IT Employment

Is the permalancer a corporation's dream?


A permalancer, or a permanent freelancer, is a person originally hired at a company on a contract basis, but who essentially becomes a full-timer (though without the perks and benefits of a full-time employee).

The upside to being a permalancer is, of course, employment. You work in the office and use company equipment. The downside is that permalancers don't get the health benefits, paid holidays, or access to a 401K that permanent staffers do, and are often the first people to go in a layoff.

The benefit to corporations is that in a permalancer they get a full-time employee without having to pay full benefits and payroll taxes on that person.

According to an article from Portfolio.com:

The IRS, in order for health insurance to be excluded from taxable income, requires all company employees to receive it. But employers and employees with seniority have gotten around that by hiring the young as "freelancers" and "contractors," a category that includes a growing share of the workforce.

Last December, the VH1 network, which is owned by Viacom, announced that it would be curtailing the benefits of the company's permalancers. The permalancers then staged a walkout, causing Viacom to reconsider its position. It restored the benefits and some permalancers were offered staff jobs.

Are any of you out there permalancers? If so, what has been your experience with company benefits?

About

Toni Bowers is Managing Editor of TechRepublic and is the award-winning blogger of the Career Management blog. She has edited newsletters, books, and web sites pertaining to software, IT career, and IT management issues.

15 comments
eduardo
eduardo

Yes, permalancer is corporation's dream, is there any better away to avoid tax and work benefits? I work in such contract basis, I mean even worse! Many people in Brazil works on contract basis for company that give services to another company. In some cases, people are sub-contracted in 3, 4 or more levels. And other cases, the lower level contract makes you part of a "fake company" that give service to another company that interfaces relashionships with a client. This way, the workers have no benefits at all, the employers don't need to pay the country taxs. This become very popular in Brazil nowadays. For the people that is starting their carreer in IT field I normally said to them to look anything else. Such blood contracts is commun in the field and people blind each other thinking that they are winning more than it was supposed to be. At least we have a public heathy care, not good as in England, Canada and Cuba but it is better than US. (God, I have seen Sicko Movie - So sorry about you guys and very wory about my country that is following the same way of humanity senseless distruction - all about money and profit). Take care!

tonoohay
tonoohay

If you are in IT-Networking-Software and have not done a study on the Independent Contractors vs Micro Soft then you are working blindly! One recent article I found on VAULT.com sums it up... "nolo.com "by Stephen Fishman " "When hiring, don't let what happened to Microsoft ""happen to you. " Companies see Full Timers as an asset that depletes revenues and ROI. There are very specific laws for the IC (i-contractor) but no one enforces them and workers today get placed based more on their ability to be quiet as opposed to becoming part of the team and lasting over time! fyi.................. The federal district court dismissed the workers' suit, but they appealed to the Ninth Circuit Court of Appeals and won. In a much publicized decision, the appeals court held that the workers could not be excluded from Microsoft's benefit plans because they were common law employees, not ICs. The case turned on the fact that Microsoft's plans contained very ambiguous definitions of just which employees were covered. (Vizcaino v. Microsoft Corp., 97 F.3d 1187 (9th Cir. 1996)) Later, a 15-judge panel of Ninth Circuit decided to rehear the case. Their decision, which was issued in Spring 1999, largely affirms the prior decision, meaning that Microsoft owes a small fortune to its misclassified workers. (Vizcaino v. Micrsoft Corp., 120 F.3d 1006 (9th Cir. 1997))

GreenPirogue
GreenPirogue

I was a contract employee for one company, and one thing that is missing in the discussion was that I was not really treated as "part of the team." I was actually full time with one employer and contract to make extra money with another employer. I eventually left the contract position after receiving a substancial raise at my "day job." Permalancers are an employer's dream, because all of the hours paid are working hours (billable hours). How many hours are "wasted" by the water coolers discussing sports or what not? Permalancers also receive less pay per hour because of the lack of benefits. I understand one discussion about how the IRS treats contract verses employees, but when I was a contract employee, other than the lack of benefits, I could not tell the difference in my job. I was given company supplies, told what to do when, given guidelines on how to complete the jobs, and I had to fill out a timesheet online, the same system that their hourly employees used. From the employer's perspective, if this team concept is really all that important, I would think they would limit contract employees to jobs that have a short duration and need specific skills.

frostbite
frostbite

It cuts both ways. As a corporation if you are permalancing a "commodity" resource need you might be able to get away with permalancing. For although you have several benefits, here are a couple dis-benefits that may help you take a second look at your policy of permalancing. You have a bigger risk in the long run, for the permanent freelancers to run away once they have absorbed a big chunk of business process knowledge. Also, in countries with short supply of skilled labor, you get the perennial problem of competing with the market during every contract renewal.

