Project Management

Leaving consulting for full-time employment

Chip Camden identifies the potential advantages and pain points of getting out of IT consulting for a full-time job.

TechRepublic reader Joseph Serrago sent the following email:

I have seen several articles on TR about people leaving their jobs to work for themselves. What I have not found much is the opposite. I am closing up my own business and going to work for someone else, first time in 7 years. I wonder if you have written any posts about someone leaving their own business for the regular work force.

Why you might want to become an employee

Different people may have different reasons to stop consulting, but probably the most frequently voiced desire is for more consistent income. As a consultant, you can be motoring along with three or four loyal clients for years, and just when you've gotten used to receiving a certain amount each month, one of them drops off the radar and you must suddenly scramble for more business. Sometimes finding new work can take months. Meanwhile, you're exhausting your rainy day fund, if you even have one. Worst case, you're running up a line of credit and hoping you'll be able to pay it off someday.

Even if you don't have much trouble finding new business, you still have to devote a lot of energy to it. Once you get it, you have to balance the top priorities of all of your clients against your available time. You find yourself wishing that you could spend more time doing the work, and less time figuring out what you're working on. Even though an employer may present you with conflicting goals, you can (theoretically) always boil those down to what is most important to your employer. Multiple clients always think their #1 is the most important.

Employees generally enjoy benefits that consultants have to pay themselves. Health insurance (at least here in the United States) can be a major drag on income, whereas most employers pay at least a decent portion of it -- and they can negotiate group policies that often provide more coverage for less anyway. Paid vacation and sick leave come to employees -- consultants have to plan for that unpaid leave. Often we don't, so we end up not taking a vacation for years. When it finally catches up to us, the stress of illness is amplified by the realization that we're also losing revenue. Employers often match retirement savings -- guess who does the matching when you work for yourself?

Just managing the details of running a business consumes a lot of personal energy and attention. An employee doesn't have to worry about that, unless it's part of their job.

Things to watch out for before leaving consulting

Be careful, though, not to fall into the "grass is greener" fallacy. It's always easier to focus on the negative side of our own experience. When we compare that to a proposed path that eliminates those pain points, we need to make sure we don't ignore the different issues we might face in the new situation.

Are you ready to surrender a good deal of autonomy? Your employer may exercise more control over what you do than your clients even wanted to. Hopefully, your boss will be receptive to input, but ultimately the decision is no longer yours to make -- for better or worse.

Have you fully analyzed the difference between your proposed compensation and what you're making now? At least in the United States, the tax effects of making the transition from self-employed business owner to employee are significant and complex. Whereas you may have avoided income tax on a good portion of your revenue by tracking all business expenses, you won't be able to deduct nearly as much as an employee. On the other hand, you won't have Self-Employment Tax (which ostensibly makes up both the employer and employee portions of FICA contributions). Other nations will have different issues to worry about, I'm sure. In short, just as you can't simply divide your desired annual income to come up with an hourly consulting rate, neither should you take your annual consulting revenue as a benchmark for your employee salary. Somehow, you end up losing money both ways.

Being an employee will make it harder to fire you, and in most cases should that happen you can take advantage of Unemployment Insurance. However, even though a consultant is easier to fire, that rarely happens with all of your clients at once. Being an employee is usually an all-or-nothing affair, and you're committing more of your future success to the fortunes and whims of just one company.

What about your clients?

Assuming that you aren't totally devoid of current business, you need to think about how to transition your clients away from needing you. That's a requirement of human decency. Besides, it never pays to burn bridges. You might need them again someday.

If practical, try to finish up any current projects, or at least get them to a point where they're stable and well-documented so that someone else can take over. If you have a colleague whom you trust, recommend them to your clients as a replacement. They don't have to take your advice, but at least you didn't leave them without an option.

In some cases, you might be able to continue to consult part-time while you work as an employee. If you do, you should make sure that both your employer and your clients know and approve. You don't want your divided attention to compromise your effectiveness, or to create the perception that it does. In any case, it might be a good idea to keep your business licensed and your bank account open at least for a while so that if one of your former clients has an emergency you'll be able to bill them and deposit their check.

About

Chip Camden has been programming since 1978, and he's still not done. An independent consultant since 1991, Chip specializes in software development tools, languages, and migration to new technology. Besides writing for TechRepublic's IT Consultant b...

19 comments
ArtSposato
ArtSposato

Six months ago I switched from being a consultant to a full time employee - and have regretted it ever since. 


I felt more pride and security as a consultant - I liked the emphasis on the quality of the work and ability to get it done right and on time instead of all the politics and putting up with nonsense and game playing at the office. 


I actually got treated with more respect as a consultant - my time was more valuable and my input was more valued. As an employee they watch the clock and care more about you "doing your time" than getting things done. It's torture.


I hate having only one focus and not having different projects to keep my attention and new things to learn. 


So, after serving out a full year so I don't seem flightly, I am looking forward to going BACK to consulting. 


