Contracting vs. Permanent Employment


Four years ago I took a big step and decided to leave my permanent job with EDS, a computer consulting company, and venture out on my own as an independent consultant.  I had been with EDS for 11 1/2 years.  A few people I knew had already made the leap and were successful in doing so.  I contemplated the idea for quite a few months.  It’s a big step.  The economy at that time (2006) was quite good (no recession as we’ve just experienced).

It was becoming quite apparent that even though my “permanent” job allowed me to “sit on the bench” between being placed at various client sites (and still get paid), even the large consulting companies were waiting mere weeks before laying off permanent employees who had been with the company for as many as 17 years.  I quickly saw that there was no loyalty and it would only take one short stint on the bench before unemployment came knocking.

I waited until I saw what would happen with one of these independent consultants that I know when they finished up one contract and looked for another.  In this case it only took three weeks before finding another position.  This was the green light for me.  I had been concerned about waiting months between contracts especially since I have a family to support (I’m the only breadwinner for the time being) so this was my first priority to guage.

Prior to venturing out on my own, I had more than 12 years of experience coming up through the ranks of being a programmer, an analyst, a team lead and up to project manager.  My reputation in my relatively small city of Winnipeg was very good.  During my time at EDS I was continually asked to come back to projects that I had left which told me that the clients were quite happy and satisfied with my work.  In this small community, reputation is rather important as it’s often more who you know and not what you know.

So I took the big step and found a one year contract to get me started.  Wawryk Consulting Services was born.  That one year contract was extended for another year and after that I decided to move on to a 16 month contract at another client.  Now I’m onto my third client and was just informed that I will be extended here as well.  So far (knock on wood) I haven’t had any lag between contracts and like I said it’s been four years.

I’ve been working with a consulting company who is the go-between from me to the client.  That company is Smart PlanIT and they handle billing and collecting from the client (I bill Smart PlanIT directly).  They also look for contracts for me as they have many contacts they deal with.

There is definitely more risk involved in going independent.  Quite simply, if you don’t work, you don’t get paid.  And that goes for vacation time as well.  There’s no more 3, 4 or 5 week per year vacation limits.  It’s whatever you negotiate with your client as to how much time you can take off.  Some like more time off, some like less.

Is the extra money worth the risk?  It is if you put away some money for those “just in case” times where you have a significant break between contracts.  Generally when you go independent you also do not have access to benefits.  Take this into account when determining if the extra money is worth losing your benefits.

If you’re lucky enough to be with a compnay with a good pension plan, consider putting away a portion of your income when you go independent to make up for the shortage of retirement cash you will lose from eliminating this pension plan.

Going independent is not all roses and sunshine.  There are pros and cons to this chosen route.

 Below are the things I really enjoy about being independent:

  • The elimination of certain mandatory activities required by being an employee of a company, such as career education planning and performance reviews,
  • The elimination of being a *number* instead of a *person*.  That is, the HR department of your company probably doesn’t even know who you are.  Furthermore, they may not even be in the same city or country as you,
  • There is no limit to the amount of vacation time you can take in a year,
  • You’re not stuck in a role or a position until the company wants to move you.  This means you could be doing something you don’t like for a very long time until you either leave the company or the company chooses to listen to your complaints,
  •  Raises (or non-existent raises) based on how the company wants to pay you.  When you’re independent, you negotiate your own rate and if upon an extension you want more money, you negotiate for it.  That said, you may not get it but if they want to keep you, they’ll make some arrangements.

 

 

 

 

 Some of the things that I find are disadvantages of being independent are:

  • Not everyone chooses to be set up as a corporation but if you do, make sure you have someone help you out with the paper work and legalities.  This could be somewhat of a daunting and cumbersome task if you’re not fully aware of what needs to be done,
  • Doing the accounting.  Whether you get an accountant (extra cost to you) or you do it yourself (extra learning curve and time), it’s inevitable that the accounting must be done.
  • If you’re a corporation you need to pay the Canadian Pension Plan cost twice, once from the corporation side and once from your personal side.  This will eat into the profits of being independent,
  • Potential lack of a benefit plan.  Take this into account when working out the figures of what your income should be as an independent,
  • Sick time is not paid.  There have been times when I’m not feeling 100% but I would rather make the effort to struggle it out at work than miss the whole day’s pay,
  •  Vacation time is not paid.  Sometimes if you take a week off to “laze around the house,” you have to guard against calculating how much money that week of vacation is costing you.  Or, similarly if you go on a vacation you have to resist the urge to include the amount of money you will lose for that week off in your vacation budget.

In the end, there’s no doubt in my mind that I will stay as an independent consultant.  Sure, it’s not for everyone but if you look at the employment landscape these days, your permanent job may not be as permanent as you may have thought.  And I’ve grown accustomed to having the elevated life style that independent consulting has granted me over the past few years!

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About brianwawryk
PMP and Prince2 certified project manager.

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