Eoghan
Eoghan

Its always a joke. Contract to hire, yeah, sure. I had one "manager" tell me that if I did overtime (for free) it would be favorable and I would be hired. I explained to him that the reason the company hired contractors was to avoid paying benefits but otherwise it was a simple relationship: 1 minute work = 1 minute pay. And then there was the 24x7 cell phone he wanted me to carry. I asked them what the differential would be - typically 25% pay for just carrying the thing, 4 ours minimum pay if you had to answer it. Yup, that was the end of carrying a pager 24x7. Oh, did I mention this "manager" was an Iraqi? When the gulf war started I asked if he was going home to fight for freedom for his country... you don't think he had that planned do you? Of course, in the automotive industry they eventually come around and tell you that as a supplier you will have to charge them less. I said no sweat, what 25% of my knowledge did they want me to leave at home. Yes, the permanent freelancer is the corporation's dream, and the freelancer's nightmare. If you want to be treated like dirt and pushed out the door at contract end, then the job is for you. Otherwise, steer clear.

reisen55
reisen55

My experience at a major automobile headquarters was disasterous. The firm required employees on the help desk to be Corp-to-Corp of any nature, because the firm that managed staff for the help desk dictated that policy. We are not talking, by the way, cheap cars here but very expensive ones. This firm had money to burn. The helpdesk managed calls from internal employees and automobile dealerships around the country. A substantial load. The helpdesk people had to fund their own efforts to start up and maintain all expenses, and then discovered (a) that the helpdesk was given zero support by corporate IT (never told about anything ever so we had to wing it) and (b) that the firm had a history of terminating anyone at anytime for any reason. One manager shoulder tapped an 8 year veteran one day - fired - and it's sooooo easy to do that with a permlancer. After I left, another 5 people departed, one holding three years of in-house knowledge and thus a loss of enormous importance for help desk. So the operative philosophy is: hire, fire and there are always new drone units in line waiting to be suckered in. Fools game

timo
timo

Prior to being "let go" at one company, the recruiting company that billed the client at the site I worked at and then cut a check for me as a 1099 employee got sleazy. Over the weekend, after I was let go, they called asking me if I had my timesheet. I told them it was completed + signed, but in being so taken aback by the surprise, I had left it on my desk at the company. The fellow at the recruiting agency asked me specifics for where to look for it, I provided him these, and he assured me I'd have them fax the timesheet over to them, and I'd be paid. No phone calls later, and no responses??? find out the company _did_ get the timesheet back, and the $40/hr. * 40 hours I was suppose to receive never came. Now they claim they are not responsible for timesheets I did not submit. Unfortunately, the laws regulating contractors aren't so favorable if a contractor wishes to disclose to the IRS the nature of the relationship may have breached what is deemed acceptable to the IRS. (Read the IRS's pages on how to determine if you are actually a legitimate 1099 or W-2 Contractor). Not only is this company now responsible for paying all of the taxes I'd otherwise have to pay as a 1099 to the IRS, but they also are facing hefty fines for violating IRS Tax Code. Long story short: companies can call you a contractor all you want. But the definition of the worker-employer relationship must basically be this: you must determine the general day-to-day assignment, not your "boss." If an employer want to expose themselves to lawsuits, where you can claim of damages/compensation equal in sum to the total benefits package that you'd otherwise receive, + be audited by the IRS for quite a few times, such employers might want to eventually stop being so clever. This reminds me of people trying to sidestep sleep by taking amphetamines in the 50's. It only lasts so long before you have to face reality: few things in life have shortcuts that actually last.

