Note: I started this article shortly after my last career transition and never published it. I’m now in another transition time and wanted to write something about my experiences with contract work.
Especially for older job seekers, contract work is often more readily available than full time employment, and it can be a “try and buy” for the employer and for the job seeker. Once the employer sees that you are a cultural fit, can do the job and are a hard worker they may be more willing to make a long term commitment. At my most recent company, virtually all User Experience employees came in initially as contractors and were hired after six months or so if there was a good fit.
Working with contract staffing firms
- Work with a small number of firms that have good placement records in your industry and that provide support for their contractors. In the creative space there are a few contract firms that are known for good contractor experiences.
- If you’re interested in a particular company, find a connection there who can tell you if they have a preferred staffing firm they work with. The firm that got me into Best Buy specialized in telecommunications staffing, and they had good penetration in the mobile division of Best Buy. Most of the contractors on my team were placed through them. At U.S. Bank, almost all the user experience people were placed by the firm that placed me there. Neither of these firms were the biggest names, but they had strong niche positions in good companies.
Consider your goals
- Learn how companies use contractors. My first two contracts were highly unlikely to turn into full time positions because both companies tend to use contractors long term, sometimes for years. The contract I took in 2012 was a contract to hire position so there was a good chance that I would become an employee (and I eventually did). Both types can be good solutions, depending on what you want and where you are in your job search.
- I was fine with a part time contract with little chance of going full time early in my transition, because it provided me with some steady money coming in that would extend my severance pay while I continued to look for something longer term. It was also an opportunity for me to try freelance consulting work, but without the pressure of relying solely on that type of work for income.
- Later in my transition my severance was gone, my Cobra coverage was ending and the consulting work I was getting was sporadic and at too low a rate to be a viable business for me. I was no longer interested in a long term contract and took a position that was advertised as contract to hire.
Negatives about contracting
- Contractors are “at will” employees and there is even less job security than there is when you’re a full time employee (which isn’t a whole lot). It can be stressful to have a gap between employment every six months to a year.
- Depending on the contract firm you work with, you may have benefits available through that firm but without the subsidies you get when you’re a full time employee, so health coverage is expensive. The good news is that with the Affordable Care Act insurance companies can no longer refuse coverage if you have pre-existing conditions.
- Some firms do offer limited holiday and vacation pay, but you’ll probably have to work a certain number of hours to be eligible. I find that when I’m doing contract work, holiday weeks are stressful because of the limited pay I receive those weeks, and I take very few days off other than holidays. Others are better able to take time of without pay and not be stressed by it.
Types of contracts
- W-2 contracts: When I first contracted in the 1990s there were very few of these. Most contracts were 1099 contracts. That changed due to some legal issues, and now most companies use W-2 contracts. This means taxes, social security, etc. are deducted from your checks, and you’re not subject to self employment taxes because you’re considered an employee of the contract company. This is an easy way to do contracting, but since there is more overhead for the contract firm your hourly rate will probably be less than what you’d get as a 1099 contractor.
- 1099 contracts: These sometimes go through a staffing firm and other times are negotiated directly with the company you’re doing the work for. Nothing is withheld. You tend to get higher hourly rates this way, but you may also need to pay self-employment tax and do quarterly estimated tax payments.
During my 2011-2012 transition I did a mixture of both. My primary contract at Best Buy was W-2, as was an off-and-on contract I did part time for another company. Some freelance journalism I worked on was 1099 work. I didn’t have to do estimated taxes because the majority of my income had taxes already withheld. I just had a bit more withheld from the W-2 payments to avoid getting penalties for not having enough taxes withdrawn each quarter.