Be an employee or be a freelancer but be cautious when it’s full-time work that’s a bit of both

I often hear from my UX colleagues that they are thinking of going off on their own. They tell me that they’re ready to make the leap to freelancing and think that they have found their first gig – maybe it’s a 3-month contract, or 6-month or full-year contract. Often it’s full-time so they know that they’ll have secure income for a good length of time.

My advice to them is simple: Approach with Caution!

Nothing seems wrong with these temporary arrangements. It’s work, it’s full-time and it’s steady income for a specific duration. Yet the arrangement has neither the benefits of being a full-time employee, nor many of the benefits of being a freelancer.

Before we consider why these arrangements are problematic, it’s useful to understand what those various benefits are. I’ve written about these benefits previously, but here’s a quick summary.

Benefits of being an employee

While I have spent many years in an exclusively freelance capacity, I’m very aware that I have given up some of the benefits that come from being an employee. Employees get subsidized insurance, sick days, vacation days, matching retirement contributions, raises, bonuses, and often the camaraderie of a core set of colleagues as well as a feeling of belonging. And to add to that, one of the biggest benefits of being an employee is having a level of job safety that comes from being an employee. No, nothing lasts forever, but employers will generally work harder to hold onto good employees than good freelancers when times get tough.

Benefits of being a freelancer

Even though I’ve given up those employee benefits, however, I realize the many benefits to being a freelancer. For one thing, my hourly rate is higher than it would be as an employee, and any profit goes to my business instead of to an employer’s. As long as work keeps flowing, this more than covers any subsidies that I’d get as an employee, as well as compensates for making the choice to take some unpaid days off. As a freelancer, I can choose to use my work time to have paid or unpaid exciting UX adventures and use those adventures to both be a part of a community and simultaneously work to build that community – so it is also possible to create a socially cohesive set of colleagues as a freelancer.

I can also use as much of my non-billable time as I wish to seek out new work and do business development (a must as a freelancer!) so I can be directly responsible to keep the pipelines full. Personally, while I’ve certainly had periods of billable work drought through the years, looked at on an annual basis, I’ve never really come out behind what I think that I would have made as an employee.

Project-based consulting vs. staff augmentation: defined

Staff augmentation means that a company needs extra (often full-time) staff for some duration of time but decides for whatever reason that these staff should be contractors and not employees. For all intents and purposes, they are like full-time employees, but they are not. Sometimes staff augmentation comes with a “temp to perm” carrot: If you like us and we like you, we may hire you as a permanent, full-time employee.

Project-based consulting, on the other hand, means being available to provide specific types of solutions to clients on a per-project basis. The client has a specific project need that is not met by existing internal staff and the freelance consultant meets that need for a portion or the entire duration of the project. While this arrangement could span differing lengths of time, the needs tend to be defined by the lifecycle of the project.

So what’s wrong with staff augmentation?

Staff augmentation can be an iffy proposition for a company. The company may need to justify why it chose to hire a contractor and not an employee, saving on such things as payroll taxes or benefits. In the United States, the IRS has several criteria used to decide whether the company is making the right choice. But whether the company is right, ultimately what matters to the individual is whether the position is right.

A staff augmentation arrangement means that the contractor won’t have the benefits of being an employee. Simultaneously, a staff augmentation rate is often not going to be what the rate would be for a solution provider who can supply expert and necessary skills to specific aspects of a project. Even if the rate roughly covers the lost benefits, it’s very likely not going to be high enough to cover time off for business development activities or for being “on the bench” after the particular project is complete.

What should you do?

If you enjoy being a full-time employee with all the benefits that come with it, then by all means do your best to remain an employee. If confronted with an enticing contract-based staff augmentation type role for a finite period, let the company know that the role is intriguing but that you want to be an employee instead. If this isn’t an option, then consider carefully whether this arrangement makes sense enough for you to leave your current job. If it provides valuable skills and experience and the job market is strong, then it may be okay to take it and to plan to start looking for another full-time job a month or two before the initial end-date of the contact.

If you want to be a freelancer or enjoy being a freelancer currently, however, then consider carefully whether a staff augmentation arrangement is right for you. You may be better off doing less than full-time work that ideally has a higher hourly rate than working full-time for a “long-term” but temporary contractor position. You can use your free (albeit unpaid) time to find other smaller projects where you provide solutions to clients. You’ll be diversifying the eggs in your freelance basket so when one project ends, you’ll still have other billable work. Plus, when you have free time, you can funnel that time into business development so that you can seek out new work going forward.

 

Image of temporary and permanent puzzle pieces: NoridzuanMahfok / BigStockPhoto.com

2017-04-22T22:36:15+00:00 Apr 5, 2017|Tags: , |