With millions of positions temporarily or permanently eliminated in the wake of the coronavirus pandemic, many people are seeking alternative forms of employment. Even if you’ve been a full-time employee your entire working life, part-time work and one-off gigs may suddenly be on your radar.
Today, we’re taking a closer look at one type of work you might be thinking about if you’re out of a job: contract work. We’ll compare the differences between contract work and full-time employment and discuss some pros and cons of contract work to consider if you’re thinking about trying it.
Contract Vs. Employment: What’s the Difference?
The main difference between the classifications of contract vs. employment are what the company can control. For a full-time employee, the company has a lot more say in not only the work that’s done, but how it’s done.
In addition to dictating job duties and deliverables, an employer can set their employee’s hours, determine where the work will be done (i.e. an office) and direct which tools or applications will be used to complete the work. An employer can also dictate what employees cannot do, like doing outside work for a competitor or posting about the company on social media.
A contractor, on the other hand, has full control over how the work in a project is done. The only thing the employer gets to dictate is the deliverable. The contractor has the final say on what tools they use to accomplish the work, how long and when they work, where they work, etc.
The second major difference between contractors and employees is how they are paid. Employees of a company receive a W2, while independent contractors receive a 1099. The employer is not responsible for withholdings like federal income taxes and FICA taxes for a contract employee as they are with full-time employees. We’ll talk more about the implications of these financial classifications in the pros and cons.
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Pros of Contract Work
It comes with a lot of flexibility
Contract work is great for trying out a job to see if you like it. You can choose whether to carry on after the contract is up based on how it goes. Working on a contract can be an ideal way to fill a gap in employment while you look for something more permanent. You can also build a full-time income by taking on multiple contracts at once.
It’s a guaranteed paycheck
Because you sign a contract before any work is done, you’re guaranteed to get paid (assuming, of course, you uphold your end of the deal). If you negotiate certain terms, like getting paid 50% upfront, it can bring in a lump sum of cash that’s a nice cushion when your finances are uncertain.
Contract work allows you to try new things that might be outside the scope of your “normal” profession. It offers the opportunity to work on creative projects and pursue work in areas where you have a passion. Working on diverse contracts can increase your technical knowledge, sharpen your skills and help you learn new ones you might not be exposed to in the confines of a 9-to-5 regular job.
You have the potential to earn more money for your time
If you have a knack for working efficiently, you can potentially earn a lot more on an hourly basis than you would working for a fixed salary. For example, let’s say you land a contract that pays $2,500. If you can complete the work in 10 hours, you’re essentially making $250/hour. It’s unlikely you’ll command that kind of hourly rate in any part-time job.
It can be a foot in the door to full-time work
This is known as contract-to-hire. Under such an arrangement, the contract serves as a “trial period” of sorts. At the end of it, the company will decide to either hire the contractor full time or end the contract. We’ve seen a lot of companies moving to a contract-to-hire model during the pandemic, since it’s a way for them to postpone the costs of onboarding and benefits while still kicking off the working relationship.
It can earn you experience with industry heavyweights
Major companies frequently work with contractors to save on overhead costs, cover staffing gaps and access niche expertise. A contract gig with a company like Coca Cola, Amazon or Nike looks great on your resume and can be easier to land than a full-time role.
You get to skip out on office politics
Politics come into play in even the healthiest of workplaces. As a contractor, you’ll be mostly removed from office cliques, gossip and pettiness.
You’re your own boss
The most universal benefit to contract work is that at the end of the day, you answer to yourself. If you’re an independent, conscientious worker who likes to be in charge, contract work might be the perfect arrangement for you.
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Cons of Contract Work
You’re responsible for your own benefits
As an independent contractor, you won’t enjoy an employer-sponsored health insurance policy or retirement plan. You’ll be responsible for covering these things on your own, and depending on your situation, this can be pricey.
You’ll have to cover additional taxes
As we mentioned above, independent contractors aren’t subject to withholding, which means you’ll need to keep track of what you make, calculate the taxes you owe on your earnings and submit payment to the IRS yourself. You’re also responsible for an additional portion of your federal income taxes (which, if you’re a full-time employee, are paid by your employer) and self-employment taxes, which account for your contributions to Social Security and Medicare (if you’re a full time employee, you’ll typically see these deducted from your paycheck with the term FICA).
Independent contractors often charge rates that, on the surface, seem incredibly lucrative, but you have to factor in all of the additional financial responsibilities mentioned above to determine the actual take-home pay.
The end of the contract means no more paycheck
Even if the client likes working with you, there are no guarantees after the current contract is completed. They might not need any more work done beyond the initial scope, or they might decide to bring in someone internally to tackle similar projects moving forward. One common mistake contractors make is going into a project with the assumption that it will lead to an employment offer; while this sometimes happens, it’s usually the exception rather than the rule.
When you don’t work, you don’t get paid
This might seem obvious, but it comes with some unexpected mental hurdles. When you’re a salaried worker, you probably don’t think twice about staying home when you’re feeling sick or taking vacation days a couple times a year. As a contractor, though, that time away from work translates directly to dollars not being earned. It can be a challenge to adjust to this new mode of getting paid.
You miss out on the team experience
Some people thrive working as part of a collaborative team. If you’re one of these people, you won’t get that experience in most contracting roles. Depending on the project, you might have phone calls or video conferences that pertain to the work and in some cases might even complete your work onsite, but your job will largely be done independently and without that same “team experience” you have when you’re a full-time staffer.
There aren’t the typical opportunities for professional development
As a contractor, you won’t receive the same type of coaching you would get when working in-house somewhere. In fact, you might find the lack of direction challenging. You’ll have to seek out your own mentors and professional support system and if you want to advance in your career, create the opportunities to do so on your own rather than climbing a predetermined corporate ladder.
There’s an earning ceiling
As a contractor, your earnings are directly tied to the work you produce. No matter how lucrative a contract role is, there are only so many hours in the day and thus, only so much work that can be accomplished. This means at some point, you’ll hit an income ceiling. Thousands of people make a very comfortable living doing contract work, but it can be a challenge to find the payment sweet spot that is both reasonable for clients and sufficient to support you financially.
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Find a Contract Job with 4 Corner Resources
Think contract work might be a good fit for you? 4 Corner Resources can help you land a position that capitalizes on your skills and fits your personality while bringing in a paycheck during an uncertain time. We work with some of the top employers in the country and can make the connections that will build your resume and open doors in your career.
We handle contract, contract-to-hire and temporary positions and can talk you through the nuances between them to decide which is the best fit for you. Browse our open positions now and apply for any you’re interested in on our Jobs board, or send us your resume to be considered for future openings.