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Same happens at ‘struggling’ companies like Deutsche Bank fe. The media presenting massive layoffs while having first-hand information of very well paid contrac

Same happens at ‘struggling’ companies like Deutsche Bank fe. The media presenting massive layoffs while having first-hand information of very well paid contract gigs. Perhaps there are accounting benefits to contracting?

ithinkinstereo 7y ago
1) No FTE associated taxes (payroll, unemployment, etc.) 2) No FTE associated benefits (health insurance, 401K, etc.) 3) Easier to terminate 4) (Arguably) Can grind harder Hopefully, some of the recently laid-off employees can get re-hired as 1099-contractors. Sometimes working as a 1099 can actually be more lucrative (sometimes much more) than being a FTE.
- seibelj 7y ago
  There are definitely times in life where working by choice as a contractor makes more emotional and financial sense. Sometimes you just don’t want to be “all-in” at a company but still contributing and making a good salary. If you have a spouse to provide benefits and hire an accountant to setup things properly, you can make very good money as a contractor. Even better if you can work part time for several with a high rate and juggle them around - then you start outsourcing some labor, and before you know it you have a consulting business.
  - ithinkinstereo 7y ago
    Yes, I definitely agree. If going the contractor route--and if the pay is six 000s+--I would highly recommend getting an LLC and all the great tax benefits that provides. Easily adds 5-10% (if not 20%+) to your bottom line.
- pembrook 7y ago
  Getting hired as a 1099 contractor at a big tech company in California has become impossible if you work on-site at said company. LLC or not, doesn't matter. You won't pass procurement. You will most certainly be a W2 contractor through some middleman who takes a nice cut. Even for higher-end consulting talent. No big company is willing to risk contractor misclassification lawsuits anymore.
cleansy 7y ago
With big corporations it's sometimes the case that your people "budget" differs from your project budget. Even if you have to fire employees you might still have the budget for your project, which is usually what you pay contractors or externally developed software from. Plus the work a contractor puts into the project is "balance sheet neutral" when it's capitalized.
- samsonradu 7y ago
  > Plus the work a contractor puts into the project is "balance sheet neutral" when it's capitalized. Can you please explain this in a more ELI5 manner?
  - cleansy 7y ago
    It depends on how the laws or practices are in the US but for most european countries: Capitalizing means that the hourly rate of a contractor will be added as an increase of value in the software he/she creates. So you pay me 10k for something and this way the value of the software increases by 10k. The software itself is an asset. Whereas in some cases with employees you can’t fully capitalize their cost towards a piece of software, so the cost are on the balance sheet more of a loss than an increase in value of an asset. Accounting trick basically. However I’m not an accountant so that’s only what I heard from my clients when I asked them why for example they don’t hire a full time employee for a long term project.
    - samsonradu 7y ago
      Feels very much like an accounting trick indeed but I get the idea, thanks! Still some questions remain: Why wouldn’t an employee add to the value of a piece of software? Also why would a contractor paid 10k add 10k to the value of the project and not 0? Or 100k? Would a company having a bigger than avg contractor-to-employee ratio be a red flag? As to be overvaluing their assets?
kevstev 7y ago
I looked into this years ago when I worked at investment banks and was astonished to learn that 70% of the IT Department were actually contractors. I may be inaccurate on the precise accounting terminology, but essentially a full time employee is a recurring cost, while a contractor is a non-recurring cost, and this makes your books look a lot better to those who aren't paying close attention. During that period of time, it certainly felt that your job was a lot safer if you were a consultant vs FT. They also paid those contractors by the day, not the hour, and it also felt like they kept the FT'ers around for the "free" labor they provided for weekend work- How I even investigated that 70% number is that I was in theory at least relatively high up the totem pole, but got doing real drudgery type weekend work- checkouts after network upgrades and such since my team had so few FT people. I then mucked around with our api a bit and got the actual numbers and saw this wasn't a unique phenomenon to my team.

ithinkinstereo 7y ago

1) No FTE associated taxes (payroll, unemployment, etc.) 2) No FTE associated benefits (health insurance, 401K, etc.) 3) Easier to terminate 4) (Arguably) Can grind harder Hopefully, some of the recently laid-off employees can get re-hired as 1099-contractors. Sometimes working as a 1099 can actually be more lucrative (sometimes much more) than being a FTE.

seibelj 7y ago
There are definitely times in life where working by choice as a contractor makes more emotional and financial sense. Sometimes you just don’t want to be “all-in” at a company but still contributing and making a good salary. If you have a spouse to provide benefits and hire an accountant to setup things properly, you can make very good money as a contractor. Even better if you can work part time for several with a high rate and juggle them around - then you start outsourcing some labor, and before you know it you have a consulting business.
- ithinkinstereo 7y ago
  Yes, I definitely agree. If going the contractor route--and if the pay is six 000s+--I would highly recommend getting an LLC and all the great tax benefits that provides. Easily adds 5-10% (if not 20%+) to your bottom line.
pembrook 7y ago
Getting hired as a 1099 contractor at a big tech company in California has become impossible if you work on-site at said company. LLC or not, doesn't matter. You won't pass procurement. You will most certainly be a W2 contractor through some middleman who takes a nice cut. Even for higher-end consulting talent. No big company is willing to risk contractor misclassification lawsuits anymore.

cleansy 7y ago

With big corporations it's sometimes the case that your people "budget" differs from your project budget. Even if you have to fire employees you might still have the budget for your project, which is usually what you pay contractors or externally developed software from. Plus the work a contractor puts into the project is "balance sheet neutral" when it's capitalized.

samsonradu 7y ago
> Plus the work a contractor puts into the project is "balance sheet neutral" when it's capitalized. Can you please explain this in a more ELI5 manner?
- cleansy 7y ago
  It depends on how the laws or practices are in the US but for most european countries: Capitalizing means that the hourly rate of a contractor will be added as an increase of value in the software he/she creates. So you pay me 10k for something and this way the value of the software increases by 10k. The software itself is an asset. Whereas in some cases with employees you can’t fully capitalize their cost towards a piece of software, so the cost are on the balance sheet more of a loss than an increase in value of an asset. Accounting trick basically. However I’m not an accountant so that’s only what I heard from my clients when I asked them why for example they don’t hire a full time employee for a long term project.
  - samsonradu 7y ago
    Feels very much like an accounting trick indeed but I get the idea, thanks! Still some questions remain: Why wouldn’t an employee add to the value of a piece of software? Also why would a contractor paid 10k add 10k to the value of the project and not 0? Or 100k? Would a company having a bigger than avg contractor-to-employee ratio be a red flag? As to be overvaluing their assets?

kevstev 7y ago

I looked into this years ago when I worked at investment banks and was astonished to learn that 70% of the IT Department were actually contractors. I may be inaccurate on the precise accounting terminology, but essentially a full time employee is a recurring cost, while a contractor is a non-recurring cost, and this makes your books look a lot better to those who aren't paying close attention. During that period of time, it certainly felt that your job was a lot safer if you were a consultant vs FT. They also paid those contractors by the day, not the hour, and it also felt like they kept the FT'ers around for the "free" labor they provided for weekend work- How I even investigated that 70% number is that I was in theory at least relatively high up the totem pole, but got doing real drudgery type weekend work- checkouts after network upgrades and such since my team had so few FT people. I then mucked around with our api a bit and got the actual numbers and saw this wasn't a unique phenomenon to my team.