, you get vacation time, sick days, bonuses, and company purchasing perks. You get a much better insurance coverage than you can afford to get privately.
* As a full time employee you might get a severance package, if the company doesn't feel like dealing with you, but it's completely optional.*
I've been around for quite a few years now and have never once heard of a company not offering at least a month's severance. Technically, sure, it's optional, but it's also insurance: they don't have to worry as much about you suing them if they pay you a little on the way out.
* I'd rather be unemployed (and motivated to find a better deal) than working for less.*
That's your choice, but I have to wonder about your math. What are you paying for health benefits, and what would they be as an FTE -- and how much better would they be? I bet it would make up the difference. What about paid vacation? Sick days? Holidays? You get jack-squat for those as a contractor.
Meanwhile, as an FTE, you get vacation time, sick days, bonuses, and company purchasing perks. You get a much better insurance coverage than you can afford to get privately.
* As a full time employee you might get a severance package, if the company doesn't feel like dealing with you, but it's completely optional.*
I've been around for quite a few years now and have never once heard of a company not offering at least a month's severance. Technically, sure, it's optional, but it's also insurance: they don't have to worry as much about you suing them if they pay you a little on the way out.
* I'd rather be unemployed (and motivated to find a better deal) than working for less.*
That's your choice, but I have to wonder about your math. What are you paying for health benefits, and what would they be as an FTE -- and how much better would they be? I bet it would make up the difference. What about paid vacation? Sick days? Holidays? You get jack-squat for those as a contractor.
Note that the author is Australian, and health insurance works very differently.
We have a public system, but many people choose to buy private insurance as well. Depending on the level of private insurance you can pay anything from $2000-$10000/year (for one person).
It's very rare for a company to pay for a person's insurance, though.
We have a public system, but many people choose to buy private insurance as well. Depending on the level of private insurance you can pay anything from $2000-$10000/year (for one person).
It's very rare for a company to pay for a person's insurance, though.
In my particular case I get paid around $90/hr ($135/hr for overtime, plus paid major holidays). Which comes to around $180K/yr. The full time position I was offered is $130K/yr. There's no way in the world vacation + health insurance is worth $50K.
So if I take a month off, I lose $14.4K ($90 * 160 hours). A decent insurance PPO plan is $1100/month for me any my wife. So that's another $13.2K. So the total is $27.6K. And I don't think that many FTEs have a month of paid vacation.
So if I take a month off, I lose $14.4K ($90 * 160 hours). A decent insurance PPO plan is $1100/month for me any my wife. So that's another $13.2K. So the total is $27.6K. And I don't think that many FTEs have a month of paid vacation.
Plus another what, $13k, for self-employment taxes?
What's a self-employment tax?
The way it works here (Australia) is a contractor charges GST (basically a value-added tax) to the employer of 10%. The 10% is standard, so people don't usually include it in discussions of their rates (ie, if he is getting $90/hour, then the company is paying $99/hour).
After that you can handle the money how you like - if you are smart you can setup a company or trust so you only pay the company tax rate on most of your income. At worst you just pay yourself the income, and so you are taxed as though you have the $180K income.
The way it works here (Australia) is a contractor charges GST (basically a value-added tax) to the employer of 10%. The 10% is standard, so people don't usually include it in discussions of their rates (ie, if he is getting $90/hour, then the company is paying $99/hour).
After that you can handle the money how you like - if you are smart you can setup a company or trust so you only pay the company tax rate on most of your income. At worst you just pay yourself the income, and so you are taxed as though you have the $180K income.
The company thing still comes with a caveat in that you have to prove that you're not just using it as an umbrella to reduce your tax. There are a set of tests that a company goes through at tax time, and they have to pass them in order to be considered a proper company (the 80/20 rule is one of those tests).
In the US, employers pay a medicare and a social security tax. If you are self-employed, you have to pay those taxes in addition to your regular taxes, because you are the employer too.
My current contract is W2-hourly. I'm pretty sure I get taxed just as a regular employee.
Contractor/employee is irrelevant for me.
I was ill for a while and thinking of changing area, but went back to computers.
I did make a promise to myself: To prioritize fun; only do things I love. Never to take a job for money if I can get a job I'd like better, for less money.
I don't know if I could have taken that decision if I had any rugrats.
Edit: What I forgot to say which was relevant (it is late here), was that I wouldn't want to look for customers either.
I was ill for a while and thinking of changing area, but went back to computers.
I did make a promise to myself: To prioritize fun; only do things I love. Never to take a job for money if I can get a job I'd like better, for less money.
I don't know if I could have taken that decision if I had any rugrats.
Edit: What I forgot to say which was relevant (it is late here), was that I wouldn't want to look for customers either.
PS: I'm a contractor, per hour and I also do what I love.
I went from contractor to "real employee" at a big company and it was no problem keeping the same take-home pay, while also getting paid vacation, cheaper insurance, 401k matching, etc., etc. I feel a little burned for not asking for more money, but nobody would actually take less money, right?
