Jason Moran
Tuesday, July 08, 2008
Salary Vs Contracting: The Other Side Of The Fence
I thought I'd revisit Salary Vs. Contracting now that I'm back in a salaried job.
I have now worked an even amount of hourly, salary, W-2 contracting, and 1099 contracting.
My overall take on it is this: I want to do pure 1099 contracting if I can help it at some point in the future...but I am enjoying the perks of a salaried job while I can.
I haven't gotten paid for holidays in years, and it is really nice to still get a full paycheck for 3 and 4 day weeks. I don't have any vacation days yet, but when I do and I take my vacation it will be awesome to not take the "double hit". When you are contracting it is a double hit because you pay lots for your vacation and you come home to no pay for the time you took off.
However, let me explain why the 1099 route is the best way in my personal opinion (for software developers). First of all, you don't 1099 under your personal name. You create a corporation (LLC, S-Corp, etc). The business at the front end is the key to the whole thing.
Since you are working for this newly created business you can pay yourself for your work and for rent (because you have to do your work at some physical place). Then you get to write off your computer, supplies, travel, and all kinds of other things on your taxes. Plus, it provides legal protection. If you did something stupid like break a non-disclosure agreement they can't sue the pants off of you directly, they would be suing your company.
Before I continue with a few more good 1099 points, let me tell you some of the bad. Your taxes are way more complex, so you'd better hire an accountant. You'll have to do some payroll stuff for yourself and any other employees you have, including their taxes and sending off IRS paperwork. Some of your clients won't pay, or at least not in a timely manner. Sure, you might make 30,000 dollars, but what if they give that to you in 5 months in a single payment? Can you survive until the check shows up? One last thing, you need to pay double taxes (employer and employee portions).
Anyway, the last couple 1099 pros: You generally make a bit more than salary/normal contracting so that covers your extra taxes and then some if you are writing off enough on your taxes. You can hire other people to do the work for you. Lastly, you can work on your own terms.
Let's say you are busy at a client but company ABC wants you to redo their website for $8K. You don't have the time. However, you ask your website-savvy buddy that wants to moonlight a little how much he thinks he could redo the site for. He says he could redo it for about $4K, but in case anything unexpected comes up it could max out at $5K. You take the contract, let your buddy do it, pay him worst-case-scenario $5K and bank $3K just for setting the whole thing up. You can't do that if you are working directly for an employer.
All that being said, I'm happy where I am at my salaried job right now.
I have now worked an even amount of hourly, salary, W-2 contracting, and 1099 contracting.
My overall take on it is this: I want to do pure 1099 contracting if I can help it at some point in the future...but I am enjoying the perks of a salaried job while I can.
I haven't gotten paid for holidays in years, and it is really nice to still get a full paycheck for 3 and 4 day weeks. I don't have any vacation days yet, but when I do and I take my vacation it will be awesome to not take the "double hit". When you are contracting it is a double hit because you pay lots for your vacation and you come home to no pay for the time you took off.
However, let me explain why the 1099 route is the best way in my personal opinion (for software developers). First of all, you don't 1099 under your personal name. You create a corporation (LLC, S-Corp, etc). The business at the front end is the key to the whole thing.
Since you are working for this newly created business you can pay yourself for your work and for rent (because you have to do your work at some physical place). Then you get to write off your computer, supplies, travel, and all kinds of other things on your taxes. Plus, it provides legal protection. If you did something stupid like break a non-disclosure agreement they can't sue the pants off of you directly, they would be suing your company.
Before I continue with a few more good 1099 points, let me tell you some of the bad. Your taxes are way more complex, so you'd better hire an accountant. You'll have to do some payroll stuff for yourself and any other employees you have, including their taxes and sending off IRS paperwork. Some of your clients won't pay, or at least not in a timely manner. Sure, you might make 30,000 dollars, but what if they give that to you in 5 months in a single payment? Can you survive until the check shows up? One last thing, you need to pay double taxes (employer and employee portions).
