8 ms·

What I find interesting is that at the higher end, contractors used to get paid more than full-timers. I've got about two decades of sysadmin work under my bel

by lsc 8y ago

What I find interesting is that at the higher end, contractors used to get paid more than full-timers. I've got about two decades of sysadmin work under my belt, both contract and direct hire. I mean, I've probably worked more as a contractor than as a direct hire? and I've turned down a bunch of "promotions" to direct hire 'cause I was making really good money, and the direct-hire job usually meant a pay cut. I mean, sure, people with kids and people who valued stability would still switch over to full time when given the opportunity, but if you were a gambler like me, you'd stick with the contract gig. But it seems like something changed this decade. Of the contract and direct hire jobs available to me? the direct-hire jobs just pay a whole lot more; like now? even if I only plan on sticking around another year, it totally makes sense to accept when they offer me the full time position. I mean, it could all be unique differences that have to do with my own situation, but I also think that the prestige has changed; contractors are looked down upon more than they were (I assume that prestige follows money)

quickthrower2 8y ago
I doubt the same company would offer less for a contract on the same position. I can see why it is balancing out in general though. More investor money going into companies that prefer to hire full time staff rather than contractors would push up rates for permanent staff.
0xADEADBEE 8y ago
This is fascinating. What do you think possible causes for that might be? Is this an America/Bay Area thing or do you suspect it to be more widespread? Would be interested in other people's take on this also.
- lsc 8y ago
  So my impression is largely a bay area/silicon valley impression, every time I try to work elsewhere, people start asking for degrees, which I don't have, and they also mention that they pay dramatically less. Or, at least, that is my experience, with the jobs I have been offered. My perception is that salaries for direct-hire software engineers at top-tier companies have gone way up in the last ten years or so. My impression is that contractor wages are... keeping up with inflation. Also note, my perception is that contractor interviews have not gotten much more difficult at all, while direct hire interviews have practically become contests of endurance; like you are expected to spend like 5x as much time on a direct hire interview than, say, 10 or 15 years ago, while you can do a contract interview over a long lunch. Companies also seem to be okay paying Engineers very significant sales-style performance bonuses (in fact, this is where almost all of that increase in pay has come from) and this really helps them keep the gamblers; the people like me who jump every few years 'cause someone offered 20% more. (I mean, the bonus system is another system you need to learn to game, but it's not harder than the interview system.) My speculation (and I'm totally unqualified to speculate on sociological trends, but you asked.) is that something has changed, and the cultural prestige of the Engineer has gone way up, and that this has changed management's willingness to spend directly on Engineer compensation.
  - Aloha 8y ago
    My last contract job, I was hired sight unseen, with only a cursory technical interview, that mostly established I could breathe.
    - halfastack 8y ago
      That was my experience as well. Needless to say, I was woefully unprepared for the job, but that also meant I have learnt a ton of interesting things.
  - WalterBright 8y ago
    A contractor can be let go on a moment's notice, so there is much less risk of a bad hire than a direct. So no need to expend the effort on an interview.
  - xfitm3 8y ago
    What do you do where a degree is critical? I've never even been asked about my education in over 20 years.
    - lsc 8y ago