IT.Consultant
IT.Consultant

permalancer or what some employers call a contract employee. After a long period of unemployment, I accepted a contract employee position with a major bank. I became the only Web Developer for a mutual fund company owned by the bank. The manager had lured me with the promise that if I performed well, I would become an employee. Well, it was all a lie. Without documentation, training or assistance, I maintained all of the company's Web sites. I had already outperformed the person I replaced. This person only lasted 4 months. I later learned that I earned less than that person. I lasted there just over 2 years, but after a year there, I knew they were stringing me along. So, I decided to get even by doing as much self-training as I could to prepare for an even better job. Near the end of my last contract extension, I told them: Make me an employee or I'm leaving. After they decided not to renew my contract or hire me permanently, my contacts there told me that my replacement was paid more, but couldn't even do half my job. Since then, I've promised never again to be a permalancer and instead focus on doing IT consulting for healthcare organizations, but as a contractor paid by the hour. I never want to repeat this experience, but I'm glad to have gone through it because it taught me many business lessons I'll never forget: Lesson #1: Never become a permalancer unless you have no other choice. Like contract-to-hire, it's just a racket. To me, it combines the worst of both worlds: a) none of the advantages of employement (i.e. benefits, health insurance, retirement contributions, training) b) none of the advantages of contracting (i.e. higher pay, freedom to work with many clients or choice of projects) Lesson #2: Train yourself on as much as possible before leaving. The more underpaid you are, the more knowledge you need to take with you so that you can get a better-paying job. Lesson #3: You get what you negotiate, not what you deserve. Lesson #4: Success is always the best revenge.

reisen55
reisen55

At one other job I had as a 3 month temp to perm employee, I was stuck in a side office, the junk PC room really, with a promise that an office in the main "team" area would soon be made ready. Never happened. The job lasted two months really, I was extremely depressed about being in a virtual Siberia and that affected performance. My manager, too, was an idiot, no sense of humor at all but the employees loved me. I noticed today that they are once again posting a job notice for this position from hell. I presume the employee who replaced me also went crazy and either quit or was driven out. And shall we get onto the subject of outsourcing? Permanlancing writ large.

gdeles
gdeles

Designations of permalancer, idependent contractor, temporary employee are just accounting dodges. The real bottom line that people with good skills will find good paying jobs. If the company is too cheap to pay for benefits then it is too cheap to pay for good labor. The employee / contractor differentiation is based on the assumtion that there is qualified employee that is somehow mentaly impared to not want affordable health care or equivalent pay. The assumption that it is eaiser to fire a contractor than employee is fiction. Expecially in right to work states like Missouri. The need for contractors come from companies with bureacratic lockin from labor unions or legacy bloated benefits packages. The IRS has punished Microsoft for being unfair to "common law marrige" employees that were classifed as contractors "wage whores". Which has lead to bizarre shell outsourcing companies and term limits on contractors. Imagine the inefficiencies for companies that must eject a contractor after 18 months. As much as I dislike the concept of socialized medicine, univerial health insurance would level and simplify the playing field. Maybe then the managers would spend time on how to effecively run the company rather than ways to screw the labor.

reisen55
reisen55

I am attempting to do the same, having been a contract employee on a few BAD jobs and seen healthcare networks in a major hospital chain, NYCity, GONE SO BAD it is not funny (why? Outsourced, cheaper, faster, better). I am finding that I truly enjoy my outside clients, working on my own time and solving my own issues. Welcome to the Land of Oz

tonoohay
tonoohay

Next week on the PBS program NOW will feature a group seeking to create a UNION solution to helping contract workers get more secure woking arraingments Not sur If I agree or feel it could but I'll locate the specific info and post it.

tonoohay
tonoohay

If you are in IT-Networking-Software and have not done a study on the Independent Contractors vs Micro Soft then you are working blindly! One article found on VAULT.com sums it up... "nolo.com "by Stephen Fishman " "When hiring, don't let what happened to Microsoft ""happen to you. " Companies see Full Timers as an asset that depletes revenues and ROI. There are very specific laws for the IC (i-contractor) but no one enforces them and workers today get placed based more on their ability to be quiet as opposed to becoming part of the team and lasting over time! fyi.................. The federal district court dismissed the workers' suit, but they appealed to the Ninth Circuit Court of Appeals and won. In a much publicized decision, the appeals court held that the workers could not be excluded from Microsoft's benefit plans because they were common law employees, not ICs. The case turned on the fact that Microsoft's plans contained very ambiguous definitions of just which employees were covered. (Vizcaino v. Microsoft Corp., 97 F.3d 1187 (9th Cir. 1996)) Later, a 15-judge panel of Ninth Circuit decided to rehear the case. Their decision, which was issued in Spring 1999, largely affirms the prior decision, meaning that Microsoft owes a small fortune to its misclassified workers. (Vizcaino v. Micrsoft Corp., 120 F.3d 1006 (9th Cir. 1997))

Ed Woychowsky
Ed Woychowsky

Don't EVER explain how something works when they contact you after you've left, even when they threaten a lawsuit. Knowledge is power.

IT.Consultant
IT.Consultant

That bad experience no longer makes me bitter. I never thought that I go from being a full-time employee in the financial services industry to a contractor for the healthcare in a single jump. After going contracting, I'll never return to full-time employment again.

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