Contract to Hire Job

[themainevent]

I have been working as a contractor for almost a year now and, after a former employee left, was offered a full-time position within the company.

For those of you who have been in a similar situation, what exactly is the transition from a contractor to an employee like? As in, were you re-interviewed, was the process lengthy, etc. Also, how big was the pay increase compared to what you were getting in the contract position?

[mobilehaathi]

That's going to be rather specific to your job/field I would think.

I imagine you'll at least be getting benefits now, though.

[sviato]

There will certainly be tax implications!

[balamw]

Originally Posted by themainevent

Also, how big was the pay increase compared to what you were getting in the contract position?

Depending on the contract, you might actually not get a raise. Your total compensation may go up due to benefits etc... but your hourly rate may actually stay the same or potentially even drop slightly.

True independent contractors often charge 2x more per hour than they would get as full time employees.

B

[Tomorrow]

Originally Posted by themainevent

For those of you who have been in a similar situation, what exactly is the transition from a contractor to an employee like? As in, were you re-interviewed, was the process lengthy, etc. Also, how big was the pay increase compared to what you were getting in the contract position?

I wasn't re-interviewed and it was not a lengthy process.

My paycheck went down as a result - contractors are typically paid much more per hour because they don't receive fringe benefits like vacation days, insurance, etc. Also, contractors have to pay all of their payroll tax, not just part of it like full-time employees do.

The biggest difference for me was going from being paid straight time for every hour worked to being on a salary with no overtime. But at least my work weeks were shorter, as well.

[balamw]

Originally Posted by Tomorrow

My paycheck went down as a result - contractors are typically paid much more per hour because they don't receive fringe benefits like vacation days, insurance, etc. Also, contractors have to pay all of their payroll tax, not just part of it like full-time employees do.

Of course YMMV, at least at my current employer most "contractors" aren't really independent contractors they are employees of some staffing agency that my employer contracts with for temporary help.

In those cases the "contractor" may well see no difference in their check.

B

[velocityg4]

I would just find out what the pay and benefits are. Then compare it to what you are getting now. Since you are required to purchase healthcare now those benefits could be very good (assuming they have a decent plan). Plus you can also be getting a 401K, life insurance, etc. So I'd factor all those in.

Since it sounds like you've been there a while. I'm sure you must have a good idea as to what the hours and work conditions are like for an employee vs a contractor.

Also since they want you as an employee. You should have some room to negotiate a better salary, vacation time and benefits than their initial offer. Just be sure to get said benefits in writing.

Originally Posted by Tomorrow

I wasn't re-interviewed and it was not a lengthy process.

My paycheck went down as a result - contractors are typically paid much more per hour because they don't receive fringe benefits like vacation days, insurance, etc. Also, contractors have to pay all of their payroll tax, not just part of it like full-time employees do.

The biggest difference for me was going from being paid straight time for every hour worked to being on a salary with no overtime. But at least my work weeks were shorter, as well.

Just to clarify you still pay the full payroll tax. It's just half the Social Security and Medicare is hidden from you by the employer paying for it directly. That is still money you could have received.

[Tomorrow]

Originally Posted by velocityg4

Just to clarify you still pay the full payroll tax. It's just half the Social Security and Medicare is hidden from you by the employer paying for it directly. That is still money you could have received.

Could have received if my salary were higher. It's not deducted from my salary; only half of it is. When I was working contract, I wrote a check every quarter for the full amount.

[TedM]

Originally Posted by sviato

There will certainly be tax implications!

You still have to pay taxes as a contractor. Its just later in a 1099.

[themainevent]

I was under the impression that if you are an independent contractor, or 1099, then you are typically paid much more because there is no intermediary staffing agency to take a cut of your paycheck. Job security is lower and risk is higher, therefore the compensation is greater. And on the contrary, contractors like myself who file a w2 and are paid by a separate staffing agency could expect a pay increase for the exact opposite reason independent contractors would suffer a loss; someone has to pay the middle man. Do I have this straight?