      >What do you do where a degree is critical? I've never even been asked about my education in over 20 years. I am a "linux systems administrator and programmer" in silicon valley, me too. I mean, I'm sure that my lack of a degree gets my resume binned some places, but almost nobody mentions it, and there are plenty of jobs where they clearly don't care; I don't have trouble finding work. My experience is that if I try to get a job outside of silicon valley (and especially if I try to get a job outside the USA) my lack of credentials becomes a big issue. Part of this is cultural, I think, though a lot of it has to do with work visas. As a US citizen, I can vacation most places without too much trouble, but I still need to jump through hoops if I want to work elsewhere, and if I want to get a 'skilled worker' visa, they usually expect a degree.
  - 0xADEADBEE 8y ago
    Thanks for the insight. I've experienced British, Australian and New Zealand contract markets and contracting is far and away the only way to get even close to Bay Area salary levels so I'll be watching this trend closely. I really appreciate you commenting; thank you.
- usrusr 8y ago
  If it's mostly America/Bay Area I would propose the following explanation: Conventional employers/clients (e.g. your friendly diesel manufacturer) spend money on developers when they have a problem they want solved, they love expensive freelancers: if they could they would fly in a squad of experts, get a solution for a single lump sum payment and then hand it over for maintenance to that underpaid slob they keep in the basement. Overfunded startups as well absurdly profitable SV success stories are a very different story. Building a talent pool is a core investment for them. In many cases they would rather have one good hire than two good ones and two bad because their immediate needs are already met and low performing hires are avoided not so much because of another head on the payroll, but because talent dilution is impossible to undo. They are not interested in adding quantity, but building quality teams is just the way they spend their money. Offers will be either high or nonexistent, and freelancers not welcome.
  - tracker1 8y ago
    Exactly this... to your first point, second tier cities in terms of software development jobs (Phoenix, Austin, Atlanta, etc) have a lot to offer. There's enough contract work that you can always find something within a couple weeks, and pay is generally competitive to salaried positions. There's also quite a bit of FT work, but more of that will be with more stable tech. YMMV, but the quality of life, at least for me in Phoenix feels significantly better. I may not be making a quarter million or more a year as I might in SV, but I also don't have nearly the level of stress in my life.
  - 0xADEADBEE 8y ago
    An interesting point - I hadn't at all considered the trend of slowly growing an engineering team. I'd bet you're on the money with this.
WalterBright 8y ago
The benefits package a direct employee is typically worth 40% of the salary. Hence, a contractor without benefits or employment stability gets paid more to compensate.
- lsc 8y ago
  > The benefits package a direct employee is typically worth 40% of the salary. Hence, a contractor without benefits or employment stability gets paid more to compensate. I... think you may be mistaken. I've heard that big companies have a total overhead of 40% for a worker, and that might be true once you factor in the cost of middle management and office space, though again it would vary a lot by pay (I imagine office space costs a large portion of a less well paid salary. Around here, quarter-million dollar a year SWEs get the same tiny desks you'd expect of someone making 1/4 that.) but I've got a reasonable idea of what benefits cost, and it's nowhere near 40%, at least for a SWE in my jurisdiction, where total comp is so high and the benefits are... comparatively minimal.
  - dajohnson89 8y ago
    don't forget about equipment and payroll tax
    - lotsofpulp 8y ago
      It’s 7.65% for first $128k for federal, maybe a couple extra % for state level taxes.
  - polskibus 8y ago
    As a contractor you don't get paid holiday (incl bank holiday) or sick days. That by itself can account for 20% of pay, not counting other benefits.
    - lotsofpulp 8y ago
      Most salaried people have 7 to 9 holidays per year, and if you’re lucky and highly paid, maybe another 4 weeks paid time off. 6 weeks of paid time off divided by 52 weeks is just 11.5%, and that probably puts you in top 10% of the population in terms of paid time off.
alkonaut 8y ago
