Contractor vs FTE: The Difference In Pay Isn’t The Only Thing To Consider

Having been both a full time employee (FTE) and contractor in my career, I will try to address some differences between the two types of employment, what the benefits and drawbacks are to both. It’s important to note that pay is not the only point of difference between the two. Climbing the corporate ladder, access to training, working on career beneficial projects, perks and benefits.

Pay

The pay gap between full time and contract worker can be significant, but let’s break down exactly what that means. The pay for a full time employee is usually the median price point. Unless it’s a high-in-demand or executive role, don’t expect the company to break the bank for a full time role. That being said, as a full time employee, organizations are willing to offer you things that are equatable to pay. For example extra time off, sick days, consistent pay even on holidays, benefits, and possibly a bonus. When put together, these items can match or come close to the pay gap between contractors and full time workers.

Compared to a contractor, the dollar value of the salary of a full time employee can be laughable. While most full time employees make closer to the median of their roles pay range, a contractor will probably make closer to the highest end. That being said, most contractors don’t get paid on holidays, usually have no benefits and some even have to pay their own taxes by themselves (think periodic visits to the post office). They also can’t really negotiate beyond cash. So once the max limit is reached, there’s really not much else in the area if negotiating or trading items of unequal value.

Length of work

The average FTE doesn’t really have to worry about length of work. If a project their working on is sunsetted, they are often rolled over to another one given they’re adding value. Contractors are often the first the go. Even the very best contractors often find the organizations they work for either trying to convert them or looking for new projects to put them in. Seasoned contractors often put away enough money to sit on the bench for 3-6 months, sometime even longer.  

Type of organization and culture

In the book Soft skills and Software Developer’s Manual, author John Somnez talks about the different experiences he’s had as both FTE and contractor at different organizations. Some companies treat contractors like second class citizens, different (further) parking spaces, different colored badges, different pricing on cafeteria items, second dibs, you get the picture. Other organizations treat ‘consultants’ like royalty (federal government for example). The experts and solution providers. No initiative feels credible without a few of them thrown in the mix.

Type of work

One of the biggest areas of division between FTEs and contractors is in the type of work they get to do. Contractors are often experts and hands-on. In a given project or program, they are often sought out for the most challenging parts. While this can be rewarding, overseeing the project and its execution is often left to FTEs. FTEs usually also get the more creative and interesting job titles, something you can actually negotiate during a job offer. Critical roles with perks are often reserved for FTEs. Management positions are also reserved for FTEs. An outstanding contractor that is considered for management will most likely be offered the role on the condition they convert to FTE first.

 

Given these differences, obviously both have their pros and cons. You have to make a decision based on what is your priority, preference and stage in life. If you’re at a stage where stability is of a higher priority, you may want to go the FTE route. You may also want consider that option if you’re into company paid benefits and healthcare. However, you could be in a phase of your life where earning the highest possible income trumps all, and your skills can command it. Do what feels right. Hopefully this article provides some insights to your decision making.

 



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