Should I Jump the Contractor Ship?

[puneri_punter]

I want your opinion and advice.

I have been a Project Mgr contractor (Corp-to-Corp) for the last three years in NYC Metro area. The money, work and tax advantages have all been very good.

However I am having a very hard time finding Corp2Crop gigs that pay $95+/hr. Therefore I was speculating if I should take a full time employment in a large corporation. (I have been getting quite a few FTE offers)

Let us assume the money in FTE is comparable or slightly lower than corp2corp.

From a long term (say 5 Years) perspective, what are the advanatages of FTE?

Please advise.

[Desi_by_Nature]

I don't intend to divert this thread, but i have a related question.

I am a FTE - lets say earning $X per year (base), medical insurance for family completely paid for by employer, standard 401k benefits etc.

Now I have an offer from a staffing firm for a contract position in the Seattle area for a huge technology company (no marks for guessing). I've never been on a contract before. They asked me my "hourly rate" and I have no idea what to tell them.

My understanding is that since i'm on a contract, i won't get the standard medical, 401k, ESOP benefits that other FTE employees will.

So what should be my hourly rate in terms of 'X'. Is there an industry standard formula?

[LoveIndia]

Lets say you are making $X per year in FTE.

If you go as a contractor on corp-to-corp basis or S-Corp basis, you will have to pay 7.65% additional Social Security Tax and Medicare Tax Plus FUTA/SUTA tax of 1%. Also, you will have to pay atleast $800 for Medical insurance for a family of 4 which depends on many factor such as Location, your family health condition and the number of companies offering insurance in that location. I will say you can add around $10000 per annum for medical insurance. Also, add down-time of 3 months in a year where you will have to look for projects and you will not be paid for it. So, effectively, I will add everything and will come out a figure of 60% more than FTE which is:

Contractor Salary per annum = $1.6X (FTE)
Assuming we all work 2000 hours in a year, then your per hour rate should be = $1.6X per year/2000.

Assuing you make $100000 in FTE, then you will have make $160000 per annum which is $80/hr.

Also, you can claim lot of business expenses and 25% to SEP IRA which will hugely save your tax.

[Chicago Desi]

OP,

How about having a management role or leading a team? If that important to you? As a contractor, you will always be an individual contributor.

[RRS]

#DBN,
AFAIK, the standard rate is 1.5 times your hourly rate as FTE and goes up based on your experience level and skill set and employer's urgency for the opening. For ex. , your base salary + benefits(Bonus, stock options(ESPP+ESOP),401K, health benefits, sick leave, paid leave,paid holidays, floating holidays, cash incentives+employer's share of SS/Medicare tax) add to be x per year and you work y hours in a year, your hourly rate is x/y. Don't take only base salary to compute your FTE hourly rate as there are other factors affecting your total compensation.

The contractor rate is 1.5 the FTE rate if it's corp to corp(independent contractor). If it's W2, then it's probably around 1.3 as 401K matching and SS/Medicare/unemployment tax share comes from the vendor who employs you and places you.If it's the former, you should ask higher than standard rate, as you need to be compensated for lean periods(or gaps) between contracts as OP mentioned.

Most of the temp positions offer contract-to-hire positions, that means you can enjoy higher perks only for a limited time :-)

[Desi_by_Nature]

Thanks LoveIndia, RaReSha ...that's very helpful information.

[puneri_punter]

OP,

How about having a management role or leading a team? If that important to you? As a contractor, you will always be an individual contributor.[/quote]

This is exactly my problem. I am in a Management role. Increasingly companies want Managers to be an employee. Hence I am having diffculty finding Corp2Corp gigs for PM position.

What you said is 100% true, I am seeing contractors are indidicual contributors. Either they are hired for a specific skill or for a very short duration.

If money was not a criteria, FTE is clearly a superior choice. But the money and tax savings of Corp2Corp are really hard to give up.:emcry:

I want to know what are the other benefits of FTE, especially long term.

DBN,
You should never accept a contractor position with W2. I have a spreadsheet that allows you to compare W2 vs C2C strictly from the money perspective. I will clean it up and post it.

[Desi_by_Nature]

DBN,
You should never accept a contractor position with W2. [/quote]

What does contractor position with W2 mean? what is wrong with that?

[Chicago Desi]

This is exactly my problem. I am in a Management role. Increasingly companies want Managers to be an employee. Hence I am having diffculty finding Corp2Corp gigs for PM position.

What you said is 100% true, I am seeing contractors are indidicual contributors. Either they are hired for a specific skill or for a very short duration.

If money was not a criteria, FTE is clearly a superior choice. But the money and tax savings of Corp2Corp are really hard to give up.:emcry:

I want to know what are the other benefits of FTE, especially long term.

DBN,
You should never accept a contractor position with W2. I have a spreadsheet that allows you to compare W2 vs C2C strictly from the money perspective. I will clean it up and post it.[/quote]

As a contractor, your career can progress only so much. The company cannot have direct reports reporting to you when you are in a contractor position. In that case, the career choices and growth options are pretty limited. I am willing to bet that as you move higher up into senior management roles, you can make a lot more money than what you can make as a contractor. This alone is reason enough, IMHO, to give up a contractor role and work as a FTE.

To draw parallels between your position and another industry, management consultants also make very good money when they are in relatively junior roles. However, at some point, they have to take up a FTE position with one of their clients to avail of the career growth trajectory and the performance bonuses. Not to say people do not make careers as practice leads, but those are few and far between.

[restlessdesi]

#1,

First you need to define 'career success' or 'job satisfaction' for yourself. For some its $$$, for some its titles, for some its quality of work and for others its a combination of all of the above.

For the short to medium term, while you are young and can still travel around, contracting is fun. You are usually in the thick of things, albeit as an individual contractor. You also get a lot of exposure to different companies, methodologies etc and a lot of intangibles you gain from them in a very short period of time. And most importantly, you are largely immune to political BS or personality issues that will eventually show up in most any workplace.

With families and kids, it gets difficult to travel and keep finding gigs locally. Around this time, you are also probably looking to be in 'cruise control mode' (read 40-45 hrs per week, decent pay, secure job, management role etc.) and then transitioning to FTE might make more sense. Regarding long term career prospects, stock options etc...they all boil down to $$$ eventually, hence my original question about 'job satisfaction'.

My 2 cents.