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I am contemplating moving from a permanent position into a contract opportunity.

The details are that this contract position would pay 1.75 times more than the permanent position I am in currently in. The contract is slated for 6 months with the potential to go longer.

I feel that I am under paid in my current permanent postion, however the benefits are very good. The outlook for a raise or promotion is not bright at the moment.

I understand that in this economy any permanent position is a blessing, yada yada yada, but I am looking to make more money, and I feel as thos this would be a great way to do so.

Sure the contract could end and leave me on unemployment, but permanent positions are not as secure as they used to be and this could be an opportunity to broaden my skills, (I work in the HR field).

Any input on this topic?

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Again.... it depends very much on your company and your financial situation. Why do you need the extra money, do you ne... (more)

smeagle (May. 14, 2010 @ 12:48p) |

Depends on whether it's an hourly contract or a performance contract.

A friend was hired to help edit a book (performance... (more)

wordgirl (May. 14, 2010 @ 2:31p) |

If you are unsure of the situation, then pick hourly, so you are paid for every hour worked.
While company employees are ... (more)

BlueSeaLake (May. 15, 2010 @ 9:22a) |

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No input, other than you have picked the best time in the last 2 years to make this move.

Unless you work for the government, there is nothing permanent about a "permanent position"...

The general rule of thumb I've heard is you should be getting 2-3x your salary for an equivalent contract position. Make sure to price out the replacement cost of your benefits.

Would you qualify for unemployment if your contract ended?

I am not aware of any rules that would prohibit me from collecting unemployment.

I just quit my IB job to run my business full time and start another business. Permanent job is only permanent for as long as they need you. Do what makes you happy

carsonstreet said: I am contemplating moving from a permanent position into a contract opportunity.

The details are that this contract position would pay 1.75 times more than the permanent position I am in currently in. The contract is slated for 6 months with the potential to go longer.

I feel that I am under paid in my current permanent postion, however the benefits are very good. The outlook for a raise or promotion is not bright at the moment.

I understand that in this economy any permanent position is a blessing, yada yada yada, but I am looking to make more money, and I feel as thos this would be a great way to do so.

Sure the contract could end and leave me on unemployment, but permanent positions are not as secure as they used to be and this could be an opportunity to broaden my skills, (I work in the HR field).

Any input on this topic?


Just to clarify, when you say "1.75 times more" do you mean that the contract position will pay 175% of your current salary, or 275% of your current salary? The literal meaning of what you wrote is 275%, but I am not sure you meant that.

Just be sure you factor in your cost the benefits into your salary. You may have less cash, but if it paying for your insurance, retirement funds and commuting costs.

carsonstreet said: I am not aware of any rules that would prohibit me from collecting unemployment.

Just the law. That's not such a big deal anymore.

1.75 times your salary really doesn't sound like much of a raise. No holidays, vacation days, sick days, and probably insurance and 401k benefits. Plus you'll pay all of the self employment tax, with no cap on social security. Depending on your specifics, it could be a little better overall, but if you have "very good" benefits now, I would not expect any sort of lifestyle change with the contract income.

175%

denbo32 said: Just be sure you factor in your cost the benefits into your salary. You may have less cash, but if it paying for your insurance, retirement funds and commuting costs.

plus the actual costs of being an independent contractor
7.65% more taken out of salary (a tiny bit less than that, but the amount less depends on your total salary)
all other costs like computer costs, electricity, repair costs, any other costs associated with what you actually do
my point is, the cost isn't just the loss of benefits, but many other things as well

Could you please elaborate?

The reason companies hire contractors is because they can be easily fired. There's a good chance you'll come into work one day and be let go for no fault of your own. You won't be able to collect unemployment. They will hold carrots over your head to make you think the contract will be longer or that you'll get hired on full time. It's not worth the stress IMO.

UtahDealSeeker said: carsonstreet said: I am not aware of any rules that would prohibit me from collecting unemployment.

Just the law. That's not such a big deal anymore.


IIRC, independent contractors can pay into a program similar to the federal unemployment insurance system, but that isn't mandatory, so the person has to voluntarily do it. There is also some other program that only a couple states have adopted that does something for self employed people. It like gives you money when you are laid off in order to be self employed or something like that. I'm not sure if you have to be employed prior to that, or if you can be self employed and get the benefits to self-employ for another business or something like that.

To clairify , I would be an employee of a staffing agency not a independent contractor.

Factor in the amount of time needed to get another job once the contract is over is the salary difference high enough, also understand chasing the money is never good in the long term. See if the new opportunity is getting your more exposure on new items to learn or steer you away from dead or dying skills set. If your confident on your skills and ability to get into another position then its good. Make sure that you remember that in the contract position client is always king so don't go around assuming that your suggestion or rants will get you higher. Keep existing networking contacts during your assignment. You will never know when you might need their assistance.