Contract should always pay significantly more than direct hire, since there is less security and benefits. It simply shouldn’t be possible to enter a contract for less than direct hire wages and benefits, in cases where the contract is obviously a way of circumventing employment. Laws should be written such that circumventing the spirit of the law is also circumventing the letter.
- icebraining 8y ago
  As far as I know, that's exactly what the law in many (most?) places says. In the US, multiple states - most recently California, after a case regarding delivery drivers - apply the ABC Test[1], and the IRS has its own classification as well. I mean, it's not that the contractor can't get paid less, it's that they can't be contractors at all, even if the employer claims so. [1] https://www.law.cornell.edu/wex/abc_test https://www.law.cornell.edu/wex/abc_test
  - bsenftner 8y ago
    According to the ABC Test, my entire visual effects career (15 years) was illegal.
    - lsc 8y ago
      this is... well, yeah, a surface reading of the test is clearly not how it legally plays out, 'cause from a surface reading, almost all "contract" jobs are not. I think this is legally dealt with where I am by ensuring that everyone is an actual employee of someone... if you are a "contractor" you are actually an employee of the body shop. You get paid on a w2, and thus aren't legally a "contractor" From what i see, the body shops charge the employer 30-50% more than what they pay the employee (the range depends entirely on how good the employee is at negotiating, and tends to start closer to 50%, and move towards 30% as said employee is in the same position for a while)
- closeparen 8y ago
  A contract can include security, where at-will W2 employment never does. But working as a contractor demands a substantial premium anyway, because the contractor is responsible for self-employment tax.
Rjevski 8y ago
Where are you seeing this? Here in London I still get way more as a contractor then I would be full-time, like 50% more.
- C1sc0cat 8y ago
  You should be getting 2x to 3x more
  - akvadrako 8y ago
    There is no "should". Most contract jobs are low risk - they might last for years and if you get fired, you can easily find a new one. Unless there is a major economic downturn, in which case even permanent employees will be downsized. That's easily worth a 50% salary bump. It also often comes with tax advantages.
    - C1sc0cat 8y ago
      3x is the norm for short term it contracts in the UK - ok if its a year you could go lower.
    - yardie 8y ago
      In the US 2x or (100%) is the equivalent to a direct hire salary. Since the employer taxes, social contributions, and paperwork filing is directly managed by the contractor now. You’ll have to be your own HR or hire someone to do it for you.
      - mancerayder 8y ago
        That's not really true: -- you can tax deduct a lot of things, of course, which include day-to-day travel, equipment (phone, internet, laptop), and much more. A part of rent. Let's not even talk about the SEP IRA you can use to further put away money for yourself and lower your tax burden. Unlike an employee 401k, you can decide to put a large chunk of your salary in an IRA at any time, including up until Apr 15 of the following tax year. -- I'm about to find out, but the lower corporate tax may be a boon here -- You work 40 hours, or whatever hours. Employees work INFINITE hours. Weekend work, on-call anyone? I'm not sure what you mean by own HR. For healthcare, you can use the state marketplace or you can look into things like Freelancers Union. For paying tax, you have an accountant. For naughty behavior to report to HR, you have only yourself...
softwaredoug 8y ago
I think the difference is high value, in demand skills vs temp office work. Indeed we’ve always had this dichotomy with temp agencies paying peanuts to just about anyone to do menial office tasks. But if you have skills where the supply is low, it would not make sense to stick around one of these $10/hr jobs...
maxxxxx 8y ago
I have seen the same change between the 90s and now.
prolikewh0a 8y ago
What happened is corporations ate all of those temp jobs and put themselves in between as a middleman to eat 50%+ of your salary for essentially being a job finding company, making it even cheaper and easier for the company hiring. You also have multiple lines of management. I see an abundance of software engineer contractor jobs for $17/hr in Seattle. If these paid good, they'd be great. but they aren't paid good anymore.

