W-2 vs Contractor

I’ve been both and it is hard at times to say which is better.

Now my experiences as a contractor, have primarily been as part of a team, where I was basically working full-time with my client, but it was through my consulting company, Red F Tech, vs just being a part-time contractor or having to piecemeal multiple contracts together to make a full-time ‘paycheck’. I’ve been fortunate with my consulting work that I always had an ‘anchor’ client that effectively covered all my major expenses and then I’d have one or two additional smaller contracts.

I’ve worked at W-2 full-time gigs that I hated and some that I’ve loved, including my current W-2.  With W-2 work, you’re expecting to be part of a team, working and collaborating with co-workers on achieving the companies goals.

First and foremost, I’d say the biggest differences are in the pay-scale. My W-2 work has never paid quite as well as my contract work. Inversely, the benefits of contract work, don’t exist and by benefits, I mean time-off, sick-pay, healthcare, equipment, etc.

As a contractor I was responsible for my own laptop, software (unless it was something specific for the customer’s workflow and then I’d have them buy it or just buy it and expense it back to them). But as a W-2, I’ve been handed a laptop, and monitors and so on.

The cost of healthcare is always a hot-topic in the United States these days, but needless to say it is a very nice benefit that most “professional” W-2 gigs provide. As a contractor, you’re going to be shopping the marketplace or if you’re fully incorporated, you can probably take advantage of getting insurance as a company, though you’ll need two employees, everyone needs a bookkeeper right?

In discussing the fact that I’ve been working a new W-2 job since the Q1 of this year, one thing that came to mind as an immediate difference is ‘Meetings’.

As a W-2, I find myself working during the meeting (when I’m not a presenter) and keeping an ear open for my name or relevant project data. This isn’t a fantastic thing to do, but as a W-2 employee I’m getting paid to finish my work, so a ‘Meeting’ generally detracts from me finishing whatever project I am working on. I know a lot of folks that do this and yeah, once in a while there is that ‘Oh shit, I was asked a question, and I don’t know what we were talking about.’ moment, so I try not to split my focus too much during a meeting.

But as a contractor, a meeting is glorious, I’m getting paid by the hour, we can talk all day long if you want. But I am also not a greedy contractor, I try not to keep a meeting going just to drum up billable hours, and if we spend a huge chunk of the meeting gabbing about not-work, I don’t charge for that part of the meeting.

Regardless, of the pay differences, I do think you look at time differently, some W-2 employees LOVE meetings, but those often the same employees that are coasting, they might have had some passion and drive at one time (might, maybe not, benefit of the doubt). Contractors though, some contractors are terrible. They are just waiting to get that last invoice in, before you fire them. Which is why a contract is something you need to make sure gives you an out on not paying for crap work or frequent check-ins before invoicing etc.

I know I’m rambling a little, it’s been a while since I blogged, so stream of consciousness is just at the wheel here. Forgive me.

With Contracting/Consulting you’re getting paid big bucks up-front, with the hopes there will always be big bucks. I had a boss tell me once (in a consulting setting) that you charge three-times your cost, this way you can make sure to have money when there aren’t any contracts. I’ve never been that lucky, but I tried to make sure I had some safety nets in my contracts, like deposits and such.

With W-2, you’re trading some of those up-front big bucks for the idea that you’ll have stability in a paycheck and paid benefits, also if things go south severance or at least unemployment.

But overall, the two are about the same paycheck wise, at least that has been my experience thus far. But the attitudes on time are wildly different when it comes to W-2 vs a Contractor and funny enough, even bosses will WASTE W-2 worker time (because presumably we are talking about a salaried worker), so that time is like free right?

It’s the fallacy of a sunk-cost, if you make a salaried W-2 worker say address, stuff, and seal envelopes, vs having a service do it, you’re only out their time. And if they’re just marketing staff, who cares. But if you look at the actual cost, you’re wasting money.

Same goes for conference calls, oh my god conference calls, at one company I worked at we had something like 30 people on the call and would listen to folks drone on about this and that. And if the meeting started late, but say 30 people were one (waiting for the CEO), then that’s 300 minutes, five HOURS of company time wasted. Some of those calls would go on for like an hour.

No one cared about the cost of that, but god forbid we try to buy some redbull for the developers.

I’ve gotten way off-topic.

But I think you can maybe see where I was going with this. Or maybe not, at least I’m writing, on my lunch-hour.

The only other thing I think I can say about it is, if you’re doing well as a contractor and taking advantage of all the tax incentives that being properly incorporated can give you, then stick with it. But if a good W-2 gig comes along,  with great benefits and more importantly a great team, then you should go for it. You won’t regret it.

I know that I haven’t, but also don’t lose sight of the cost of an hour to the company.


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