Karen Steele, Steele/Case Communications
There are as many ways of arranging work as there are jobs out there. In this chapter attempts to identify some commonly used methods of employment for contractors and consultants.
1.1. Captive Consultants and Contractors
The term "Captive Employee" is industry slang for employees working on a 1040 tax status. Permanent, full-time employees of company, they may perform services for a number of client companies. The contract with the client is between the client company and the employer of the captive employee -- generally a consulting or contracting firm.
The employee is generally paid a salary, whether or not that employee is actually performing work for a client company. Usually these positions involve compensation that includes a benefits package such as medical, dental, etc. When they are performing work for a client company they are sometimes compensated for overtime.
1.2. Contracting
1.2.1. Contract Employee
A contract employee generally works on a "contract" that an agent (job shop or booking agent) has with a client company. The agent (we'll call these job shops) holds the contract with the client to provide labor or consulting services. You may have a contract with the agent to provide these services for client companies.
You are a temporary employee (or contract employee) of the agent. The agent pays your taxes, provides (at least) Worker's Compensation insurance, and witholds taxes from your wages.
With any luck, the agent will also provide some form of health insurance and other benefits. You may will be expected to pay for these benefits, which are provided at a group discount.
1.2.2. Independent Contractor
Independent contractors work independent of an agent (or job shop), and hold their own contract with the client company. The contract should define the work to be provided or performed, compensation for the work, and the rules by which the compensation will be granted.
Additionally, you may find clauses about providing notice if you are moving on, or guaranteeing the work. You may also be required to provide proof of various types of insurance, and DBA's (Doing Business As) or articles of incorporation to prove that you are indeed a business and not a contract employee of the client.
The IRS has some fairly strict guidelines that govern how an independent contractor may do business, and the penalties can be daunting. This is why so many clients (in recent years, at least) prefer to go through an agent.
You can protect yourself and your business by knowing what the rules are and how they apply to your situation.
<< jump to IRS page on 'net>>
For more infomration about this check out the IRS Web site.
1.2.3. Captive Contractor
A captive contractor is an employee of a job shop or consulting firm, who acts as a contractor on projects for various clients. In this case, the employer will provide additional benefits such as paid holidays, sick leave and vacation time.
They should also pay you for hours (over 40) which are billed to a client.
1.3. Consulting
Usually a consultant is someone who is brought in for a limited time to solve one or more specific problems -- often they are brought into a client company to train or assist existing staff. Often these consultants are people with advanced or specialized skills that are needed for a time. Many client companies find the cost of maintaining this skill level prohibitive, and bring in a consultant on an "as-needed" basis.
1.3.1. Independent Consulting
One who sells their skills to clients independent of a broker or a consulting firm is an independent consultant . Independent consultants charge the client directly, handle their own taxes and benefits (including additional training). They are often entrepreneurs.
1.3.2. In-House Consulting
Many times large companies will have consultants on staff. These are individuals with some specialized skill that is shared between multiple areas of the company. For example, a large telephone company handling database publishing may have a database consultant on staff, while another company may have one or more an online help consultants.
1.3.3. Consulting Firm Consultant
Consulting firms, especially large ones, such as Anderson Consulting or EDS, have consultants with specialized skills that can be shared among multiple projects of the firm. These jobs often require substantial travel.
2.1. Work on demand (as-needed)
This is an interesting category of work in which a contractor is put on a retainer by client company. The retainer guarantees the client company a specific number of hours from the contractor each year. The client calls you in as they need your services, and when the retainer has been satisfied, you bill for the additional hours. This is a good way to guarantee a certain amount of cash flowout through the year.
2.2. Fixed Bid
With this method, you estimate a piece of work for the client company, telling them what you would charge to do a job. Generally, neither the scope or the price is renegotiated after the bid is in the client's hand.
2.3. Hourly
Many consultants and contractors like to work on an hourly basis, where the company pays you per hour worked.
2.4. Consulting by the Day
Some consultants charge a "day rate". This is the way most consulting firms charge time, but can become a problem when you've based your day rate on an eight hour day & you're regularly putting in twelve hours.
2.5. Fixed Term
Fixed term contracts state that you will work for the client company for a fixed duration of time, and what they will pay you for that service. Sometimes clients expect exclusive rights to your services when working under this type of contract. In that case, it's an exclusive contract for services.
3.1. Job Shops
Job shops, sometimes called contract houses, provide labor on a temporary basis to various client companies.
3.2. How they work
Generally they will provide a contract with you to perform services for a specific client for a length of time.
