Questions on Contract Work
Questions on Contract Work
(OP)
Hello all,
I was laid off a week ago and now the company I was working for wants me to come back for contract work a couple of days a week, maybe more, maybe less, for who knows how long. I have never done this sort of thing before and was wondering a few things:
1. What should be included in the written contract? Should there be a minimum number of hours per week or should they be able to let me know when they need me, whenever they need me, for however long?
2. From what I understand, the hourly rate will be the same as my hourly rate when I was working full-time. Is this acceptable and the norm?
3. Are RRSP and Employment Insurance payments required when working under a contract?
4. Will I still receive Employment Insurance benefits when doing contract work for a very limited number of hours? I guess this varies from state to state (or province in my case.)
Heck, it's better than sitting at home, but I just want to make sure I'm not being taken advantage of.
I was laid off a week ago and now the company I was working for wants me to come back for contract work a couple of days a week, maybe more, maybe less, for who knows how long. I have never done this sort of thing before and was wondering a few things:
1. What should be included in the written contract? Should there be a minimum number of hours per week or should they be able to let me know when they need me, whenever they need me, for however long?
2. From what I understand, the hourly rate will be the same as my hourly rate when I was working full-time. Is this acceptable and the norm?
3. Are RRSP and Employment Insurance payments required when working under a contract?
4. Will I still receive Employment Insurance benefits when doing contract work for a very limited number of hours? I guess this varies from state to state (or province in my case.)
Heck, it's better than sitting at home, but I just want to make sure I'm not being taken advantage of.
Clansman
"If a builder has built a house for a man and has not made his work sound, and the house which he has built has fallen down and so caused the death of the householder, that builder shall be put to death." Code of Hammurabi, c.2040 B.C.





RE: Questions on Contract Work
Peter Stockhausen
Senior Design Analyst (Checker)
Infotech Aerospace Services
RE: Questions on Contract Work
2. NO this is not the norm and would not be acceptable to me. Depending on circumstances the hourly rate should be increased to allow for any non monetry benefits lost as a result of not being a direct employee. For instance, an increase to cover any lost retirement or health benefits. Also any required increase to cover any additional tax or liability insurance costs (you may not be coverd by your old employer). An increase to cover some vacation. Possibly an increase to cover periods without work.
When I was in a similar position (I left rather than was laid off but was still contracting for the old company) they offered me the equivalent hourly rate. I wasn't looking at it as a long term job so I just made them bump it up to cover the raise I would have got if I'd still been direct (I left just before raise time) and the contribution they made to my retirement. Being UK health benefits weren't a concern. I can't remember what I did about making up for vactation.
3. & 4. Don't know.
It seems to me, given what you say on 2, they may be taking advantage of you - but you know how they are better than anonymous people on the net.
Maybe take a look at "Trends and Strategies" there's a forum over there about starting a business which may have applicable information.
KENAT,
Have you reminded yourself of FAQ731-376: Eng-Tips.com Forum Policies recently, or taken a look at posting policies: http://eng-tips.com/market.cfm?
What is Engineering anyway: FAQ1088-1484: In layman terms, what is "engineering"?
RE: Questions on Contract Work
I do not think I will make a fuss about them offering the same hourly rate. I am worried they'll axe me for good if I raise the issue. Beggars can't be choosers, I guess.
Clansman
"If a builder has built a house for a man and has not made his work sound, and the house which he has built has fallen down and so caused the death of the householder, that builder shall be put to death." Code of Hammurabi, c.2040 B.C.
RE: Questions on Contract Work
Whether you get your employer to pay the difference or take it out of your check is up to you.
KENAT,
Have you reminded yourself of FAQ731-376: Eng-Tips.com Forum Policies recently, or taken a look at posting policies: http://eng-tips.com/market.cfm?
What is Engineering anyway: FAQ1088-1484: In layman terms, what is "engineering"?