It just doesn't seem logical that I would suffer a pay cut for being "promoted" to a full time position. If they see value in me and want to secure me in the company, is the only type of additional compensation I can expect to see limited to benefits/vacation excluding salary?

[balamw]

Originally Posted by themainevent

contractors like myself who file a w2 and are paid by a separate staffing agency could expect a pay increase for the exact opposite reason independent contractors would suffer a loss; someone has to pay the middle man. Do I have this straight?

In this case you really aren't a contractor, you're an employee of the staffing agency.

It does all depend on your employer. You might get a raise in hourly pay, but then again you might not. It all depends on the business realities of the specific company and position.

B

[themainevent]

Well my job title is contractor, in the sense that I'm being contracted by a company to work for them for a specific amount of time. But I see what your saying.

So what happens if these people who are working on contract at another company don't get brought on full time? Since they are technically still employees at the staffing agency, does the agency actively look for another job to place them in given their skills? Or are they simply "let go" once their current contract is up?

[malman89]

Originally Posted by themainevent

It just doesn't seem logical that I would suffer a pay cut for being "promoted" to a full time position. If they see value in me and want to secure me in the company, is the only type of additional compensation I can expect to see limited to benefits/vacation excluding salary?

I would wager most commonly those that get hired direct from a contract to hire position at least get the same wage plus health insurance, PTO, and a 401k if your new employer offers it. Maybe you'll get a tiny raise on top of that. It probably depends on what the staffing agency bill rate/mark up was for your position.

Originally Posted by themainevent

Well my job title is contractor, in the sense that I'm being contracted by a company to work for them for a specific amount of time. But I see what your saying.

So what happens if these people who are working on contract at another company don't get brought on full time? Since they are technically still employees at the staffing agency, does the agency actively look for another job to place them in given their skills? Or are they simply "let go" once their current contract is up?

Mixing up terms - you're not a contractor, but a contract to hire (CTH) employee. I actually currently work at a staffing agency that mainly focuses on CTH employment for most of its business (the other side being direct hire/outsourced recruiting). I would say it would depend on the agency and the client location. Our placement terms vary by location and definitely job skill. Low skill positions are something like 520-720 hours (typically 3-4 months), high skill CTH positions can easily be 1040+ (6 months+).

Many CTH associates call in and wonder why they aren't hired at day 90/hour 520, but none of our clients dump associates because they reached their minimum hours and only one I know of hires immediately at day 90. Sometimes the client waits until more than 1 person hits the minimum day/hour mark to bring on a group of 5, 10, or 30 direct. They don't want to be doing new/rehire orientation for people all the time. Sometimes they want to wait until the next fiscal year. Sometimes they just don't know you're at your hour/day mark until they ask us.

It's actually in the staffing agency's interest to keep you on longer. I do invoicing and payroll and we pay your taxes like FUI and SUTA. However, if associates hit the max contribution on those taxes, we don't have to pay for it and it bumps up our margin. Admittedly, it's a pretty slim bump and due to turnover, most associates hit neither, or FUI at most.

[themainevent]

To any that have been in a similar situation, about how long was the actual transition from a contractor to a full time employee? My boss offered me the job at the beginning of this month, but I am still waiting to hear back from HR on what happens next.

[mobilehaathi]

You're probably better off asking someone at your company who went through a similar process. Surely it is dependent on company-specific factors more than anything else?

[malman89]

Depending on the terms between the staffing agency and the client (which they may or may not divulge to you - definitely NOT markup, but term), your physical employer might need to pay a prorated placement fee for your services if you have not hit the minimum hour/time requirement.

Say your agreement was 2080 hours/one year and you're at 1800 - the agency is due a a prorated placement fee based on the remaining 280 hours at some certain percent.

If you already satisfied the term of their agreement, the hiring in process should be instant (or perhaps at the end of the current pay period for ease).

[themainevent]

Ok that makes since, thanks for clearing things up.