Unless it was a really golden opportunity with somebody you knew well and trusted not to screw you over, I'd stay put. In addition to all the other factors mentioned by wiser posters than I, there is the potential for extreme misery in your new position.

There are reasons some companies hire contractors rather than full-time employees - they can work you like a dog and don't have to pay overtime, all their HR duties are pushed off onto you, they can toss you out like a soda can when they're done. In a worst-case scenario, there's not even a guarantee that you will be paid for the full six months if the contract's not worded very carefully.

jdmetz said: The general rule of thumb I've heard is you should be getting 2-3x your salary for an equivalent contract position.
Unless you're really underpaid in your permanent position, this is unrealistic. What I normally see is 1.5-1.8 times raise.

SlimTim said: Plus you'll pay all of the self employment tax, with no cap on social security.
The cap on SS is at around 106K. There's no cap on medicare but it's 2.9%. And it's not like you wouldn't pay SS/Medicare when working full-time.
PS No expectation of unpaid overtimes is priceless.

jetsfan92588 said: 7.65% more taken out of salary (a tiny bit less than that, but the amount less depends on your total salary)
it's not a tiny bit
if you go on schedule c, your self-employment tax will be written off your taxes

Employers do not like to hire persons who have worked as contractors, they consider this to be some kind of black mark. On the other hand, if you want to be a contractor a company if much more likely to hire you as a contractor if you have been a contractor before.

If in the long term you want to be an employee, stay an employee. If in the long term you want to be a contractor become a contractor. It is not so easy switching back and forth.

For various reasons, what appears to be much more money working as a contractor is not as good a deal as it seems.

wordgirl said: There are reasons some companies hire contractors rather than full-time employees - they can work you like a dog and don't have to pay overtime, all their HR duties are pushed off onto you, they can toss you out like a soda can when they're done. In a worst-case scenario, there's not even a guarantee that you will be paid for the full six months if the contract's not worded very carefully.
It's actually a full-time position where you'd likely work unpaid overtime. Contractors are typically paid hourly so you get paid for the time you worked.
As far as the length of the contract, that's right, it can end even earlier than you thought and no sane company will sign up for a contract they can't break.

carsonstreet said: To clairify , I would be an employee of a staffing agency not a independent contractor.
Oh well. Then nothing will really change for you. You're still a W2 employee. What you're talking about is more like consulting, not contracting.

Some contract positions are W2 not 1099..

So then you only lose Holidays/Sick/Vacation days and Health/Dental along with a 401k match..

Is it W2 or 1099?

welookgoodcom said: Some contract positions are W2 not 1099..

So then you only lose Holidays/Sick/Vacation days and Health/Dental along with a 401k match..

Is it W2 or 1099?

Most of the time they give you a choice whether to go 1099 or W2. And most of the time you'll be better off picking 1099. 1099 C2C is even better in my opinion but that's a grey area and depends on your particular circumstances.

Yoksel said: jetsfan92588 said: 7.65% more taken out of salary (a tiny bit less than that, but the amount less depends on your total salary)
it's not a tiny bit
if you go on schedule c, your self-employment tax will be written off your taxes


It now sounds like this may not apply to OP, but doesn't the writeoff just mean that you don't have to pay income tax on the amount that you pay in self-employment tax? That doesn't seem like an effective discount on the tax. As W2, I also don't pay income tax on the SS and Medicare withholdings. But it's been years since I've had any 1099 income - am I remembering the details incorrectly?

The frequent loop goes: Industry -> Consulting Company -> Contractor -> Consulting Company -> Industry

Yoksel said: jdmetz said: The general rule of thumb I've heard is you should be getting 2-3x your salary for an equivalent contract position.
Unless you're really underpaid in your permanent position, this is unrealistic. What I normally see is 1.5-1.8 times raise.


I'd definitely agree that 1.75x is reasonable considering that he's going through a job shop.

If he was being put in a position to actually be a fully independent contractor, then more would be needed to balance things out.

SlimTim said: Yoksel said: jetsfan92588 said: 7.65% more taken out of salary (a tiny bit less than that, but the amount less depends on your total salary)
it's not a tiny bit
if you go on schedule c, your self-employment tax will be written off your taxes


It now sounds like this may not apply to OP, but doesn't the writeoff just mean that you don't have to pay income tax on the amount that you pay in self-employment tax? That doesn't seem like an effective discount on the tax. As W2, I also don't pay income tax on the SS and Medicare withholdings. But it's been years since I've had any 1099 income - am I remembering the details incorrectly?



W2 = you only pay your portion of SS & Medicare

1099=you pay yours and company's portion of SS & Medicare
AND might need to incorporate (filing fees, accounting time/cost) which could be cheap or might not.
Usually it's easy to incorporate but closing the corp incur costs

Either way you need to see how much extra they will give you as a 1099. Unless it's a good 20%, it's
usually just better to be a W-2

^^^ Has it even been stated whether this is a W2 or 1099 position that's being talked about?