RE: Questions on Contract Work
Peter Stockhausen
Senior Design Analyst (Checker)
Infotech Aerospace Services
RE: Questions on Contract Work
"If you work for an employer, 6.2% of your wages is withheld and your employer deposits the withholding, along with its 6.2% matching contribution, with the government for the social security programs. In 2008, the employee tax and matching contribution stop after the first $102,000 of wages. In addition if you work for an employer, 1.45% of your wages is withheld and the employer makes a matching 1.45% contribution to the Medicare program, making the total withholdings at 7.65% (6.2% OASDI and 1.45% Medicare). However, all wages are subject to the Medicare tax; there is no ceiling."
"If you are self-employed, you pay 15.3% of your taxable income into the social security and Medicare programs, up to the first $102,000 of income. You continue to pay 2.9% of your taxable income into the Medicare program for your earnings above $102,000."
So if you take the exact same rate as you were making before, you will be taking at least a 7.65% pay cut with taxes alone. It seems to me that they let you go and now know that you are desperate. If you really need the work, take it by all means and look hard for something else. Then once you find something just leave, they are not being fair to you so PLEASE do not treat them with the respect that they do not deserve.
SW 2007 SP 5.0
RE: Questions on Contract Work
One of them ended up getting audited a couple year later because of the mess this caused.
I would be very carefull about how you do this, at least talk to an accountant and possibly a lawyer.
There are ways to incorporate yourself or other methods to help handle this.
KENAT,
Have you reminded yourself of FAQ731-376: Eng-Tips.com Forum Policies recently, or taken a look at posting policies: http://eng-tips.com/market.cfm?
What is Engineering anyway: FAQ1088-1484: In layman terms, what is "engineering"?
RE: Questions on Contract Work
Your former employer may not appreciate having to pay their cut though.
KENAT,
Have you reminded yourself of FAQ731-376: Eng-Tips.com Forum Policies recently, or taken a look at posting policies: http://eng-tips.com/market.cfm?
What is Engineering anyway: FAQ1088-1484: In layman terms, what is "engineering"?
RE: Questions on Contract Work
Given that you do have specific experience, they should be able to squeeze at least double your direct rate out of the tightwads, and leave you better off too.
You are being >seriously< ripped off.
Mike Halloran
Pembroke Pines, FL, USA
RE: Questions on Contract Work
You are being ripped off. I would say that you should be be billing them at least twice your current hourly rate. If you want to reduce that, fine, but you are doing them a favour and their other employees a disservice.
Cheers
Greg Locock
SIG:Please see FAQ731-376: Eng-Tips.com Forum Policies for tips on how to make the best use of Eng-Tips.
RE: Questions on Contract Work
To work on a contract basis for the same as your regular rate, you are paying all of your overhead (which before they picked up) and you are getting little in return.
Assuming you are in the US, I offer the following example....Suppose you were being paid $50 per hour before. They paid the employers portion of the Social Security on that (a little over 7 percent). They paid some level of worker's compensation insurance, general liability insurance, professional liability insurance on your existence in the company. In all, if you made $50 per hour, the company cost was at least $110 per hour. Now you are charging the company $50 per hour for contract work. Their cost goes from $110 to $50. Your net goes from $50 to about $22.75 for all that you now have to pick up from them.....See how you're getting screwed!
Further, they should indemnify you for your work so that you don't pick up their liability in the event there's a problem.
I know you want to keep some income, but play hardball...they'll fold to get you a bit more money. Even if you charge them $75 per hour, they are getting a good deal.
RE: Questions on Contract Work
If the company allows you top use its infrastructure, i.e. they cover printing costs, code books, reference books, or are even providing a dedicated workplace where you can use their computer and software, you will do ok with this rate. If you have to cover a part or all of the above yourself, you need a higher rate.
Don't accept a contract that states that they can tell you when to work and where to work. It might be like that for a while, but don't write it the contract. This is asking for trouble, as the IRS might look at this as a "quasi employment". The company might have moe trouble than you, but still you don't want to give somebody a weak up call. Other triggers are a dedicated work place (but, as mentioned above, this saves you money), and only having one client for a long period of time. Don't loose sleep over this, a lot o freelancers and sole proprietorships start out this way, and nobody hangs you if you do this for a year or two. But after some time, you should be able to show that you are your own boss.