“To be, or not to be…that is the question!” In fact, it’s a great question for both literature buffs and contract workers. The answer makes a big difference in your Paycheck and work situation. Is it better to be a Fulltime Employee (FTE) or just a Contractor? Answer: it really depends on who’s asking the question and what the situation is.
So let’s explore the differences and see how it applies to you and your Paycheck.
Here are Five Fast Facts about contractors and FTE’s:
- 🧑💼 What’s The Difference? The main difference is who exactly you work for. If you work for a company, you’re an employee; otherwise you’re a contractor (also called a contract worker, independent contractor, freelancer, etc.). Contractors get paid by the company but are considered independent or external. They are generally hired for a specific job and a specific limited amount of time. Employees often perform a wider variety of tasks, and they are employees until they either leave the company or are terminated. They’re stuck with you, you’re stuck with them!
- 💰 Tax Differences - Uncle Sam will get his cut one way or another, but it looks different for a contractor. Employees have their taxes withheld from their paycheck and sent directly to the government by the company, but contractors don’t have taxes withheld and have to pay taxes on their own. The IRS uses different forms for them (W2 for employees and 1099 for contractors), and there are some different rules that apply to both. But rest assured, both will have to pay up.
- 💸 Pay And Benefits - Most of the time, contractors get paid a higher hourly rate than their employee counterparts, but they also don’t receive benefits like insurance, paid time off, training, or retirement. So, a contractor will pocket more cash up front, but the job is less secure and has fewer perks. But hey, if you have a spouse that gets those benefits so you don’t need ‘em…cha-ching, baby!
- 💪 Flexibility - Contract work offers maximum flexibility for both the company and the worker. Companies often hire contractors because they get specific needed skill sets without having to train employees, and because it’s very easy to let contractors go during hard times without any residual cost like unemployment. Still, contractors often like the setup because they tend to get higher pay, more flexible hours, and can potentially work for multiple companies at the same time (or they at least get to move around frequently for more variety).
- 💡 Today’s Landscape - Of the hundreds of thousands of workers that were laid off in the past year, almost 40% of them will be replaced by contractors. Since most experts are predicting a recession soon, companies are looking for ways to quickly and easily slim down when the going gets tough. Large companies use contractors for almost a quarter of their staff; small businesses use them for about 20%. Both are up significantly from just a few years ago. So, if you have an in-demand skill set, you should be able to get a good paying job quickly as a contractor; just be aware that you’ll likely be out the door first if the economy crashes!
🔥Bottom line: Is contract work a good thing? The answer is clearly “it depends.” It can be, for both the company and the worker. Either way, it likely comes down to a balance of the risk you can take on compared to the money you’ll make. The post-pandemic world of remote work has triggered an explosion of contract workers, and it’s easier than ever to land a great paying job that way. But, a contractor job is never as secure or long term as an employee job, and when the going gets tough, the tough often part ways quickly and easily. Either way could work out really well, or cause lots of problems. Just be informed as you consider your options, and pick the right one for your situation.
What’s been your experience with contractors?
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