Leave full time job and work as Contractor [closed]

Question

Currently I have a good full time position for a software company in the United States (I am also from the US, to avoid confusion). Recently I was contacted by a recruiter in regards to contracting for another fortune 500 company at a higher hourly rate. However, I am very new to this and skeptical at the same time. So here I am seeking some outside advice from anyone who may have any opinions or past experiences with this type of work. So to get started here is some background info:

ABOUT CURRENT POSITION / SITUATION

• Current Job is a Full Time Software Engineer position at a leading software company.
• Previous Employment consisted of 1 year as a full time web developer, and two years prior self employed as a 1099 contractor.
• I am not single and have a child and wife to support. My wife works part-time minimum wage.
• I have a lot of college debt. (one of the reasons I considered looking into this)
• I like my current job and it seems pretty secure for the most part.
• I can support my family with my current income and make my monthly payments on student loans.

WHAT I KNOW ABOUT THE CONTRACT

• It would be considered an "Umbrella" contract.
• The contract is 18 months
• The contract provides health, vacation, 401k, dental/vision
• Pay is $16 more per hour from what I currently make
• Roughly 50,000 (before taxes) more than what I would earn over that time frame with current employer. Enough to pay off most of student loans assuming I find work right after the contract is finished.

So with that in mind, I know ultimately I have to make this decision. But some advice / perspective would be very much appreciated. As any advise I get from the recruiter is likely to be bias. So what I would like to know is... Would it be a good idea to pursue this considering my current state of affairs? Or would it be a better idea to stick with the job I currently have. And if I was to pursue this, what things should I look out for in regards to this? Thanks in advance.

Answer 1

Forget about it. To leave a full-time job to take a contract you should get a minimum of 50% more than your current hourly rate, considering the number of hours you are actually working. Hint: it's probably considerably less than 2000 hours per year. The recruiters will tell you that a $60/hour contract is equal to $120,000/year. It's not even close, unless you are working huge amounts of overtime. If you leave the full-time position, you will likely be giving up:

1. your subsidized health insurance
2. paid vacation
3. any 401(k) matching or other retirement funding if you are so lucky
4. Job security. As a contractor they may let you go with zero notice. Then you will have to live on unemployment until you find your next contract.

I wouldn't leave an $80K full-time job for less than $60/hour on a long-term contract, and probably not even then unless I had enough liquid savings to go several months without a paycheck, and I lived in a metropolitan area with a lot of opportunities.

BTW, how did you get from $16/hour to $50K over 18 months? Assuming you are in a 28% task bracket, you will pay something like $5.50/hour in income tax, social security, and medicare. That leaves $10.50/hour x 2800 hours, minus your increase in health insurance premiums, minus any increase in commute time and expense. If a recruiter tells me that $x/hour is equal to a $2000x salary, I call BS and put them on my spam list.

And don't underestimate the cost of commuting. If the new position is 15 miles farther, that's 30 miles per day or 600 miles per month. If you drive a reasonably new car, that will cost you $300/month in gas, maintenance, and depreciation. More if you will be using toll roads. It will also consume a minimum of half an hour per day. That's worth at least another $500/month.

Answer 2

On the surface, this sounds like an excellent deal, but I encourage you to ask some questions (and get the answers in writing).

First, you mention that the pay is $16/hour more than you are currently making. Is this your take home pay, or is it the amount of money the umbrella company will bill you out at? With umbrella contracts, you need to be careful when you estimate your real take home pay. Umbrella companies can (and do) pay expenses related to your 'employment' from the billing rate. And they take a margin. Make sure that you clarify exactly what your take home pay will be and make sure that the recruiter who answers these questions is qualified to answer them.

Second, you mention that the contract is 18 months long. Is that a fixed term contract or is there an at-will clause. This would not be the first time that a recruiter offers an 18 month contract, then terminates the consultant three months in because there is no more work available.

Third (this is related to the second point), how does termination work? If the Fortune 500 company is not happy with your work, can they fire you immediately? They most likely can do this, and if they do, how much help would your recruiter be able to offer you?

Fourth, what happens when you leave this company? Does the Fortune 500 company have an expectation of privacy? Keep in mind that one year of experience in a 'leading software company' > one year of experience in XYZ umbrella company.

Fifth, what kind of rules are there about paying you. Do you actually submit the number of hours that you work, or do they pay a fixed rate based on a 40 hour week no matter how many hours you actually work? Keep in mind that a 50% per hour raise is not worth very much if you need to work double the hours!!

Again, this sounds great on the surface and if it is as good as it sounds, you should congratulate yourself. But, be careful because recruiters are not always the most honest people on the planet. You have a good thing already, so be vigilant.

Best of luck in your decision and definitely be proud of yourself!

Answer 3

I was at one time in your situation: my late mom to support and a large student debt to pay off. This definitely left me disinclined to take risks that I could not calculate, and the possibility that my calculations would be wrong was always uppermost in my mind.

The first thing I did was to build up the cash reserves. At least, enough cash reserves so that I would not have to fall back on my credit line in case of emergencies and unexpected events. If I got hit with anything untoward like a firing or a layoff, rebuilding the cash reserve was my top priority the minute I was back on the job.

Once I had a minimum of three to six-month cash reserves built up, I was very aggressive in attacking my student debt as I did not want to have it hanging over my head, especially since student debts are not dischargeable in case of bankruptcy. I was also aggressive as hell about building up my skills set. Over time, I proved myself to a series of employers with the result that my salary kept going up.

I'd say, don't plan anything shorter than medium term, don't take chances that you don't have to. One issue that you should consider is, is there any chance, looking forward, that your wife will be able to do better than just make minimum wage? It's easier to take a risk on a new job when you have your wife's income to fall back on, and vice versa.

I'd say that at this point in your life, how well you manage risk will determine how well you will do over the next 20 years. In managing risk, your first order of business is to understand all aspects of it so that you can estimate it.

Good luck and good fortune to you :)

Answer 4

It is really hard to advise in such situations. But some questions to consider:

• New company has likely 3 or 6 months period when you can cancel your contract if they see it "no fit" for whatever reason. Can you return to your current job, or find another one quickly enough? So salary increase cannot be the only deciding factor.
• And vice versa: You may expect salary increase in your current job, right? So 6 months from now, the difference will be less, and risk will be seen more foolish.
• Is there someone who you can rely in USA to help you if things will not work out? If not, you need to take less risk that your colleagues with stronger support network.

Maybe you can turn this around: can staying in your current job can give you and your spouse time/resources for her to improve her skills and get better paying job? Which will give you more flexibility in the future. Work like a tag team, you are.

You are completely right that advice from recruiter is biased: s/he is making profit only if you leave current job.

There are plenty of questions to ask (and people will suggest more), and only you will know the answer.