Thursday, August 9, 2012

There's good news and bad news when moving from a contactor role to a permanent employee.

Let's start with the good news of being a company employee. There is the potential for promotion. You will become part of a long term team. You'll most likely be provided benefits such as health, life, and disability insurance. You'll be given the opportunity to participate in retirement programs like 401K. Your employer will be paying half of your Social Security tax. Lastly, you may be given the opportunity to learn new technologies via internal company initiatives and/or formal training classes.

Now let's discuss the bad news. You'll have little or no flexibility regarding the projects you work on and your work schedule. Also, you will meet less people, because you will be working with the same team on multiple projects, rather than changing teams, companies, and/or industries on a project-by-project basis.

You will also see some dramatic changes in your compensation. The things you consider positive or negative with this change is primarily based on your current financial position, your long term goals, and your ability get health insurance for you and your family from other sources.

To begin, as an employee the cash amount in your paycheck will go down because your compensation is not just cash based, it includes insurance benefits, retirement benefits, paid vacation, paid holidays, tuition reimbursement and other similar items. When you add up the value of all these benefits, your total compensation may be higher, but your cash-in-pocket may be significantly less.

Also consider that while it's great that companies provide health insurance and other benefits, some may not be of value to you. For example, if your spouse works and you and your family can be covered on his/her health insurance, you getting health insurance via your job may provide no financial advantage.

In closing, it's enormously important for you to consider where you would like to be in five years personally and professionally. That said, does working as a contract programmer or as a company employee get you where you would like to go?

This blog is based on a column I wrote last year, as part of my weekly blog in IT World. For my most recent IT World blogs, go to http://www.itworld.com/blogs/eric-bloom.

Until next time, work hard, work smart, and continue to grow.