Contract vs. Full Time?

Sometimes this question is put as Contract vs. Perm. However, both the “Full Time” and ‘Perm’ terms are misnomer. Contractors generally do work full time, and a ‘Permanent’ position is by no means guaranteed to anyone these days.

There was a time back in the late 90’s when contractors had it pretty good. Independent contractors (i.e., 1099) enjoyed high hourly rates, in some cases staggeringly high, perhaps combined with overtime, netting some lucky individuals annual pay well into the six figure range.

Alas, those days are long gone. When the dot-com boom imploded companies found it easiest to cut the contractors before their own employees, so they were the first to go. Pretty soon the shell-shocked contractors were out staggering in the streets in search of new gigs, and the going pay dropped. Triple-digit hourly rates became a thing of the past.

Also exacerbating the situation were the IRS rulings in the 90’s that made it more difficult for people to work as independent 1099 contractors. More and more companies required contractors to work through agencies as W-2 employees. That meant the agencies would get a big cut of the hourly rates, sometimes 50% or more, though the contractors now got at least token benefits.

Fast forward to 2008. The contracting market is now such that virtually every contractor works through an agency as W2 employees. Rates have come down such that contractors make no more than perm employees on average, at least with benefits and downtime taken into consideration. And contractors are less likely to be contacted about good opportunities and more likely to get calls from disreputable “Body Shops”.

So what is the advantage now to working as a contractor? Perhaps if you are interested in working with new and different things, constantly learning and challenging yourself, contracting may provide that – at least in an ideal world. But in more cases it’s a lifestyle choice; many contractors don’t want to be tied down to a single job, dealing with politics and the career ladder, and want the freedom to be able to pick and choose their assignments -- even if that results in some economic tradeoffs.