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Full Time vs. Subcontract Employment

By Brian.H ·
I have been approached by a defense contractor who appeared to take interest in my resume, literally due to a 5 year contract opening for a computer support position the defense contractor had won. The discussion lasted 29 minutes with a newly fresh outlook of gainful employment in the I.T. industry after being laid off for close to 18 months from the telecommunications industry. Since then, my resume had been proactively rewritten, professionally tailored. A lot was said and spoken about inthose 29 minutes.

My current back ground is a four year degree, B.S.I.T in Networks & Telecommunications support with 4.5 years as help desk, I.T. Systems Analyst, database development consulting, and field service technician with some date gaps of unemployment.

The question that was imposed on me from the project manager that had personally called me was to ask me if I was interested in either Full Time Employment or Sub-Contracting. Per the project manager, he didn’t have a preference that he wanted me to choose; per his word’s, “You can go any where you decide.” Further more, he said the job entails the exact back ground you possess already, but wanted to confirm that I had earned my 4 year degree already, yes I did.

What do I need to know in regards to be a Sub-Contractor for that particular position? As a full time employee, I would get the employee package, but as a sub-contractor, what do I get? I fully believe I need to govern, protect my own assets as to understanding taxes to handle, medical, pension plans, and other insurances, but that adds up. If I choose sub-contracting, what do I look for in negotiations of a decent salary that will comfortably cover those things, but also be able to live comfortably too?

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Control Destiny

by Oldefar In reply to Full Time vs. Subcontrac ...

There are advantages to being a self-employed contractor, but it takes the right mindset.

Typical employee cost is salary plus 25%. This means that if they are offering you $80K as an employee, you are even at a negotiation point asking $100K asa contactor. If the position is being filled by a body shop (Manpower, Volt, etc.) the client expects an additional hit on top of that of another 10 to 30 percent.

Next, you have to consider how you will handle your own benefit package. Medical, retirement, days off - this all has to come out of that contract. You need to have a plan of your own in place to insure you have the "paid" vacation and holidays.

A five year contract versus an employee adds the issue of raises. I suggest youwork an annual bump into the fee to handle that. Alternatively, set a flat rate so that you bank the increases. Do a little research first - what has the cost of benefits done the past five years and what would that mean in terms of the annual bump plus raise.

Talk with an accountant on setting up to take the best advantage of tax laws. You may very well be able to write off some of your home costs, some or all of your personal technology, and even additional eductation if you structure yourself correctly.

The local ICCA chapter may be a good place to ask questions and find references to a good accountant focused on independent IT contractors.

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Worth the hassle?

by timwalsh In reply to Full Time vs. Subcontrac ...

You need to ask yourself a couple of questions.

Question 1: Given the same benefits dollars, could you put together a personal benefits package that is comparable or better than what you would receive as an employee?

Another issue is taxes. As a sub-contractor, you would ptobably be responsible for making sure ALL taxes are payed at the correct time.

Another issue to check: Often any money deducted by an employer to pay the emplees share of benefits is deducted pre-tax (which has the benefit of reducing the amount of income that is taxed). Would this "benefit" be available to you as a subcontractor?

Question 2: If you can put together a better benefits package with the same dollars, does the added advantage offset all the time and energy (and hassle) required to manage all the pieces, not to mention the tax issue.

Having said all this, there are companies out there that specialize in handling all these "hassles" for self-employed contractors and consultants. One such company (that I am familiar with) is Payrolling.com (www.payrolling.com). It appears that Payrolling.com only does business in California. But I would imagine there are similar businesses in other states. But realize that these services aren'tfree, so you would still need to ldo a cost-benefit analysis.

If you choose the sub-contractor route, don't expect to make out any better as far as net income. I'm sure this company knows exactly how much money they spend on benefits as a percentage of salary. You need to try and determine what that percentage is for this company. That will be your magic number.

Good luck, no matter which way you go.

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