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Thinking about this today, what's the big deal? We're currently moving over to more of a contract model with the employees.
Aside from an unstable work situation (but that won't be an issue here) I'm having a hard time seeing what the big fuss is?
From a taxation point, I'd much rather be a contractor through my own LLC. There's a lot of incentives available there that would otherwise be unavailable if you were just a worker.
The only problem I see is insurance. However, everywhere I've worked previously, health insurance had such a crazy deductible (like <3k was out of pocket, >3k they paid for), a worker on contract could surely find a better situation than that.
Not seeing why so many see contract situations as unfair or bad. Like I said, if I had the choice, I'd take full-time contract over full-time employee, every time.
Thinking about this today, what's the big deal? We're currently moving over to more of a contract model with the employees.
Aside from an unstable work situation (but that won't be an issue here) I'm having a hard time seeing what the big fuss is?
From a taxation point, I'd much rather be a contractor through my own LLC. There's a lot of incentives available there that would otherwise be unavailable if you were just a worker.
The only problem I see is insurance. However, everywhere I've worked previously, health insurance had such a crazy deductible (like <3k was out of pocket, >3k they paid for), a worker on contract could surely find a better situation than that.
Not seeing why so many see contract situations as unfair or bad. Like I said, if I had the choice, I'd take full-time contract over full-time employee, every time.
If you were an long term employee with job security, a pension, 401K match and great insurance it would likely not be a step up.
I do know guys who left a job with a full pension and retiree health care and stepped into a contract job with equivalent or better pay. It worked great for them!
Now if your previous jobs offered lesser benefits, no pension, questionable job security and similar pay. Then it might look like a decent deal.
When it is used with people who have real experience and other options... it's bad enough.
but when contracts and temps are used at what should be the entry level... it's awful.
Worse is when it's used in perpetuity specifically to avoid employer responsibility.
It's a very bad thing. I am in IT, I work for a company that sends people out to companies as contractors, often in long term roles. The place where I and several of my colleagues were placed is a great place to work, but the actual employees at this company get much, much better pay, benefits, and vacation time than we do as contractors. So the contractors are always in the hunt to find other regular permanent jobs, or else working to get hired on permanently at this company as FTE's. Contractors are never vested in the place they are working, so you can't count on having your workers "go the extra mile" for the place they work, because they know that place is not vested in them- does not care about them, either, since they are just a contractor. So you won't often get the same level of hard work and dedication out of them, nor will you get that person to stay long term.
Again in my example- several people I work with are great at what they do, and the company where we are placed really has poured a lot of time and resources in training them for the role and yet is powerless to hang onto them if they decide to leave. They are leaving one by one not at all because of the workplace environment, but because of the company we actually work for- because of the poor pay, benefits, etc. And so there is nothing this place can do to hold onto these good contractors since they do not dictate what pay, benefits, etc. the workers get since we are contractors.
The supervisor here at this company discusses this with me a lot, he hates the situation and wishes the upper management would allow him to just hire my entire team on permanently so they would have control over these things and have less chance of losing good guys every few months.
The difference is huge- if I were to get hired on here at this place, for doing essentially the same job I would get a $10K per year pay raise, medical insurance would cost $400 per month less for myself and my son, and with that I would get better coverage with a drastically lower out of pocket annual maximum and drastically lower deductible, and I would get more vacation time. I know this because our team is split, half are regular FTE's here and half are my guys, contractors- all doing the same work.
So it's a poor situation for the workers and a poor situation for the companies if they care about having quality workers who stick around and have dedication to their workplace.
You have to be more organized and more mindful of the tax implications, particularly if you aren't a LLC. Hopefully, Obamacare will help somewhat with the insurance. Make sure you fund your own retirement plan.
I worked contract for years but the thing to remember is 1) you can be released with little notice, and 2) the benefits many large firms offer make total compensation 40% over base salary so don't underprice your expertise... I always asked for four times my corporate salary and would not even talk about anything less than double.
It is a good system for some workers and some companies some of the time... evaluation is critical.
I've worked Contract (Corp2Corp) most my career. The biggest benefits are pay and how easy it is to reach the maximum contribution limit of your 401k ($49,000 or whatever it is now). Putting away that kind of money tax deferred year after year has afforded me a great level of comfort financially.
The downside is that no one holds your hands and it can be tough if your health insurance requirements are high.
You have to be more organized and more mindful of the tax implications, particularly if you aren't a LLC. Hopefully, Obamacare will help somewhat with the insurance. Make sure you fund your own retirement plan.
It's pretty hard NOT to.
15.3% SE tax
25% federal tax
9.3% state tax...
Or I could put it into retirement and not pay any of those. I'm ignoring that you can deduct half of the SE tax for simplicity, but that's not really going to materially change anything. Why on earth wouldn't you maximize your retirement? It beats the heck out of paying 40 cents on the dollar in taxes.
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