Anyway, the last couple 1099 pros: You generally make a bit more than salary/normal contracting so that covers your extra taxes and then some if you are writing off enough on your taxes. You can hire other people to do the work for you. Lastly, you can work on your own terms.
Let's say you are busy at a client but company ABC wants you to redo their website for $8K. You don't have the time. However, you ask your website-savvy buddy that wants to moonlight a little how much he thinks he could redo the site for. He says he could redo it for about $4K, but in case anything unexpected comes up it could max out at $5K. You take the contract, let your buddy do it, pay him worst-case-scenario $5K and bank $3K just for setting the whole thing up. You can't do that if you are working directly for an employer.
All that being said, I'm happy where I am at my salaried job right now.
Labels: contracting, job, money, work
¶ 11:28 AM 5 Comments
Thursday, December 27, 2007
End Of 2007 Update
I suppose I have to give an update to all of my countless readers every once in a while. Hundreds if not thousands of you may not even know me in real life, so this might be the only chance you'll have to take a peek into my life.
The "big" things are being out of work, the new job, and of course the puppy (which you can sometimes call "puppie", I heard).
I'm a contractor and I certainly unsderstand that there is always a risk that I will find myself lacking enough work to pay the bills. However, I did my due diligence and I had the next thing lined up to start at the end of my previous contract. Mere hours before I was supposed to start the new contract (in reality I think it may have been like five days...) I received a call informing me that all new contracting positions would be suspended until at least the following month. If you can't translate what that meant to me it pretty much meant that the rug got pulled out from under my job at the last second (and some other poor souls as well).
I'll skip the gory details in between then and the final result and I'll just tell you that I eventually managed to find a new contract. Now I'm doing [NON-DISCLOSURE AGREEMENT] and working on [N.D.A.], which obviously sounds super rad and crazy awesome. I mean, how many places have you worked at that regularly have employees wearing as many leather products as the new place I work. Harley-Davidson Dealer Systems has nothing to do with what you all thought at the end of the previous sentence (you have sick and twisted minds!). Anyway, I'm digging the new job as it is challenging, interesting, a growth experience, and it pays more than the last job -- which is pretty much all you can ask for.
I'll still be digging myself out of the oops-I-forgot-to-save-money-for-times-when-I-don't-have-a-contract situation I was in for a long while. While I'm doing so I have a semi-retarded but ultra-cute puppy at home. We asked around and my mom would be the prime candidate to take Sadie when we get rid of her.
The thing about it is we are sort of attached to Sadie and she is getting better at most things. She usually sleeps through the night and doesn't pee on everything all of the time anymore. She listens to a few key commands if she isn't being moody. I'm used to that with my wife, so I already know how to handle that. Plus she doesn't usually pee on things when she gets excited (I'm not sure where my wife stands with that). I'm thinking we'll be keeping Sadie around (my wife, too).
I probably need to throw some pictures up showing how much Sadie has grown (she's 5 pounds now, which is like 2.777 times bigger than any of the other pictures you've seen).
Peace out homies. Stay crunk and shake dem apple bottoms, aight? ¶ 3:45 PM 1 Comments
The "big" things are being out of work, the new job, and of course the puppy (which you can sometimes call "puppie", I heard).
I'm a contractor and I certainly unsderstand that there is always a risk that I will find myself lacking enough work to pay the bills. However, I did my due diligence and I had the next thing lined up to start at the end of my previous contract. Mere hours before I was supposed to start the new contract (in reality I think it may have been like five days...) I received a call informing me that all new contracting positions would be suspended until at least the following month. If you can't translate what that meant to me it pretty much meant that the rug got pulled out from under my job at the last second (and some other poor souls as well).
I'll skip the gory details in between then and the final result and I'll just tell you that I eventually managed to find a new contract. Now I'm doing [NON-DISCLOSURE AGREEMENT] and working on [N.D.A.], which obviously sounds super rad and crazy awesome. I mean, how many places have you worked at that regularly have employees wearing as many leather products as the new place I work. Harley-Davidson Dealer Systems has nothing to do with what you all thought at the end of the previous sentence (you have sick and twisted minds!). Anyway, I'm digging the new job as it is challenging, interesting, a growth experience, and it pays more than the last job -- which is pretty much all you can ask for.