It's interesting seeing differences between countries. Like the author said in the comments, 401k isn't an "issue" in Australia. I don't know how 401k works, but Superannuation in Aus is a compulsory 9%-10% of your salary that your employer sends to your super fund (that you can't access until you're 60). If you're a contractor you don't have to pay yourself super (so you could have more immediately available money), but you could also put away 9% just like your employer would. There's no insurance issues because we get government provided healthcare, and depending on the contract structure you go with there's actually a few decent protections an employer is required to provide you (if you structure it that you're a company contracting to another company then you're out of luck there).
So realistically the major difference is "security", which to be honest there isn't much of regardless you being an employee or contractor. So at least in Australia, unless you're getting an increase in your hourly rate, or a company says they'll only continue to send you work if you're an employee, there's no major advantage to switching to be an employee.
So realistically the major difference is "security", which to be honest there isn't much of regardless you being an employee or contractor. So at least in Australia, unless you're getting an increase in your hourly rate, or a company says they'll only continue to send you work if you're an employee, there's no major advantage to switching to be an employee.
Most of the contractors I know are making about $100/hour. I dont know any FTEs that are making $200k per year.
This may be true at "Ma & Pa's Web Development Shop", but it's not true at banks.
I work for a tech company all of you know, and have plenty of friends at other major tech companies. I don't know any that pay your average senior engineer anything close to $200k, but that's the going rate for an average experienced contract. Specialized contractors get paid a lot more than that.
nobody would actually take less money, right?
Often it appears that you take a hit to your pay, but when you do the benefits math (paid holidays, vacation, health insurance, sick days) it's at least a wash.
Often it appears that you take a hit to your pay, but when you do the benefits math (paid holidays, vacation, health insurance, sick days) it's at least a wash.
Yes, for the right job, or for something they love, they would do it. I know because I have done it.
I went to the UK in 2004 to do some travelling and working for a couple of years. Initially I was contracting in London at pretty good rates (between GBP 400 and 600 per day -- as I said, in 2004). The first year of contracting I earned just over GBP 120K. That's approx. USD $190k on the current exchange rate.
Part of the reason I went there was because I wanted to take a stab at the games industry. It was something that I had always wanted to do, and the industry here in Australia was awful. So I took at job at one of EA's studios.
That year I earned GBP 27k, approx. GBP 90k less than the year before.
Do I regret it? Not at all. I had a blast. It was a great experience and I met some amazing people.
So no, it's not all about the money. For the right gig in the right place with the right level of passion, earning enough to survive is exactly that: enough.
OJ
I went to the UK in 2004 to do some travelling and working for a couple of years. Initially I was contracting in London at pretty good rates (between GBP 400 and 600 per day -- as I said, in 2004). The first year of contracting I earned just over GBP 120K. That's approx. USD $190k on the current exchange rate.
Part of the reason I went there was because I wanted to take a stab at the games industry. It was something that I had always wanted to do, and the industry here in Australia was awful. So I took at job at one of EA's studios.
That year I earned GBP 27k, approx. GBP 90k less than the year before.
Do I regret it? Not at all. I had a blast. It was a great experience and I met some amazing people.
So no, it's not all about the money. For the right gig in the right place with the right level of passion, earning enough to survive is exactly that: enough.
OJ
Yup. Bonus, 5% matching 401k, etc.
I made a good living as a contractor for about 2 decades, although the aftermath of the .com implosion almost did me in, even though I had nothning to do with it. But I recovered and soldiered on. I finished a lucrative contract Sept 15, 2008. Then it was a year and a half of nothing or jobs tha paid way less than I was used to getting. I could make ends meet if I didnt pay taxes, but you know how that goes.
Then I got a job with a kind of Internet conglomerate. It isnt half bad. The pay plus the bonuses plus paid health care give me an income that's within 10% of a typical good consulting year. The health insurance was a biggie, because I couldnt get it any more. The people are talented and the corporate BS is less than I expected. I cant quite get my workweek down to the 40 hrs that is expected, but no more death marches.
Then I got a job with a kind of Internet conglomerate. It isnt half bad. The pay plus the bonuses plus paid health care give me an income that's within 10% of a typical good consulting year. The health insurance was a biggie, because I couldnt get it any more. The people are talented and the corporate BS is less than I expected. I cant quite get my workweek down to the 40 hrs that is expected, but no more death marches.
Apologies to anyone who has struggled to hit the site. It's not used to this level of traffic!
I'm enjoying the discussion too, thanks for the insights!
OJ
I'm enjoying the discussion too, thanks for the insights!
OJ
Slightly offtopic, but do you have in America casual employees?
In Australia, many non-professional jobs have award wages. These are the minimum rate you're allowed to pay someone in that position, eg a Pharmacy Assistant may earn a minimum (and I'm making these figures up) of $18.50/hr full time. I think this figure may vary by state, but I'm not sure. These rates are for full time employees; 37.5hrs/week, 10 sick days, 4 weeks holiday, 10 public holidays all of which you're paid for.
