The number one complaint I hear about career planning can be summed up in one sentence:
Things used to be simpler.
Get into the best college you can. Work hard, get decent grades. Graduate and get a safe, dependable corporate job with generous benefits.
It didn’t matter that there was no career guidance after graduation, because the formula was so simple.
Especially for the high achievers who read Agile Lifestyle, you could probably start coasting sometime after taking the SAT in junior year of high school and still land a decent five figure entry-level job 4 or 5 years later.
The formula’s not so simple now.
Colleges have steadily increased their prices while delivering less relevant education. Companies and entire industries are being disrupted at an increasing pace. Firms are responding to insecurity by slashing payroll and benefits.
In other words, the days of the W-2 employee are numbered.
The 1099 Workforce: The Rise of the Contract Employee
There’s a surprising silver lining to this story.
As the economy changes, the workforce has become more agile in response.
A new class of contract employees is rising. Contract employees aren’t tied to the fortunes of a particular company.
These contract employees often have the best of both worlds, being both an entrepreneur and an employee: the steady paycheck you get from working for a larger company, and the freedom and security that comes from working for yourself.
Temporary placement service provider Adecco predicts that the rate of growth in contingent workers will be three to four times the growth rate among traditional workforces, and that they eventually will make up about 25% of the global workforce.
The future is about gigs and assets and art and an ever-shifting series of partnerships and projects.
– Seth Godin.
The shift to contract workers isn’t entirely voluntary. Many are still seeking full-time employment, but many others are realizing why it’s good to be a contract employee.
Here are five of my top reasons to become a contract employee:
#1: Get Paid More
When I was an attorney for a software company, I drafted the work agreements for a number of our contract employees.
This was an interesting situation to be in, because I had worked with a few of them on previous business deals.
The first time I saw what the contract workers made, I was floored.
The annual pay of the contract employees was 33% higher than my salary and the salaries of other employees at a similar level.
True, the contract workers didn’t get any health benefits or 401(k) match … but I would gladly take the increase in cash, wouldn’t you?
Why were contract employees paid so much more?
Contract employees are cheaper for the company to hire, because about half of a normal employee’s compensation goes to taxes and benefits. That’s compensation that’s not doing you any good but counts against you anyway.
With the rise of internet-based health insurance like ehealthinsurance.com and President Obama’s health insurance exchanges set to go into effect in 2014, relying on your employer to give you healthcare is becoming obsolete.
And of course, if you’re in a country with nationalized healthcare, one of the big reasons to be a full-time employee is already gone.
So what are you still doing at your job?
#2: Be More Productive
The verdict is in: working from home makes you more productive.
Ariel Schwartz in Fast Co.Exist discusses how in a Stanford study looking at telecommuters versus regular call center workers, the telecommuters out-hustled their collocated counterparts by 13%.
Of course, everyone works differently. But even when the company expanded the experiment by giving everyone the option to work from home, the initial finding of increased productivity held:
Not everyone who participated in the study, however, elected to work from home–two-thirds of the control group stayed in the office, while half of the telecommuters decided they would rather be in the office as well. Unsurprisingly, the telecommuters who experienced an increase in performance were the ones who decided to stay home.
Contract employees don’t all work from home, and some corporations are wising up to the benefits of letting their salaried employees work from anywhere, but one of the big benefits of working for yourself is choosing your own office.
Less distractions, less switching cost, and more productivity.
#3: Increase Flexibility
The 1099 economy is changing how we organize the workforce. The rise of contract employees is far from a bad thing.
The flexibility and work-life balance that becoming your own boss brings to contract workers is hard to quantify in dollars.
But it will continue to increase in importance as we embrace multi-faceted lives that are not solely defined by work.
Contract employees also don’t generally have to submit to onerous non-compete and exclusivity clauses like their full-time brethren. Contract workers are free to pursue a second stream of income and other side projects without having to sneak around.
#4: Work Honestly
Let’s be honest.
Companies have already been treating employees like contract workers for at least the last two decades.
The line between independent contractor and employee has nearly vanished. Union rules, defined benefit pension plans, strong benefits, and guaranteed work have steadily disappeared from the modern workplace.
Most employees are at-will, meaning the company can fire you at any time.
Contract work is more honest about the relationship and mutually respects the parties’ intelligence and dignity.
#5: Find Your Personal Hedgehog
The opportunities to try on different roles and pursue different interests can be limited when you work for a company as a full-time employee.
You were hired for a particular position for particular job duties. Interdepartmental transfers are often bogged down by stringent requirements and office politics.
As a contract worker, you can pivot from role to role faster, and experiment with wearing different hats at different companies.
This process of quickly iterating aspects of your career gets you that much closer to finding your Personal Hedgehog, your life’s calling.
Final Thoughts: Avoiding the Pitfalls of Being a Contract Worker
No doubt there are pitfalls to being a contract employee.
Robert Kiyosaki in his seminal personal finance book, Rich Dad, Poor Dad, warns that the self-employed class often become slave to their own jobs.
Instead of getting freedom, these contract employees are often left running businesses that they didn’t intend to run.
It can be a delicate balancing act when you are put in charge of your career.
But then again, who should be in charge of your career, if not you?
Image by Ha-Wee.