I'll still be digging myself out of the oops-I-forgot-to-save-money-for-times-when-I-don't-have-a-contract situation I was in for a long while. While I'm doing so I have a semi-retarded but ultra-cute puppy at home. We asked around and my mom would be the prime candidate to take Sadie when we get rid of her.
The thing about it is we are sort of attached to Sadie and she is getting better at most things. She usually sleeps through the night and doesn't pee on everything all of the time anymore. She listens to a few key commands if she isn't being moody. I'm used to that with my wife, so I already know how to handle that. Plus she doesn't usually pee on things when she gets excited (I'm not sure where my wife stands with that). I'm thinking we'll be keeping Sadie around (my wife, too).
I probably need to throw some pictures up showing how much Sadie has grown (she's 5 pounds now, which is like 2.777 times bigger than any of the other pictures you've seen).
Peace out homies. Stay crunk and shake dem apple bottoms, aight? ¶ 3:45 PM 1 Comments
Friday, August 31, 2007
Is a Salary Better Than Contracting?
It is common knowledge that contracting pays more per hour than a salaried job does. I don't know that there is an exact expected ratio, but in my experience an hourly paid contracting job pays a minimum of 1.333 times better than a salary would. (I know there are caveats, I'll get to those in a minute).
Take your salary and multiply it by 1.333. That is practically the worst case scenario for how much you would make by contracting instead. That sounds totally worth it, doesn't it?
Pros of contracting:
Pros of salary (with cons of contracting):
So, is 1.333 times your salary worth the gamble of having bench time? Can you handle the fact that vacation is completely on you, and you will have next to nothing in your next paycheck? Is it worth it to have no income if you get the flu? What about having to prepare for retirement without any help from any company?
So far it is worth it for me because I am pretty good with my money and I believe I have what it takes to prevent myself from being out of work for too long. Is a salaried job the easy way out or is contracting just a long-term Vegas-styled gamble?
Take your salary and multiply it by 1.333. That is practically the worst case scenario for how much you would make by contracting instead. That sounds totally worth it, doesn't it?
Pros of contracting:
- Lots more money
- You still get paid even if you work more than 40 hours in a week
- Lots of varied experiences which will make you well-rounded
- You can never get bored because things change all of the time
Pros of salary (with cons of contracting):
- Predictable pay
- No "Bench Time" (This is a contracting term that means you are not currently billing any hours to anybody / out of work)
- Vacation time and sick time!
- Other perks like cheaper health insurance, 401K matching, bonuses, etc
- Gaining a much deeper understanding of one line of business (become an expert because you have worked at the same thing for a long time)
- Potential to "move up" within an organization because of how super good you are.
So, is 1.333 times your salary worth the gamble of having bench time? Can you handle the fact that vacation is completely on you, and you will have next to nothing in your next paycheck? Is it worth it to have no income if you get the flu? What about having to prepare for retirement without any help from any company?
So far it is worth it for me because I am pretty good with my money and I believe I have what it takes to prevent myself from being out of work for too long. Is a salaried job the easy way out or is contracting just a long-term Vegas-styled gamble?
Labels: contracting, money, work
¶ 9:49 AM 2 Comments
Wednesday, August 22, 2007
New Job
I have a new job in Brecksville. It's just a contract for a few weeks at IPA off of Snowville Rd.
I haven't had to relearn parts of existing projects in a long time, but I forgot how slow going it is for the first few days. Anyway, the good part is that it affords me a couple of minutes to update this mostly dead blog.
Maybe I'll revive it and start making weekly (or more often than that) updates.
I haven't had to relearn parts of existing projects in a long time, but I forgot how slow going it is for the first few days. Anyway, the good part is that it affords me a couple of minutes to update this mostly dead blog.
Maybe I'll revive it and start making weekly (or more often than that) updates.
Labels: work
¶ 2:05 PM 4 Comments