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Turning Contract Work into 'Permanent' Employment
Mark Swartz, M.B.A. M.Ed.
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Mark Swartz
Tuesday, August 29, 2006
Dear Mark:
I am currently considered a 3rd party contractor for my company. How do I make the switch to ''permanent'' employment (that is, full-time with benefits)? Also how do I negotiate a fair salary that is comparable to my contracting rate?
-- Nick C., Toronto, Ontario
Dear Nick,
A tricky business, this ''contractor'' thing. Keep in mind that your employer is treating you as a third party service provider, rather than as a ''permanent employee,'' for reasons that are likely financial.
For instance, when you're an independent contractor, the company isn't obligated to enroll you in its benefits program. Thus you're not legally entitled to such things as extended healthcare, reduced-rate insurance, etc. Mind you, I've worked as a contract employee before where I've been treated just like a full-timer, with access to the employer's benefit plan, sick days, vacation pay...the whole works. So it depends on the employer to some degree, as well as your negotiating skills.
Also, when you're a contractor, the employer doesn't have to give you severance pay if they decide not to renew your contract (unless stipulated otherwise). Nor do they have to give you paid vacation days if they don't want to. And the fee you're paid isn't included under ''salaries'' in the employer's accounting statements, which makes it look like they're keeping wages under control and minimizing headcount.
That's why it can be tough to convince them that making you a permanent employee would be in their best interest. After all, you've been working for them happily all this time. Why should they now take on the added expense, and legal obligations, of putting you on their payroll as a full-time staffer?
And does it even make sense for you to go this route? Look, as a contractor you don't have taxes deducted from your pay slips. You can write off all sorts of expenses when it comes to paying income tax. And you can work for other clients, if you're so inclined, which you might not be able to do if you were a real employee. Also you can take time between contracts to pursue other interests (assuming you have the resources to do so, and that you can market yourself to get more work within a reasonable amount of time).
If you do decide to ask if they'll convert you to employee status, here are some tips:
- show them why they would be better off by accommodating your request
- cite precedents of others who've made the switch previously at the company you're working with
- prepare yourself to be persistent (you may have to ask several times)
As for converting your hourly or daily rate to a corresponding salary, inhale deeply: you may have to take a pay cut. Many employers pay a premium when you're a contractor -- to compensate for not giving you benefits or security. So if you're earning, say, $40 an hour as a freelancer, which works out to about $80,000 a year, you may end up with a salary 10% to 20% below that. But hey, you've got a real job!
The choice is yours, Nick. If you think you'll have more security, access to other jobs inside the company, benefits you couldn't afford on your own, plus visibility and respect internally, then you may want to push for employment. But if you cherish your independence, love getting tax deductions, and don't feel the need to involve yourself extensively in the firm's politics (since you're not always bucking for promotion or a raise), continuing to contract may just be your best bet.
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