The landscape in the job market is changing. Many more companies, especially in the high tech fields, are hiring contractors to work on their IT projects. A question that comes up often in conversation is what the difference is between contract vs. permanent employment. In this article I will explore the differences between being a permanent employee versus being an agency placed W2 contract employee.
Most people typically understand how permanent employment works as it is pretty straight forward. In a permanent position, a person is hired directly by the company that he or she is going to be working for. Permanent employees are paid directly by the company that they work for, receive benefits such as health insurance, 401K matching, vacation and sick time (also known as PTO), as well as other perks and benefits specific to the company.
While permanent employment may seem like a more secure route to take in your career over consulting, most employees are hired “at-will”, meaning the company that employs you can terminate your employment at any time for any reason.
What to expect on a contract:
- A contract employee hired by an agency is paid an hourly rate (typically at a higher rate than a direct hire employee) by the agency and the contractor usually works on site at a specified client.
- Contractors receive a W-2 from the agency that they are contracting for, and can receive benefits such as health insurance and matching 401K (depending on the length of assignment), but don’t usually receive paid time off.
- Contractors are paid for the hours that they work and typically contract for a specified period of time which is usually the length of the project that you are hired to work on. At the end of the project, there may be a need for the contractor’s expertise and skill set on a different project within the company so contracts may get extended.
- If you are doing a great job at work and the company that you are contracting for has the headcount to hire a full time employee, contractors may also have the opportunity to become direct employees of the company if they choose too. If not, then usually the contractor parts ways with company, and they move on to their next job. When contracting with Aquinas, we start looking for your next contract before your current contract has ended to ensure ongoing employment
Who should look into contracting?
It really depends on your personal situation and what your career goals are. Contracting is usually more lucrative and can be a more flexible working situation so if you are looking to make more money and don’t really care about the amount of vacation days you receive every year, it probably makes more sense. Contracting offers the benefit of gaining a wide variety of experience quickly so if you are the type of person who thrives on change, it’s definitely worth exploring. Contractors, especially in the IT world, can move around from company to company and work with the latest technologies and on exciting new projects, which can help increase their skill set and in turn make them more marketable for future roles. By taking some time to reflect on your own personal situation and career goals, you might just find that contracting is the right option for you.
By: Herbie W.