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#1 lamentofking   User is offline

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Direct Hire vs Contract: Is there really a difference?

Posted 07 May 2015 - 11:37 AM

Hey all,

I was wondering is there really a difference in job security when it comes to direct hire salaried positions vs contract to hire positions? I live in Virginia which I found out is an "employment at will" state. I was told because of this that I could be let go from a salaried position just as easy as a contract position. For some reason I don't believe that. I was told this by a recruiting agency and I know that they rather one of their candidates get hired to a contract position than no position at all. I was under the notion that employers who sign candidates to a salary means that the candidate was exactly who they were looking for or was the best candidate for the job while a contract to hire position is more lenient because if the candidate isn't meeting expectations then the contract would be terminated. I guess the answer depends on where you are located but in terms of being let go for any or no reason at all, which is more secure?

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Replies To: Direct Hire vs Contract: Is there really a difference?

#2 no2pencil   User is offline

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Re: Direct Hire vs Contract: Is there really a difference?

Posted 07 May 2015 - 11:58 AM

Absolutely there is a difference. Direct hire you are protected by the HR handbook. As a contractor, the company that you are actually providing the work to has an 'open evaluation' period. They could tell you at lunch time to pack your things & go, & there is nothing you can do about it. You have zero HR protection from being let go.

For instance, I know of a place that is currently a bit behind. They are looking for a contractor to help catch them up with ZERO desire to bring this potential candidate on full time. When the work is complete, they are shown the door.
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#3 modi123_1   User is online

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Re: Direct Hire vs Contract: Is there really a difference?

Posted 07 May 2015 - 12:00 PM

Also benefits typically do not apply to the variable workforce of contractors.
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#4 no2pencil   User is offline

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Re: Direct Hire vs Contract: Is there really a difference?

Posted 07 May 2015 - 12:01 PM

Benefits would come form the contracting company, & not the place where the work is being done ;)

As pointed out, if there were any, & usually there are not.
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#5 modi123_1   User is online

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Re: Direct Hire vs Contract: Is there really a difference?

Posted 07 May 2015 - 12:04 PM

Sorry - I didn't fully extend out the completeness of that.

Also - typically all the US states are 'at will'.. well.. except Montana and any extenuating contracting negotiations.

Quote

Employment relationships are presumed to be “at-will” in all U.S. states except Montana. The U.S. is one of a handful of countries where employment is predominantly at-will.

http://www.ncsl.org/...t-overview.aspx
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#6 tlhIn`toq   User is offline

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Re: Direct Hire vs Contract: Is there really a difference?

Posted 07 May 2015 - 12:59 PM

The 'be let go at any time' part is pretty much true. In any 'right to work' state the employer can drop you at any time for no cause.

But when you are a real employee (not a contractor) you tend to get all the company benefits like paid schooling, paid vacation, 401k matching contributions, group insurance and so on. I've worked places that went through benefit providing companies that also get you discounts on hotel stays, amusement park tickets, store discounts like 10% off at Best Buy or half price Verizon service.

Being a salary employee only means you don't punch a time clock. You aren't hourly. You get a flat paycheck. You don't get paid overtime so no time and a half even if you work 60 hours that week. In theory it means you still get your full paycheck if you only work 30 hours that week (making up for a long week earlier in the month).

As a contractor you are responsible for paying the IRS your taxes, social security and so on. Generally the head-hunting company funnels your paycheck through their payroll service and does all this for you. But they don't have to so double-check. It can be a shock next April when you find out you owe thousands in taxes. Many contracting services also have group benefits.

I have seen where many contract positions pay higher to make up for the lack of benefits. Which for me has always been good because I don't care about a lot of the spiffs. Plus they feel the head-hunters have done a lot of background checking and so on. The hiring company might be more willing to take a chance on a contract person with no degree for example because they know they can swap him out easily and for no cost. Hiring a real employee always has some expense associated with it.

If you work for a head-hunting company you can also show that you've worked for the company for 10 years, yet gotten a wide variety of experience because of being deployed out to 7 different firms.
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#7 Programmist   User is offline

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Re: Direct Hire vs Contract: Is there really a difference?

Posted 02 June 2015 - 05:06 AM

Job security is an illusion. I've been doing this for more years that I care to count and I've worked as salaried, w-2 contract, and corp-to-corp consultant. It is true that a company in financial trouble will typically shed its contractors first, but make no mistake, your status as a "full-timer" doesn't make you any less expendable. When the dot-com bubble burst (2001) my full-time status didn't stop them from laying me and several others off with zero notice.

That said, contract work is usually shorter-term. Contractors are often brought on for a limited term engagement like a project and then expected to leave when the need is over. I've also seen long-term (2 years) and open-ended contracts. Personally, I prefer contract work to full time. I've been an independent consultant (corp-to-corp) since 2009 and I wouldn't go back. Sure, I end up looking for work more often than a full-timer, but I like that. I get to leave when the interesting work is over and the support work begins. Companies hire me for projects and when that project is complete and the full-timers are comfortable taking over the support role I leave.

So what about benefits? As a full-timer you get benefits, but you pay dearly for them with your salary. In my experience "benefits" at many companies rarely make up for the reduction in monetary compensation you get moving from contract to full-time. Some companies offer stock options which can sometimes bridge the gap a bit more, but insurance, 401K matching, and a paid vacation is not going to cut it. I'm not going to name the company, but in 2010 consultants were making 100%-130% more than the salaried folks. Do the math on that. Yes that meant that consultants were grossing the equivalent of a full year's salary in 3-6 months.

There are down-sides to contracting/consulting though. Your taxes can become more complex. You do end up looking for work more frequently, which can be a negative if that's not your thing. Some companies treat contractors differently. I've seen companies cram contractors into a conference room even through there were open cubicles because "cubicles are for employees." So you have to be selective what contracts you accept. However, if you perform well you'll likely be approached by companies who want to convert you from consultant to full-time which puts you in a really nice bargaining position if you like the company. So far only one company has tempted me to convert and it was Google. Unfortunately it came with the requirement that I move to Mountain View, which was impossible for me, so I remained a consultant.
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