Full-time employee vs. contractor

We offer you a breakdown of the advantages and disadvantages of working full-time or as a contractor, to help you make the right contractual decisions.

We want to support all the talent out there searching for new opportunities. Each new opportunity always has some differences, not only in terms of the remuneration, and responsibility but also in terms of the level of engagement with the company, legal and lifestyle aspects you might want to take into consideration.

We offer you a breakdown of the advantages and disadvantages of working full-time or as a contractor, to help you make the right contractual decisions.

Let’s have a look.

Contractor

Contractors are individuals who have a short-term bond with the company, performing a specific service independently from the employer and its day-to-day operations.

As a contractor, this is what you can expect:

Since you are your own boss, you can decide your own rates, meaning you will have the opportunity to charge higher fees and request part or the totality of the payment upfront. This, of course, depends on the nature of the service you’re being requested to perform and the policies imposed by the company requesting your services. Also, depending on the project, you will decide your own schedules, having more flexibility for both your work and your personal life. You can have better tax deductions because anything you spend on your job is generally deductible. This means laptops, commute costs, and others will all be deductible. You may have the opportunity to be part of several companies at once, which can provide you with a better understanding of what the market looks like. So, if a company invites you to join the team as a full-time employee, you will be able to make an informed decision, since you had an overview of the processes and company culture already.

However, you should consider some of the downsides of working as a contractor. Even if you work for a company for a long period of time, your position might not be as secure as a full-time worker and you’ll most likely be considered to be let go first, in times of crisis. If you’re being hired for specific short-term tasks, then you will be continuously looking for new gigs and need to be able to market yourself. It can be stressful for people who are not very organized since not only do you have to be on top of several clients but also keep up to date with the tax system. Oh yes, this can cause some headaches. Contractors are responsible for their own tax filings and social security payments and although they can deduct their own expenses, at the end of the day, they have to allocate time to account work. Since you’re your own company, remember you will not be able to benefit from companies’ healthcare programs and benefits like paid holidays, training, and professional development.

Financially speaking, you’ll have to pay social security on a monthly basis and fill out a quarterly VAT statement. Below you can find a breakdown of these contributions, assuming a remuneration of €45,000.00 = €3,750.00 x 12 months.

Note (1): If you are working for an international client, the client doesn’t retain the IRS contribution. At the end of the fiscal year, you will need to pay or receive IRS according to your yearly expenses and your professional category.

Note (2): During the first year as a contractor, you can be exempt from Social Security Contributions.

Full-time Employee

Being a full-time employee in a company may represent huge benefits for you. As an integral part of the business, you will be given the opportunity to advance your career and be promoted to higher-level positions. Your employer will most likely invest in your professional development, which can include paying for training or allowing you to participate in conferences and other relevant events in the area of business. You will have access to company benefits such as healthcare and paid leaves and all your taxes will be processed by the company. Anything you need to perform your job effectively should be provided by the company. This can include a laptop, software subscriptions, office supplies, etc.

Job security is a big part of the benefits of full-time employees. You can still be fired, of course, but, in general, full-time workers are not the first ones to go. Also, if you do get fired you will be entitled to a certain amount for the years you worked for the company.‍

However, there are also disadvantages of being going full-time employee that you might not be immediately perceived. You might end up working more hours when the company needs or be assigned other responsibilities that were out of your scope initially. Depending on the company, schedules can be very rigid, restraining you to achieve a proper work-life balance. Whereas you would not pay attention to what was going on around the office and would only focus on the job as a contractor, as a full-time employee you want to be more in tune with the company’s policies and politics since you will be there for the long run. Additionally, it is very likely that your wage will be lower than as a contractor.

Let us have a look at what your monthly salary will look like after managing all taxes and company expenses.

So, what is the best option for you?

In the end, it will depend on your work preferences and professional goals. Before accepting an offer, take into account the costs mentioned above, the duration of the project, and the level of engagement you want to achieve with the company. Also, you have to notice that as a contractor you have the chance to negotiate a higher salary once the total costs to the company are lower.

 

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July 15, 2020
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