Anyway, there's also Casual employees who aren't paid for any of the above (no sick pay, holiday pay etc), and they usually only work <20 hrs/week, but in return their award pay is 17.5% higher than that of a fulltime employee
[Disclaimer: I actually know very little about this, it being 10 years or more since I needed to know, and there's a high likelihood things have changed and the above info is all wrong]
In Australia, many non-professional jobs have award wages. These are the minimum rate you're allowed to pay someone in that position, eg a Pharmacy Assistant may earn a minimum (and I'm making these figures up) of $18.50/hr full time. I think this figure may vary by state, but I'm not sure. These rates are for full time employees; 37.5hrs/week, 10 sick days, 4 weeks holiday, 10 public holidays all of which you're paid for.
Anyway, there's also Casual employees who aren't paid for any of the above (no sick pay, holiday pay etc), and they usually only work <20 hrs/week, but in return their award pay is 17.5% higher than that of a fulltime employee
[Disclaimer: I actually know very little about this, it being 10 years or more since I needed to know, and there's a high likelihood things have changed and the above info is all wrong]
Yes we do have casual employees, the term is "part time" in America. They generally work less than 20 hours a week, no benefits like time off or holidays, but they usually don't make more money than full time employees though.
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How does someone start to get into the contractor side of things? Are you generally working connections initially? Or are you going via a headhunter/craigslist for contract only gigs?
I just look for 3 months contracts with a hourly rate on jobs listing site (I used seek.com.au)
This current one has been extended twice, 9 months down now.
It does take more responsibility, you have to do your own billing, your timesheet, and be 'more' presentable.
But all that is cheap compared to the price of working longer hours and not getting paid. At least if I work 10 hour day, I bill 10 hours. Also I get to claim so much more at tax time.
PS: to be a successful contractor, you should be good at what you do. As in 'Good' directly linked to your hourly rate requirement.
I should also clarify that it's not all glam. It's not for everybody. You have to be able to make quick and good decisions, code straight from 8am to 5pm with a half hour lunch and deliver. If you're the kind that likes to sit back and "R&D" all afternoon, or take a day to fix a bug, it might not be for you. You have to be productive and make every hour count for your employer and leave the R&D for the evening at home.
All that said, I still love it.
This current one has been extended twice, 9 months down now.
It does take more responsibility, you have to do your own billing, your timesheet, and be 'more' presentable.
But all that is cheap compared to the price of working longer hours and not getting paid. At least if I work 10 hour day, I bill 10 hours. Also I get to claim so much more at tax time.
PS: to be a successful contractor, you should be good at what you do. As in 'Good' directly linked to your hourly rate requirement.
I should also clarify that it's not all glam. It's not for everybody. You have to be able to make quick and good decisions, code straight from 8am to 5pm with a half hour lunch and deliver. If you're the kind that likes to sit back and "R&D" all afternoon, or take a day to fix a bug, it might not be for you. You have to be productive and make every hour count for your employer and leave the R&D for the evening at home.
All that said, I still love it.
I took one of these offers and am glad I did. I took an hourly pay cut of like 36% assuming 40 hour weeks which is about accurate, though I generally go slightly over.
However, I wasn't/am not a well known hot shot. I didn't graduate college (dropped out of a comp sci program 7 years prior), and all my 'experience' was a hand full of projects for local businesses and organizations. I was not even close to being able to simply pick my work or expect to bill 30+ hours a week regularly.
Now, 6 months into working full time in an understaffed department and taking on unexpected responsibilities I feel an order of magnitude more able to potentially sell myself or an idea to a business as I had always thought in terms of people before.
I've learned a ton, I make more money, and I don't think about work 120+days a year. There are definite downsides too..
However, I wasn't/am not a well known hot shot. I didn't graduate college (dropped out of a comp sci program 7 years prior), and all my 'experience' was a hand full of projects for local businesses and organizations. I was not even close to being able to simply pick my work or expect to bill 30+ hours a week regularly.
Now, 6 months into working full time in an understaffed department and taking on unexpected responsibilities I feel an order of magnitude more able to potentially sell myself or an idea to a business as I had always thought in terms of people before.
I've learned a ton, I make more money, and I don't think about work 120+days a year. There are definite downsides too..
This happened to me with Apple. The pay cut was huge; I declined. End of story.
Job security is/is not a myth. It depends on the company. However what it all comes down to is when the money runs out, you are out. If you are a mission-critical contractor or a mission-critical employee you have more job security than a non-mission-critical contractor/employee. If people feel that you truly overcharge to hell and your services are not worth it, there you go, no job security.
What is better about employee? You have a regular paycheck. Economy is shitty? You still get it, or get fired. Economy is booming? Still get it. Didn't make a sale this month? Still get it. Contractor is not so consistent.
What is better about employee? You have a regular paycheck. Economy is shitty? You still get it, or get fired. Economy is booming? Still get it. Didn't make a sale this month? Still get it. Contractor is not so consistent.
Of course, it also helps that I like the company I work for, and I enjoy the work. It's got just enough variety that I don't get bored, and it's just challenging enough, too. Every time that challenge has started to disappear, the company has upped their game and the challenge came back. I joined the company at just the right time for me and them both, apparently.