Contract or Perm

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Contract or Perm

Steve Jones - SSC Editor

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November 20, 2007 at 4:54 pm

#176922

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VadimK Mr or Mrs. 500 Points: 551 More actions · Answer 1

I'm surprised you didn't mention anything about taxes. IMO, it's the main reason people switch to consulting, at least up here in Canada. When you're a full-time employee the payroll deductions can sum up to 35-40% of monthly cheque, depending on your income. When you work as contractor, especially if you're incorporated, you get paid in full and pay your taxes after deducting all business-related expenses. The difference can be very significant to overcome any cons of being an outsider and not having a paid vacation or company benefits.

And yeah, we have free health insurance in Canada too 🙂

Steve Jones - SSC Editor SSC Guru Points: 736172 More actions · Answer 2

I should have mentioned taxes, but the only difference I'm aware of in the US is that if you contract directly, you pay 15% self employment tax v 7.5% FICA.

While you might have some payroll taxes taken by employment, you can still deduct business expenses from your income (if you're not reimbursed). You deduct them differently if you're a contractor, but the same tax numbers still apply.

Gail Shaw SSC Guru Points: 1004504 More actions · Answer 3

That's a nice tax level. I lose around 45% of my salary to tax.

Tt's a big incentive to go solo. The tax rates for self-employed is lower to start with, and there's all the deductions that can be made.

Down here (South Africa), medical aid is easy and not too costly to get as an individual, and sometimes will be better than what the company offers

Gail Shaw
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Loner SSC-Insane Points: 21279 More actions · Answer 4

I don't mind to be a contractor because I feel more relax to work. The only thing is I have to keep looking for contracting jobs. Most company will tell you the contract is 6 months, then do you start looking for another contracting job after 4 months? Sometimes after 6 months, the company would extend the contract. So I just feel very unstable and uncertain what I suppose to do. I was working as a contractor a couple times.

Can a 'regular' contractor give me some hint about contracting? The main thing is how to overcome the uncertain future.

Pam Brisjar SSChampion Points: 12094 More actions · Answer 5

Here's my basics:

Write a "notification" time into the contract.

Bill enough to account for a week or two of down time and make sure you set money aside.

Regarding the taxes, there are indeed definite tax advantages here in the US to being independent. While you can deduct "business expenses" even while an employee, the number / kind / amount that you can deduct as a self-employed person is greater (and more simple).