Which is better for me? Contract or Full Time Employment?

As someone who has been in the IT Staffing business for more than 25 years, I’ve found that people within the tech industry are often unaware that they have more than one option when it comes to the type of employment they pursue. The three most common types of employment options are Full-Time Employee, W-2 Hourly Employee, or Corp-to-Corp/Independent Contractor. These different employment possibilities really boil down to different styles of professional relationships you have with your employer. I highly suggest that, before going into an interview or signing on with a company, you get to know the pros and cons as well as the specific considerations that go along with these three options. While this may seem daunting or vague right now, have no fear; I am here to break down these options and help you make the right decision for your career in the tech industry.

The Pros and Cons of The 3 Types of Employment Options

Full-Time Employee

The Basics: The allure of joining a company as a full-time employee is the sense of having a secure position for as long as you want it.

·        Pros:

o  Benefits: As a full-time employee, you will be eligible to receive all the company's benefits. This will include health/dental/vision/life/disability insurance, retirement benefits, and paid time off. Your employer will also withhold and pay the necessary federal, state, local, social security, Medicare, and payroll taxes. One less thing for you to worry about!

o  Stability: As a full-time employee, you will feel more included as part of the company and may have the opportunity to make more decisions that impact your work than if you are an hourly contractor. As long as you are meeting or exceeding your employer's expectations and disruptions do not eliminate your position, you will enjoy the benefits of ongoing work and not having to seek out your next project due to your contract ending.

o  Company Culture: Not to sound too cheesy, but, as a full-time employee, you become part of a corporate “family.” You get to participate in the company lunches, brainstorming sessions, town hall meetings, and social events, which helps build long-lasting relationships and friendships over time.

·        Cons:

o  Less Independence: As a full-time employee, your employer will expect you to complete the work they assign you to, typically within their core working hours. This means you may have less opportunity to pick and choose which projects you work on.   

W-2 Hourly Employee

The Basics: Coming on to a company as a W-2 hourly employee means that you are being hired for a specific project and will be paid on an hourly basis. You’ll see that W-2 hourly employment is the middle ground between full-time employment and a Corp-to-Corp/Independent Contractor arrangement.

·        Pros:

o  Benefits: Many companies offer a subset of benefits for their W-2 hourly employees. Although you may not receive the type of full coverage that a full-time employee is entitled to, you aren’t left hanging high and dry when it comes to company benefits.

o  Taxes: Companies are responsible for filing all the taxes relevant to your work with the company.

o  Project-Based Work: Companies often bring on W-2 hourly employees to fulfill specific project needs. This is great for people who enjoy choosing which projects they take on that align with their specific interests or provide the opportunity to gain additional skills and expertise. It also allows you to break ties with a company easily should you want to leave once you've completed the project you were brought on for.

·        Cons:

o  Instability: The project-based work I listed above as a pro could be considered a con to some people. Since companies hire W-2 hourly employees on a project basis, they have the right to terminate your employment as soon as the project is completed. On the upside, they could also choose to keep you on for another project if you meet expectations and fit well within their team.

o   Limited Benefits: Yes, we have another pro that can also be considered a con. While a company may offer their W-2 hourly workers health care benefits, there are other luxuries that you are not entitled to. You typically will not be eligible for paid time off, pension plans, or retirement plans.

Corp-to-Corp

The Basics: When you enter into a Corp-to-Corp relationship with a company, the company pays an LLC or corporation for the work you do versus paying you as an individual. In turn, your LLC or corporation is responsible for filing and paying taxes as well as maintaining liability insurance and creating your benefits package. Your client company will typically expect you to send an invoice outlining a fixed price amount for work you completed, or alternatively, the hours you worked and the agreed-upon hourly pay rate.

·        Pros:

o  Tax Benefits: You may be able to leverage your entity for tax savings which you can’t do as a W2 hourly employee or full-time employee.

o  Freedom: Working in a Corp-to-Corp relationship gives you complete control over when you decide to work. The company that you are working for does not have the power to require a certain number of work hours per week. You also have the freedom to take a sabbatical. Should you put in the hours and save up money for six months and want to take three months off, you are free to do so. However, the company you are working for is not required to take you back after returning from your time off.

·        Cons:

o  Zero Benefits: Since the relationship between you and the company you are doing work for is Corp-To-Corp, you are not eligible to receive any benefits, such as paid time off, healthcare insurance, or retirement benefits. The only thing the company owes you is payment for work which you completed according to agreed-upon expectations.

o  Financial Responsibility: All financial aspects of running the LLC or corporation fall on the owner. This includes filing and paying taxes, invoicing, and recordkeeping.  So, you may want to consult with your tax adviser or CPA before entering into a Corp-To-Corp agreement to ensure you are set up for success.

Which Relationship is Right for You?

One point that I want to drive home is that each relationship - whether it be Full-Time Employment, W2 Hourly Employment, and Corp-To-Corp/Independent Contractor – has advantages and disadvantages. I recommend that you research each of them carefully and determine which is best for you based on what matters most to you. Also, prior to engaging with a company, ask them what history they have in terms of working with contractors versus employees. Try to find out from members of the organization how differently they treat each category of worker. Keep in mind that not all companies are willing to work with all three categories of workers. At the end of the day, you get to decide which opportunity to pursue, and the power of decision-making is in your hands.