by lsc 8y ago

quickthrower2 8y ago

I doubt the same company would offer less for a contract on the same position. I can see why it is balancing out in general though. More investor money going into companies that prefer to hire full time staff rather than contractors would push up rates for permanent staff.

0xADEADBEE 8y ago

This is fascinating. What do you think possible causes for that might be? Is this an America/Bay Area thing or do you suspect it to be more widespread? Would be interested in other people's take on this also.

lsc 8y ago
So my impression is largely a bay area/silicon valley impression, every time I try to work elsewhere, people start asking for degrees, which I don't have, and they also mention that they pay dramatically less. Or, at least, that is my experience, with the jobs I have been offered. My perception is that salaries for direct-hire software engineers at top-tier companies have gone way up in the last ten years or so. My impression is that contractor wages are... keeping up with inflation. Also note, my perception is that contractor interviews have not gotten much more difficult at all, while direct hire interviews have practically become contests of endurance; like you are expected to spend like 5x as much time on a direct hire interview than, say, 10 or 15 years ago, while you can do a contract interview over a long lunch. Companies also seem to be okay paying Engineers very significant sales-style performance bonuses (in fact, this is where almost all of that increase in pay has come from) and this really helps them keep the gamblers; the people like me who jump every few years 'cause someone offered 20% more. (I mean, the bonus system is another system you need to learn to game, but it's not harder than the interview system.) My speculation (and I'm totally unqualified to speculate on sociological trends, but you asked.) is that something has changed, and the cultural prestige of the Engineer has gone way up, and that this has changed management's willingness to spend directly on Engineer compensation.
- Aloha 8y ago
  My last contract job, I was hired sight unseen, with only a cursory technical interview, that mostly established I could breathe.
  - halfastack 8y ago
    That was my experience as well. Needless to say, I was woefully unprepared for the job, but that also meant I have learnt a ton of interesting things.
- WalterBright 8y ago
  A contractor can be let go on a moment's notice, so there is much less risk of a bad hire than a direct. So no need to expend the effort on an interview.
- xfitm3 8y ago
  What do you do where a degree is critical? I've never even been asked about my education in over 20 years.
  - lsc 8y ago
    >What do you do where a degree is critical? I've never even been asked about my education in over 20 years. I am a "linux systems administrator and programmer" in silicon valley, me too. I mean, I'm sure that my lack of a degree gets my resume binned some places, but almost nobody mentions it, and there are plenty of jobs where they clearly don't care; I don't have trouble finding work. My experience is that if I try to get a job outside of silicon valley (and especially if I try to get a job outside the USA) my lack of credentials becomes a big issue. Part of this is cultural, I think, though a lot of it has to do with work visas. As a US citizen, I can vacation most places without too much trouble, but I still need to jump through hoops if I want to work elsewhere, and if I want to get a 'skilled worker' visa, they usually expect a degree.
- 0xADEADBEE 8y ago
  Thanks for the insight. I've experienced British, Australian and New Zealand contract markets and contracting is far and away the only way to get even close to Bay Area salary levels so I'll be watching this trend closely. I really appreciate you commenting; thank you.
usrusr 8y ago
If it's mostly America/Bay Area I would propose the following explanation: Conventional employers/clients (e.g. your friendly diesel manufacturer) spend money on developers when they have a problem they want solved, they love expensive freelancers: if they could they would fly in a squad of experts, get a solution for a single lump sum payment and then hand it over for maintenance to that underpaid slob they keep in the basement. Overfunded startups as well absurdly profitable SV success stories are a very different story. Building a talent pool is a core investment for them. In many cases they would rather have one good hire than two good ones and two bad because their immediate needs are already met and low performing hires are avoided not so much because of another head on the payroll, but because talent dilution is impossible to undo. They are not interested in adding quantity, but building quality teams is just the way they spend their money. Offers will be either high or nonexistent, and freelancers not welcome.
- tracker1 8y ago
  Exactly this... to your first point, second tier cities in terms of software development jobs (Phoenix, Austin, Atlanta, etc) have a lot to offer. There's enough contract work that you can always find something within a couple weeks, and pay is generally competitive to salaried positions. There's also quite a bit of FT work, but more of that will be with more stable tech. YMMV, but the quality of life, at least for me in Phoenix feels significantly better. I may not be making a quarter million or more a year as I might in SV, but I also don't have nearly the level of stress in my life.
- 0xADEADBEE 8y ago
  An interesting point - I hadn't at all considered the trend of slowly growing an engineering team. I'd bet you're on the money with this.

WalterBright 8y ago

The benefits package a direct employee is typically worth 40% of the salary. Hence, a contractor without benefits or employment stability gets paid more to compensate.

lsc 8y ago
> The benefits package a direct employee is typically worth 40% of the salary. Hence, a contractor without benefits or employment stability gets paid more to compensate. I... think you may be mistaken. I've heard that big companies have a total overhead of 40% for a worker, and that might be true once you factor in the cost of middle management and office space, though again it would vary a lot by pay (I imagine office space costs a large portion of a less well paid salary. Around here, quarter-million dollar a year SWEs get the same tiny desks you'd expect of someone making 1/4 that.) but I've got a reasonable idea of what benefits cost, and it's nowhere near 40%, at least for a SWE in my jurisdiction, where total comp is so high and the benefits are... comparatively minimal.
- dajohnson89 8y ago
  don't forget about equipment and payroll tax
  - lotsofpulp 8y ago
    It’s 7.65% for first $128k for federal, maybe a couple extra % for state level taxes.
- polskibus 8y ago
  As a contractor you don't get paid holiday (incl bank holiday) or sick days. That by itself can account for 20% of pay, not counting other benefits.
  - lotsofpulp 8y ago
    Most salaried people have 7 to 9 holidays per year, and if you’re lucky and highly paid, maybe another 4 weeks paid time off. 6 weeks of paid time off divided by 52 weeks is just 11.5%, and that probably puts you in top 10% of the population in terms of paid time off.