In fact, I can't wait to become a consultant again. 

baconsb
baconsb

This has been a struggle for me -- staying true to my intention of leaving my successful FT marketing job. I've been consulting for the past 8 months and it keeps getting better. I don't ever want to be an FTE again. But periodically I've been tempted by several opportunities for FTE marketing leadership dream jobs that nail all my criteria: awesome team, stock options, fancy title, crazy cool projects, major career advancement. I'm talking VP-level stuff at small/mid software startups. And I keep saying nope because apparently I value autonomy more than all those other things combined.


So to all the consultants-by-choice and entrepreneurs out there, I'm curious -- how do you cope with the self doubt that comes with saying no to something of that magnitude? If you are doing well for yourself financially and emotionally as a self-employed person, is there ever a point that one *should* consider FTE?


It's just so damn tempting.

mark.railton
mark.railton

Only just come across this again. Still in IT, in the web services sector. I have taken a role where I work in a team and am not on call. I have my roster that I work and thats it. Whilst my current job may be seen as more junior that what I was doing whilst consulting, its also more rewarding for me, as there is so much less stress.

lisa_work_aws
lisa_work_aws

I'm employed part time by a client and I know they'd love to have me full time, but I'm finding the transition to employment a struggle. In employment, the focus is time. Being at the office and putting in your hours, as opposed to self employment where getting the task done is the focus. It's the difference between 'being at work' vs 'working'. If I'm not working, there are other places I'd rather be. Employment means you're depending on one client. The reason I started my business is because I realized I was soley dependent on people I didn't have a lot of confidence in. Since going out on my own, my work has been steadier, even during these slower times. On your own, you do have to manage and market yourself, and it's not easy. But I have to say, I've even come to enjoy the networking etc. I also think being in business myself makes me a better employee, as I do think more like the owners than the workers. There's pros and cons to both sides, consider what you'll give up, and is it worth it before deciding.

MSMARIA
MSMARIA

Ok so I know this is the opposite of the question but I walked away from a prestigious 6 figure, secure full time job to go back to the uncertainty of contracting. Why? Because I can't work in the box of a FTE job. I have the freedom to do what I want and control what I want to do without the politics and craziness of a FT job. People ask me am I afraid of the fact there just aren't many available contracts. Well it's definitely a leap of faith but I don't ever want to go back to FT work. I rather downsize and position my lifestyle to accomodate contracting than HAVE to find a FT job. I am happier and free. Good luck to those of you returning back to FT work. To each their own. I don't think there is a wrong or right choice, it's really a decision you make that will fit for your own lifestyle. There are alot of people who can't handle the uncertainty of consulting/contracting and need to comfort of knowing they are getting a regular check and benefits, etc. It's ok. While others like the challenge of contracting. Choose what's best for you.

DFO_REXX
DFO_REXX

Each has its advantages and disadvantages. Although you MIGHT have more freedom as a consultant, you also have no power, for the most part. That is, you are hired for a specific skill, and you will not be asked to use your other skills... as a full-time employee, you often can make useful suggestions and be considered for work "above and beyond". A lot depends upon which company you work for. Sometimes there's also no feeling of belonging as a consultant. Employees sometimes look at you and feel like you're taking a job away from a friend, or making them look bad, or any of several other things. This happens as an employee too, but at least there you have someone you can work with to take advantage of all you have to offer.

freez965
freez965

Consulting and running your own business (self-employment) is an entirely new mind-set as compared to being an employee, and I had a learning curve I didn't realize I wasn't prepared for -- but I thought I was. Having been a consultant for other companies many times, an employee many times, and finally leaving the "corporate" rate race nearly 6 years ago for my own consulting company (going on 11 years now), I personally prefer ALL of the hassles of consulting and finding business than I do working for an employer...I have free time, I make my own schedule, I meet lots of great people, I can work from practically anywhere, anytime, I don't have to worry about office politics, and so far, vacations are a non-issue, because I have other consultants and companies that "mind the store" when I want to be away. Mind you, getting to this place takes HARD WORK, and I was never rewarded directly for that kind of effort by any employer -- ever (when I left my last job, one of my former employees said they had to hire 6 people to replace me -- a new record for me). I NEVER had that much freedom as an employee, but I was close. As a self-employed consultant, I've never had so much time with my family, and it's great! The big downside for me as an employee, is that everything in your life: home, car, health insurance, tenure, income, retirement, vacation, and on and on, is tied to one "employer/client" or really one "person", i.e., you're boss. That just never really felt good (or smart) to me, and after seeing the "effects" of unemployment throughout my career on many different people, I never wanted to leave myself hanging on that "ONE" client -- the "employer" -- I'd rather have 10-20 or more "employers" than just one...Granted, everyone has their own comfort level, and I knew plenty of "happy" employees if you could call them that, it just never was the best fit for me. In fact, I had a teaching "job" part-time for a while at a local college because I liked teaching technology to noobs, and my "boss" referred to me as an "employee" in a sentence one time and I almost tossed the salad...I guess that's my comfort level with being an "employee"...your mileage will vary...Anyway, those are my reasons for staying in the game of consulting/self-employment, and becoming an employee might be a nice retirement gig, but I'm a long way from that...

