The Pros And Cons Of Contracting

During my current job search, I’ve talked to a number of recruiters and they’ve all said the same thing:  contracting is your best bet in this economy.  Companies are understandably reluctant to make long-term hiring commitments due to the current economic situation, but still have work that needs to be done. 

What’s In It For The Company?

Enter the contractor.  The hiring company is more than willing to pay a significantly higher hourly rate in exchange for not having to make a long-term commitment.  It works for the company because contractors are relatively easy to shed from the payroll when times are tough since most contractors sign on for 6 month increments.  If the contractor performs well and there’s still work to be done, the contract can be extended another 6 months or a year (roughly 80% of all contracts are extended at least once).  If the contractor’s work is sub-par or if the company is hits a rough patch, they simply don’t renew the contract and both parties go their separate ways.  Last but certainly not least, the company saves because they aren’t obligated to offer health or retirement benefits to contractors, which can easily be half again the employee’s base salary.

What’s In It For Me?

This is the crux of the matter.  If I’m going to give up long-term job security there had better be some outstanding benefits to me from this arrangement.  As it turns out, there are. 

Pros of Contracting

• You get paid for overtime!  – If you work 50 hours in a week, you get paid for 50 hours.  No more coming in on saturday to finish up a project without any financial reward.  Exempt employment is the biggest scam ever perpetuated on the American public.
• Constant change – I realize now that three years at my last job was far too long.  I was getting bored and wasn’t learning many new skills towards the end of my tenure.  I think the reason I stuck around is because it was comfortable, relatively interesting, and secure (or so I thought).  With contracting, I would constantly be exposed to new technologies, skillsets, and challenges.  If, at the end of 6 months or a year, I decided I had learned as much as I could and didn’t want to do that job anymore, I could choose not to renew my contract.  Simple as that.  It would make leaving jobs I don’t really enjoy far, far easier.
• Turbo-Charge Your Resume – A few years of contracting in different positions would allow me to fill some gaping holes in my resume and get real, marketable experience in as many different areas as I wanted.
• Full-Time Is Always An Option – There’s no rule saying contractors can’t take a full-time job at one of their assignments if they like the work and environment.  By choosing to become a contractor, you aren’t shutting yourself out of the full-time, permanent employment world.  Think of your stint as a contractor as nothing more than an extended job interview.  If it works out for both of you, great.  If not, at least you got paid in the meantime.
• It Makes Selling Out For Money Less Risky – I would never choose to work a job I hated just for the money, long-term.  But what if you only had to do it for 6 months?  That’s far more tempting and would make the job more bearable if you knew your misery’s expiration date.

Cons of Contracting

• No Job Security – You never know if your contract will be renewed or, if it isn’t, how long it will be before you find your next contract gig.  In a normal economy, the transition is usually pretty quick but there are no guarantees.  Permanent employees are much more difficult and expensive to lay off, so contractors are usually the first to be let go when times are tough.
• No Benefits – You’ll be responsible for your own health insurance and retirement savings.  Many recruiting companies (such as the one I’m working with) will actually “hire” you as a W-2 employee and provide subsidized health insurance and retirement benefits so long as you are working an assignment for them.  This makes things easier and more stable for you, but don’t forget your recruiter will take their cut off the top.  I’ve chosen to go this route since I’ve never done any contracting before and need help to navigate those waters, but experienced professionals could probably do better striking out on their own.
• Self-Employment Tax – If you choose to go it alone, you’ll have to pay self-employment tax.

While I was skeptical at first, the more I think about it the more I believe contracting is the right move for me at this stage in my career.  My biggest concern is filling a few holes in my resume, and a few contract assignments will do that quicker and easier than anything else.  There’s also the fact that I can probably make more money contracting than taking a full-time position, at least for now.  Another fringe benefit is that it would be easy to take a few weeks here or there between assignments to devote to my online businesses, which should help them grow much more quickly than they would otherwise.  Finally, it would provide a solid foundation for me to do contract work here or there for the rest of my working life.  While I do intend to eventually run my own businesses for a living, it would be nice to punctuate that with a few interesting projects here and there, both for fun and profit.