Contract positions can be appealing due to increased flexibility, higher pay (at times) and as a foot in the door at a company, among other reasons.
Before making the jump to contract, there are significant differences you should be aware of between being a contract and full-time employee.
Contract positions typically entail being employed by a consulting company who works with employers to fill positions. The typical reason is usually “staff augmentation”, where there is a temporary need for more employees for a particular job than normal. Since it is temporary, the employer will often add contract positions instead of full-time positions. A project installing a new software system, for example, would be a good example of staff augmentation because there is a defined temporary need for more people to do the work.
The consulting company then works with these employers — typically the consulting company is a “preferred vendor” for this kind of work — to place the contract employee into a position that meets the skills needed by the client.
Everything may be great if you’re working full-time hours with a defined contract period and you are getting paid some dollars to do so. But what’s the difference between you and a full-time employee at the client company?
1. Your benefits will be different from your client company
Typically, contractors are paid more money on an hourly basis than full-time employees, but their benefits are usually very different. There is no paid vacation time, though some contracting companies try to mimic paid vacations by cutting back your pay and applying it to “paid time off” as you build up time. But the paid time off is usually for both sick days and vacation.
The 401(k) programs will be different and the timing to gain access to the program will be different as well.
You usually don’t get the perks of the client’s firm, such as access to the company gym, programs, parking and other discounts found at many companies.
Plus, your health insurance will most likely be less subsidized by the employing company rather than your client company. You’ll often pay more for a less featured plan than your client company.
2. Layoff rules do not apply to your position
If you are under a contract, the contract usually provides for something simple to end it, such as a two-week notice to your consulting firm.
Most full-time positions have government regulations associated with layoffs, or performance terminations that must be followed. State laws, for example, usually need at least 3o days notice before a contract end date in the case of a layoff. Even if you are walked out the door on the same day, you get 30-days of pay. You also usually get all of your accrued vacation and sick time as well.
But a contract employee usually receives only two weeks notice. Depending on the company, you may know your time will be up earlier than that because your consulting company wants to know if they should start marketing you to other companies.
3. How contractors are treated is dependent upon the culture of the client companies
Some clients give contractors full access to company information — organizational announcements, pronouncements from the executive team on goals for the year, access to the online learning centers and daily announcements about the company. Others don’t.
Some clients are used to contractors and pay no attention to whether they are contracting or full-time; they just want to get the work done. Other clients treat contractors as second-class citizens and don’t give them the time of day to get their job done.
In other corporate cultures, contractors are seen as agnostic to the political side of corporations and are viewed as safe to gossip to about the company.
Is contracting right for you?
The same rules apply to contracting when looking for a full-time job: You should consider if the position will offer new opportunities to learn a job skill, broaden your business network and position you for employment security.