Over the course of the last few months, I've been writing tips on developing your programming career -- all within the context of working for an employer. A number of readers have written, asking me to provide tips for going out on their own as Independent Contractors. I'll be writing future tips to cover that topic as well.
I thought I would start off with this question: How do you know that Independent Contracting is for you?
-Would you like to make more money for the same services you currently provide to your employer?
-Are you a person who likes a variety of challenging jobs?
-Would you like to change assignments (and companies) periodically?
-Do you have the ability to come into a new situation and pick things up quickly and get along well with those around you?
If you answered 'yes' to one or more of these questions, then Independent Contracting could be for you. Not unexpectedly, Of course, there are some downsides.
Independent Contractors tend to earn more money (sometimes double) for the same services they would provide to an employer, but there are good reasons for that.
As an independent contractor, you'll receive a check with absolutely no taxes withheld. You are responsible for paying Federal and any applicable State and Local taxes on your own, plus you'll also need to pay Social Security Taxes. But unlike the case of an employee, you'll need to pay not only your own share of Social Security Taxes, but also the share that an employer would pay on your behalf (one reason that employers like to hire Independents).
Altogether, these tax payments can account for 40% or more of your negotiated contract fee. For those of you who don't like to be bothered with paperwork, don't discount the time and effort involved in keeping track and making timely payments to the various governmental authorities. Many of my Independent Contractor friends find the task burdensome enough to hire an accountant.
Something else to consider before making the jump to Independent Contracting is the lack of employer benefits. As an Independent, you'll receive no Health Care benefits. Finding a Health Care plan on your own is possible (I'll discuss finding a plan in future tips), but it can be very expensive.
In addition to the lack of Health Care benefits, any time an Independent Contractor takes off for Vacation, Holidays, Sick Time or Personal days means no revenue. Many of my Independent Contractor friends find the thought of taking time off without pay so abhorrent that they go long periods of time without taking a formal vacation -- a very bad idea. In addition to no paid time off, there's also no friendly Employer sponsored 401K or pension plan for Independents. If you want to contribute to a 401K or a Pension plan (and you absolutely need to), you'll need to create your own. This is not that big a deal, and I'll cover this in a future tip.
Still, taxes, paperwork, and the lack of benefits aside, the thrill of working for yourself is what drives many Independent Contractors. In future tips, I'll provide guidelines for setting fees that can ensure that you cover all of your expenses and allow you to take time off without guilt.
Written by John Smiley, MCP, MCSD and MCT, author, and adjunct professor of Computer Science at Penn State University in Abington, Philadelphia University, and Holy Family College. John has been teaching computer programming for nearly 20 years.
John Smiley is president of Smiley and Associates, http://www.johnsmiley.com/smass/smass.htm a computer consulting firm located in New Jersey.
This was first published in September 2000