alkonaut 8y ago

Contract should always pay significantly more than direct hire, since there is less security and benefits. It simply shouldn’t be possible to enter a contract for less than direct hire wages and benefits, in cases where the contract is obviously a way of circumventing employment. Laws should be written such that circumventing the spirit of the law is also circumventing the letter.

icebraining 8y ago
As far as I know, that's exactly what the law in many (most?) places says. In the US, multiple states - most recently California, after a case regarding delivery drivers - apply the ABC Test[1], and the IRS has its own classification as well. I mean, it's not that the contractor can't get paid less, it's that they can't be contractors at all, even if the employer claims so. [1] https://www.law.cornell.edu/wex/abc_test https://www.law.cornell.edu/wex/abc_test
- bsenftner 8y ago
  According to the ABC Test, my entire visual effects career (15 years) was illegal.
  - lsc 8y ago
    this is... well, yeah, a surface reading of the test is clearly not how it legally plays out, 'cause from a surface reading, almost all "contract" jobs are not. I think this is legally dealt with where I am by ensuring that everyone is an actual employee of someone... if you are a "contractor" you are actually an employee of the body shop. You get paid on a w2, and thus aren't legally a "contractor" From what i see, the body shops charge the employer 30-50% more than what they pay the employee (the range depends entirely on how good the employee is at negotiating, and tends to start closer to 50%, and move towards 30% as said employee is in the same position for a while)
closeparen 8y ago
A contract can include security, where at-will W2 employment never does. But working as a contractor demands a substantial premium anyway, because the contractor is responsible for self-employment tax.

Rjevski 8y ago

Where are you seeing this? Here in London I still get way more as a contractor then I would be full-time, like 50% more.

C1sc0cat 8y ago
You should be getting 2x to 3x more
- akvadrako 8y ago
  There is no "should". Most contract jobs are low risk - they might last for years and if you get fired, you can easily find a new one. Unless there is a major economic downturn, in which case even permanent employees will be downsized. That's easily worth a 50% salary bump. It also often comes with tax advantages.
  - C1sc0cat 8y ago
    3x is the norm for short term it contracts in the UK - ok if its a year you could go lower.
  - yardie 8y ago
    In the US 2x or (100%) is the equivalent to a direct hire salary. Since the employer taxes, social contributions, and paperwork filing is directly managed by the contractor now. You’ll have to be your own HR or hire someone to do it for you.
    - mancerayder 8y ago
      That's not really true: -- you can tax deduct a lot of things, of course, which include day-to-day travel, equipment (phone, internet, laptop), and much more. A part of rent. Let's not even talk about the SEP IRA you can use to further put away money for yourself and lower your tax burden. Unlike an employee 401k, you can decide to put a large chunk of your salary in an IRA at any time, including up until Apr 15 of the following tax year. -- I'm about to find out, but the lower corporate tax may be a boon here -- You work 40 hours, or whatever hours. Employees work INFINITE hours. Weekend work, on-call anyone? I'm not sure what you mean by own HR. For healthcare, you can use the state marketplace or you can look into things like Freelancers Union. For paying tax, you have an accountant. For naughty behavior to report to HR, you have only yourself...

softwaredoug 8y ago

I think the difference is high value, in demand skills vs temp office work. Indeed we’ve always had this dichotomy with temp agencies paying peanuts to just about anyone to do menial office tasks. But if you have skills where the supply is low, it would not make sense to stick around one of these $10/hr jobs...

maxxxxx 8y ago

I have seen the same change between the 90s and now.

prolikewh0a 8y ago

What happened is corporations ate all of those temp jobs and put themselves in between as a middleman to eat 50%+ of your salary for essentially being a job finding company, making it even cheaper and easier for the company hiring. You also have multiple lines of management. I see an abundance of software engineer contractor jobs for $17/hr in Seattle. If these paid good, they'd be great. but they aren't paid good anymore.