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I am currently on a contractual job, since 2012. I am a W2 employee, the contractual position. I make more money hourly, however the direct-hire, I get my PTO, medical coverage, 401k etc.

I have now received a direct-hire offer from another company, however I am torn, I love the contractual job and its hourly rate, however I was always told never turn down a direct-hire opportunity.

Also by me being in the U.S on green card status, I wouldn't be eligible for unemployment if the new direct-hire job doesn't work out.

Am I right in my thinking direct-hire is better than contractual and therefore I should leave?

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  • Are you a w-2 employee of a consulting firm or a 1099 contractor to the main company? – RubberChickenLeader Aug 25 '15 at 15:56
  • I am a W2 employee, the contractual position. I make more money hourly, however the direct-hire, I get my PTO, medical coverage , 401k etc – Ryan Brookes Aug 25 '15 at 16:12
  • Job counselor at one point told me this – Ryan Brookes Aug 25 '15 at 19:13
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Since you are a W-2 employee of a contracting firm the legalities of the employment law you fall under will not change much.

The first major difference is in the way you are compensated. Every where I have worked contractors make more (to sometimes much more) than full time employees in the same position. The reason for this is the employer provided benefits that full time employees get that contractors dont.

When you look at total compensation normally a contractor and full time employee will be close. When I say total compensation it includes the 401k match, healthcare, paid time off, and any other benefit the company throws out there.

When compairing the positions you need to make sure to compare total compensation packages and not just base pay. If the base salary of the direct hire position is equal to your contracting rate you can almost be guarenteed a "Pay Raise" due to an increase in total compensation.

There is a slight stability advantage to being a full time employee since in a budget crunch a company can cancel contracts with out "Laying off" people but it is an ilusion. If you are in an at will employment state the only stability comes from how easy it is to cancel a contract instead of process the paper work to terminate an employee. Some times in larger companies there are lots of buricratic boxes that need to be ticked but at other companies it can be rather easy to fire some one so it would depend on the exact company.

Over all I have not found much of a difference and most of what you find as pros and cons boil down to personal preference.

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If you are already contract you are only eligible for unemployment if you are a W2, which if you are green card you may be. Any time you receive a paycheck, as compared to a contract payment (you send an invoice, they send you money, no taxes etc. withheld) you are eligible for unemployment. The employer pays into that system.

Also, in most cases unemployment is very small compared to your full time employment. I would not make it the basis for your taking a full time position.

The bigger issue is the tradeoff in benefits (paid vacation, insurance, 401k, etc.) compared to your current contract.

Lastly in the US it's very unusual to be on the same contract as long as you have. It is exposing the company to great risk you will claim to being an employee and owed benefits (this happened to Microsoft about 20 years ago). So your time there may be limited already. I have not worked anywhere recently that allowed contractors to stay on more than 6mo.

The rule thumb to taking the full time usually applies to converting from contract to full time at the same place, but having a separate offer is good, but still measure it on it's merits, not some rule of thumb.

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  • Do you think it is a correct assessment, to view a direct-hire job, with more stability than a contractual?. I feel a little insecure about the contractual spot, not knowing if they decide at any minute to cancel the contract – Ryan Brookes Aug 25 '15 at 16:19
  • I have held 2 contract positions in the past and always felt they were temporary (one was structured that way though since it was contract to hire). I personally prefer a full time position, but I have a large family and healthcare and PTO benefits are important to me. I would make a spreadsheet and list your potential contract earnings then subtract off for your medical costs, PTO, 401k benefits, and any other tangible items. This will give you an equivalent full time rate compared to your contract rate. This will help you decide. – Bill Leeper Aug 25 '15 at 16:23
  • Thanks and I did just that a few weeks ago, and with the direct-hire position, I actuall came-out ahead in salary. Although my contractual salary is 50 an hour, I do not get PTO and don't get paid for holidays and have to pay for my own healthcare. – Ryan Brookes Aug 25 '15 at 16:26

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