The Pros and Cons of Contract Work

Contractors, contingent jobs, gig workers, on-demand employees. Whatever you call it, the number of non-employee workers is growing. Some estimates put the total as high as 40 percent of the workforce for whom temporary is the new permanent.

For some, it’s a choice. Others turn to contract work as the result of a shifting job market. No matter the reason, there are pros and cons to working as a contractor. In fact, some points are advantages and disadvantages at the same time.

The advantages of working as a contractor

The road less rutted: While it’s possible to grow stagnant as a contract worker, it’s not likely. There’s usually a fresh project just over the horizon. And, unlike employees, if you’re not feeling a certain job as a contractor, you can always say no. You get to choose what you do most of the time.

Sometimes financial necessity might force you to take a job you’d rather not, but you’ll have far more control than you would as an employee.

Try before you buy: If you’re still looking for a permanent gig, contracting in between jobs is a great chance to see if you and the company are a good fit. You’ll get an up-close view of the culture that you’re not going to be afforded otherwise.

Realize, though, that some companies simply aren’t going to add employees. Hanging on as a contractor in hopes that tide will turn is usually futile.

You can’t beat the commute: There are financial savings in spending for gasoline, vehicle maintenance and even wardrobe. The less-obvious advantage: driving time is lost personal time. You’ll quickly realize work eats less of your day when the commute is as simple as rolling out of bed. 

Become a time master: By law, companies cannot control when or how contractors work. This means that if you’re more efficient at 5 a.m., you're free to work then—as long as you’re meeting deadlines. Neither can a company demand a contractor be at the office, though the occasional meeting isn’t out of line.

The advantages here are obvious for extreme morning larks or night owls tired of trying to force their circadian rhythms to adapt to a time clock. The flexibility also is a boon for working parents.

The downside of working as a contractor

Bedeviled by details: You just became your own HR department. You’ll have to track everything from taxes to insurance payments to expenses—pesky details someone used to handle for you. And you’ll lose safety-net benefits such as workers’ compensation and disability pay.

You’re also responsible for self-employment tax, which covers your and your employer’s share of Social Security and Medicare taxes. There’s a bit of a silver lining here. What amounts to the employer’s share is deductible but it can still be a bit of a bite when you’re making those quarterly payments.

Tax software does make your new duties easier. There are a number of options, including some that are free.

Retirement planning: We’ve mentioned Social Security is in play, though most of us are smart enough to not count solely on that. If you don’t have an IRA, it’s time to start one. If you go with a traditional IRA, there are tax advantages now. A Roth IRA, on the other hand, offers advantages later. Both options are worth evaluating.

Work-life balance:  It’s hard enough to avoid working after hours when emails from the boss keep blowing up your phone. It’s even more of a challenge when the office is just down the hall and you swear you’re only going to check one little thing. Chances are, you’ll have to work a little harder to separate church and state when working as a contractor.

The lone stranger: Even working on-site, as a contractor, you’re not necessarily going to be part of the lunch crowd. The isolation is more intense if you telecommute. If you work on-site, attempt to reach out to temporary coworkers. For telecommuters, an afternoon working at a coffee shop can be a welcome change.

Look on the bright side, though. If you’re isolated, at least you’re avoiding office politics.

For most contract workers, every advantage has an equal and opposite disadvantage. Your hourly rate might soar, but you’ll have to cover your own benefits. You’ll have more scheduling freedom, but you’ll have to deal with administrative hassles. You’ll be able to say “no” to work you fear you won’t like, but you’ll sometimes have to say “yes” if your income has fallen off.

For some, the tradeoff is worth it. For others, contracting might not be the best choice.