3.3. Advantages
They do the marketing for you, finding clients for your services. They also pay you on a regular basis, regardless of how regularly the client pays them. Another nice feature is that many shops now offer benefits to the contractor such as:
health, medical & dental at reduced or limited cost
some holidays
vacation time (usually after a period of service)
3.4. Disadvantages
The main disadvantage is the tendency of these shops to keep rates down, and the lack of individual consideration in their contracts. For example, it's not unusual for the client company to be able to terminate your contract with little or no notice and for no reason, while the worker must provide up to 30 days written notice, or must complete the term of the contract.
Some folks are now asking the shops and/or client companies to provide contractors the same duration of notice.
3.5. Making it work for you
Especially as you begin your contracting or consulting career, these shops make a great deal of sense. They provide stable employment while you get to know the market and learn a new way of working.
Links to shops << >>
Consulting firms provide expert help in a variety guises to various client companies. Sometimes, they specialize in an area of business, such as data processing or banking. They have one or more consultant on staff who is an expert in one facet of the client's business. For example, an online help developer who is also familiar with banking or lending practices.
4.1. How they work
Small consulting firms sometimes hire folks for project work. That is, for the duration of a project they are doing for a specific client. These assignments can be a lot of fun and a great opportunity to learn.
Larger consulting firms (such as EDS or Anderson Consulting) prefer to hire staff consultants who can be sent out on a variety of projects for the firm. They generally have multiple projects going on at once, and may require your assitance on more than one assignment. These firms will also hire specific skills on a project basis, though they prefer to work with in-house talent. (That improves their profit margins.)
4.2. Advantages
Pure consulting, or project work can be very interesting. These projects tend to encompass lots of new technology and business philosophies. It's a great way to trade your existing knowlege base for some new skills. Also, consulting tends to pay better than contract work. After all, they're hiring you for your expertise.
4.3. Disadvantages
These kinds of projects are often emergencies -- that means lots of overtime, and perhaps travel. Be prepared for the occasional "death march" to a deadline you didn't establish. And be aware that most assignments will involve a lot of team work. If you're the kind of person who likes to work on teams, contributing to a shared goal rather than on your own, you'll enjoy this kind of work.
4.4. Making it work for you
Consulting firms are both hard and the rewarding work. Don't try to start your career here, though. You need to bring some kind of business knowledge or expertise to the table in addition to your communication skills.
Links to consulting firms << >>
Cooperatives are groups of people with a shared interest who band together to service a common need.
Cooperatives are most often seen in the marketing and advertising communication arena's, though we're seeing more and more of them filtering to other areas.
5.1. How they work
Example: A group of "creative" workers, a writer, an illustrator, a video producer and an editor, band together to form a professional cooperative. Whenever possible, they will refer work to one another. They may rent a building together, and take advantage of group insurance rates, while continuing to work as independents, within the loose structure of the cooperative.
5.2. Advantages
Cooperatives offer a support system and semi-structured work environment. They can also make your small business appear larger than it really is by providing a pool of ready talent from which you can draw.
5..3. Disadvantages
Be sure you understand any possible legal liabilities.
You may decide sharing work with professionals outside your cooperative better suits your client's needs. Make sure this is acceptable within the cooperative.
5.4. Making it work for you
Cooperatives may be the perfect situation for obtaining working space & the benefits of working within an organization without a lot of the hassle.
Project managers often build a team for each new project or hire workers for the length of a project, to fill a need on the project team. Project workers become part of a team working towards a common goal. For example, a project to write a new accounting system for the client.
6.1. How they work
There are as many different ways of structuring project work as there are projects. Generally, unless you are part of a project team (for example, a team assembled by a consulting firm), you will be hired for a piece of the project.
Certify that the scope of your work for the project is clearly defined from the outset, and that you, within reason, can control the scope of your efforts. (This means that you get to size the effort, rather than having it sized by someone who won't be doing the work.)
6.2. Advantages
Project work can be challenging and offer a great deal of work within a specified period of time.
6.3. Disadvantages
As with any team effort, you won't be able to control all the things that affect your work or when it must be completed. As long as the project manager is willing to let you provide input to the sizing of your task list this shouldn't present problems.
6.4. Making it work for you
Working with other professionals can be especially interesting on project teams, particularly watching seasoned project teams react to and solve problems. It's a great situation situation to treat as a learning opportunity.
Many corporations are leaning more and more towards outsourcing technical communications. They do this either by sub-contracting the work to a technical communication firm or professional, or by creating an in-house cost center that functions as a consulting service.
7.1. As a sub-contractor
As a sub-contractor you may be hired to provide either specific or a broad range of services to various departments within the corporation.
7.1.1. Things to watch for
If you are working through a shop, make sure they are carrying the required insurance coverage (liability, workers comp., etc.).
7.1.2. Links to shops that work world-wide
7.2. As an independent
An independent may be hired to provide either specific or a broad range of services to one or more departments within the corporation. Often, the independent will find themselves working in a more singular environment than a sub-contractor, though not always.
For more information on setting up your business and structuring the contracts, see additional chapters in this book.