Consider the trade-offs of converting a consulting contract to employee status

Q: I work as a software developer on an open-ended contract that I have directly with the company. The company wants me to become an employee, but the salary would be lower than my contracting rate. I like to change jobs every year or two, and staying independent lets me earn more money. How can I decline an offer without jeopardizing my contract? Why are companies willing to pay me a premium as an independent, but then expect me to take a 20 to 30 percent pay cut to work as their employee?

NICK'S REPLY: Tell your client that you like being self-employed and that you want to build your consulting business. Explain that it gives you the freedom and motivation to invest in your own training, keeping you on the leading edge of the technologies you specialize in. Your client may decline, but that's the risk you take. As you said, you prefer to change clients every couple of years. That's how this works.

Financially, it probably won't make much difference to the company -- and it may not make a real difference to you. Remember that when a company hires you as an employee, it accepts all the overhead costs that entails. The true cost of an employee is somewhere around 30 to 40 percent more than just salary. This overhead includes benefits, taxes, payroll expenses and other administrative costs. When a company uses a contractor, it transfers many of these costs, but it still pays them through a higher rate (20 to 30 percent, as you point out).

Consider that what you lose in pay you may get back in benefits. Run the numbers and make sure you understand them. You may still want to remain independent for other good reasons. If this is the path you want to take, you should manage yourself as a business. Study the difference between operating as an employee and as a contractor. To learn more about building a solid contracting business, I suggest you read "Consulting for Dummies" by Bob Nelson and Peter Economy, and "Million Dollar Consulting" by Alan Weiss.

THE HEADHUNTER TIP:

How to choose a successful career

How can we predict which careers will be best? Success depends more on the person than on the state of the industry. (Of course, if you enter pet-rock manufacturing, you don't get any points for having done your homework.)

There are very few people in any line of work who are outstanding at what they do. They're the successful ones, regardless of whether there's a surge into or out of their field. If you're stepping in, plan to be exceptional at the work. Get in because you want to make it a better industry, not because you want guaranteed success. That isn't how business works.

Never enter (or decide against) a business because it seems hot (or is in a downturn). If it excites you and it's not a passing fad, go for it -- with a plan to become one of the best in the field.

Copyright 2009. Distributed by Universal Press Syndicate

Nick Corcodilos is author of "Ask The Headhunter: Reinventing the Interview to Win the Job" and the host of www.asktheheadhunter.com. He can be reached by e-mail at seattle@asktheheadhunter.com or at North Bridge Group, P.O. Box 600, Lebanon, NJ 08833. Sorry, no personal replies.