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Should I Go From Contracting to Being An Employee Again?
Mark Swartz, M.B.A. M.Ed.
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Question: How can I effectively, objectively and confidently determine whether to return to an employee situation or stay self-employed? What criteria, questions and pros/cons should be evaluated? I have been a sub-contractor consultant for 4.5 years and have been successfully employed on various projects. I have been asked to apply for a permanent, full-time position on a project I have just finished. Emotionally I'm reluctant to give up the ''flexibility'' I have as contractor, but logically know this position will help strengthen my skill set. I need a strategy to ensure I have evaluated this choice thoroughly. Please help!
Elizabeth R., Victoria, B.C.
Dear Elizabeth,
It's clear from your e-mail that you are striving to take an analytical approach in considering your options here. That is encouraging. Right now you're working as a sub-contractor, where you are essentially self-employed. To go back into the world of full-time, ''permanent'' employment is a significant shift.
You have asked if there are objective criteria to consider. There are, but interestingly enough they are influenced by how subjectively you weigh their importance. Here's an example. You can calculate to the dollar how much you would earn if you continued getting paid as a contractor, versus what your take-home pay would be should you become an employee. This is accomplished by comparing your projected taxable incomes in either case; adjusting for tax write-offs you can claim when self-employed; then taking into account the value of benefits, vacation pay, pension accumulation and the like as an employee.
But let's just say it turns out that, after doing these calculations, things are pretty much a wash financially. That is, your take home pay would be maybe plus or minus 10% of what it is today if you accepted your employer's job offer. Knowing this figure, it still comes down to how key money is to you when measured against a host of other factors.
Like the ''flexibility'' that you mention above, how much is this worth to you in actual dollars? Would you take a $10,000 raise in gross pay if it meant restricting your ability to structure your own day? Would that same pay boost lose its luster somewhat if you had to start reporting in directly to a boss who ends up being a dweeb?
Not that there aren't substantial upsides to re-joining the daily toil. You've said that by accepting this position, you would be strengthening your skill set. Think of this as an investment in your own future marketability. You might well gain knowledge and abilities that potential employers or clients would pay more for. Also you build up your personal security because by becoming more versatile, you broaden your chances of finding work - either as a contractor or employee - down the road.
In any event, here are some of the factors you might want to compare when making your decision, beyond the tax implications:
- the hours of work that you would be expected to put in, including evenings and weekends (if any)
- who your boss, or bosses, would actually be, and how this will impact you - how your performance on the job would be measured and rewarded - whether there are chances for upward or lateral mobility - what sort of training you would be provided with - the employer's culture, reputation, and financial standing Another question to ask yourself is, can you strengthen your skill set to a similar degree by means other than accepting this job? You see, if you really do value your flexibility and independence, perhaps you could simply take a course or upgrade yourself in some other way.
Finally, there is a reason that you left the traditional workforce in the first place, right? What's changed since then such that placing yourself back into this environment is now more desirable? If you find it tough to come up with a solid answer, you may just be better off sticking with self-employment for now. So much for my objectivity. :-)
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