maj37
maj37

I am curious why so many people here seem to be saying that if you are an employee then you can't/don't keep up with the latest technology. That is not necessarily true. Yes some people and people in certain positions tend to stagnate but not always.

mike
mike

I have been consulting for about 5 years on my own and 10 years with a partner before that. I work about 5 to 10 hours a week on the road and maybe 10 hours at home. I make between 50-70k anually with about a dozen clients. Loose a few, gain a few, add a little gig here and there once in a while. I have 2 kids and would not give up the time I have with them and my wife for twice what I am making. I did the corporate gig before consulting and they want your blood. There is no 40 hr week for IT, at least not unless you are working for $8-10 pr hour.

Tony Hopkinson
Tony Hopkinson

but I did it, over seven years ago. Steady income, getting a mortgage, move on from fading skill sets and didn't particularly enjoy being a businessman were the main reasons. Even given all that, I chose my current employer very carefully. I was in my early forties, so I decided to work for someone I could contemplate staying with a long time. They are big, they are good,they are hugely successful and even given typical corporate garbage, they show they value their valuable people. Don't rush into it.

mark.railton
mark.railton

I'm in the process of doing this as we speak. I have been consulting part time for years and for the last couple I have used it as my main source of income. I have just taken on a new part/full time employment and am phasing out my clients as I finish up on existing jobs. The fact that I can turn off my computer and phone and not be worried that someone might be trying to get me due to a major issue is pure bliss.

CACASEY
CACASEY

There comes a point where becoming an FTE is just not an option. While Chip mentioned health insurance primarily with a focus on cost as part of a larger compensation package, there is another angle to consider: that is getting insured at all. If you leave consulting (drop your coverage) and then attempt to return to consulting you may find you are no longer insurable or your rate may be multiples of where it was when you left. Another consideration is compensation. It is highly unusual for anyone leaving consulting (after being a true consultant for a period of time - not just someone between jobs picking up part time work) to land anywhere near a comparable return, even after adjusting for expenses no longer incurred directly. The deal immamont describes is an exception rarely seen, unless you are being hired into a very niche market, or had a below market consulting rate to begin with. All that said, I have seen many consultants over the last 10-12 years in particular, leave technology and apply what they knew to running small web-based and brick-and-mortar retail businesses. Not quite the same thing as being an employee of an existing company, but sometimes what makes sense for a needed lifestyle change.

sheilaneely
sheilaneely

...still consulting. You make excellent points, most of which I've considered each time a full-time opportunity presented itself. I'm still not sure I've made the right decision, but continue to enjoy the flexibility that consulting has allowed me over the past 9+ years. Here in the US, the medical benefits are a big consideration, but sometimes I'm not sure how much my full-time employed colleagues are really saving there. Disability is another one. It's essentially impossible to find an affordable disability policy. I do fear that an extended illness or surgery would have a severe negative impact on my livelihood.

mbaizman
mbaizman

I'm leaving consulting after 4 years for several reasons: losing a large steady client, uneven income, and getting tired of the "you kill what you eat" cycle. I'm ready and excited to be part of a larger team, and I didn't like the thought of working for a consulting firm where I was doing the same thing, but knowing that I was being billed out at a much higher rate (and potentially not having a large say in which projects I was assigned to). I don't start for another few weeks, but I'll report back as to how things go...

irnmamont
irnmamont

Personally, I found the sweet spot in working as an employee for the consulting organization. The bonus structure makes the financial aspect comparable, with some of the expenses that are not a tax write-off being reimbursed directly by the employer. To me, the main benefit of being a consultant is not so much the freedom (a lot of employers will give you sufficient latitude in your scheduling provided your deliver the results,) but the ability to stay abreast with the latest technology in production environments. I know a lot of consultants that were successful in becoming employees, I do not know of any who were successful in getting back into consulting due to the immense gap in skillset that develops after a very few short years

ArtSposato
ArtSposato

@maj37 6 months into full time my skills are already falling out of date and I have to keep them up on my own time and dime. It's awful

Tony Hopkinson
Tony Hopkinson

In fact I went back to full time because I was stagnating as a contractor. It's the same problem running your own business or working for someone else, generating opportunities. An employer isn't going to pay you to pick up a tool/skill they don't need, equally without someone to sell it to with a decent ROI, as a business man justifying training yourself can be an iffy proposition. I am making distinction between say learning SQL and upgrading a SQL Server cert.

maj37
maj37

So what kind of job did you take that lets you turn off your computer and your phone and not worry someone might be trying to get you due to a major issue? Did you perhaps leave IT and go into accounting, or maybe window washing?

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