If he's going through another party, I strongly suspect that it's going to be W2 income with the OP considered a direct employee of the contracting group.

It can be a good idea, depending on the length of the contract and the likelihood that it will be extended, but it's a gamble.

I would never leave my perm position for a contract one because I have a family to support and prefer the stability. In my field there is stability to being permanent over contract.

You could always move to another permanent position or contract-to-permanent. The time you spend unemployed after a contract ends could eat up anything you gained by taking the contract in the first place.

I got offered a contractor position. I am trying to get a full time position because of benefits. I will give you an example of the current company I am working for. Also, I choose to create my own LLC and have the company that is contracting me to the main company, sending me 1099 and untaxed pay.

Benefits:

Short term / Long term disability
Health insurance (900 month family)
Vacation (2 weeks) 2% pay
Sick time 1 week 1% pay
401k match 4% pay
Annual bonus 4-12% annual pay
10k per year education
Vision Insurance
Dental Insurance
Life insurance

In my case it equals about 30k per year is benefits. So if I made 50, i should be making 80k as a contractor and purchase all these on my own.

SlimTim said: Yoksel said: jetsfan92588 said: 7.65% more taken out of salary (a tiny bit less than that, but the amount less depends on your total salary)
it's not a tiny bit
if you go on schedule c, your self-employment tax will be written off your taxes


It now sounds like this may not apply to OP, but doesn't the writeoff just mean that you don't have to pay income tax on the amount that you pay in self-employment tax? That doesn't seem like an effective discount on the tax. As W2, I also don't pay income tax on the SS and Medicare withholdings. But it's been years since I've had any 1099 income - am I remembering the details incorrectly?
You are remembering the details correctly. Your net earnings from self-­employ­ment are reduced by half of your total Social Security tax to make it consistent with the situation of those who are W2'd, as the employer’s share of the Social Security tax is not ­considered wages to the employee.

In other words, if you are 1099'd, you do pay an extra half of the Social Security tax up to $106,800 in earned income in 2010 and that extra SS tax does not result in a deduction (meaning that it does not reduce any of your other income taxes).

geo123In other words, if you are 1099'd, you do pa said: y an extra half of the Social Security tax up to $106,800 in earned income in 2010 and that extra SS tax does not result in a deduction (meaning that it does not reduce any of your other income taxes).
How is it not resulting in a deduction if you can write off the full amount of your self-employment tax on 1040?

HumDoHamaraDo said: The frequent loop goes: Industry -> Unemployed -> Consulting Company -> Unemployed -> Contractor -> Sabbatical -> Unemployed -> Consulting Company -> Unemployed -> Industry

FIXED!

SlimTim said: Yoksel said: jetsfan92588 said: 7.65% more taken out of salary (a tiny bit less than that, but the amount less depends on your total salary)
it's not a tiny bit
if you go on schedule c, your self-employment tax will be written off your taxes


It now sounds like this may not apply to OP, but doesn't the writeoff just mean that you don't have to pay income tax on the amount that you pay in self-employment tax? That doesn't seem like an effective discount on the tax. As W2, I also don't pay income tax on the SS and Medicare withholdings. But it's been years since I've had any 1099 income - am I remembering the details incorrectly?


Ya, basically if you are in the 10% tax bracket you pay 15.3% of your income as SE tax. Then you deduct half of that tax from your total income to determine your federal income tax-so you deduct 7.65% of your schedule C income. Then you add up federal income tax and SE tax to determine total tax owed.
(I am using income tax as a term separate from SE tax, its possible that the term federal income tax includes SE tax, but I am using them separately because I don't know of a term that states what I am trying to say that is separate from SE tax)-and now ive just completely confused myself-basically, ignore this post

If your a w-2 employee your employer pays Social Security and Medicare taxes of 7.5%.

You pay the other 7.5% out of your check.

If your like me and get 1099'd you have to pay the employer portion and employee portion = 15%

welookgoodcom said: AND might need to incorporate (filing fees, accounting time/cost) which could be cheap or might not.
Usually it's easy to incorporate but closing the corp incur costs

Either way you need to see how much extra they will give you as a 1099. Unless it's a good 20%, it's
usually just better to be a W-2


not sure why op would want to incorporate unless he is trying to get out of paying some SE taxes. i guess he could be looking for liability protection but that wasn't a concern in the post

it can be very expensive to incorporate. filing fees, annual returns, additional paperwork, franchise taxes (depending on where op is from), etc...

Skipping 16 Messages...
If you are unsure of the situation, then pick hourly, so you are paid for every hour worked.
While company employees are abused and made to work 55 hour weeks to get their salary which sounded good when thought of in 40 hour work week, you instead will be paid for the 55 hours.



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