Table of Contents
INTRODUCTION 1
WHAT IS CONTRACTING? 1
What is a computer contractor? What kinds of work do computer contractors do? How much do contractors earn? Who hires contractors? Why do clients use contractors? Do clients save money by hiring contractors? How is a computer contractor different from a computer consultant? How many computer contractors are there in the US? Are all computer contractors temps? What are working conditions like for contractors? What kind of status does a contractor have on the job? What percentage of contractors work through consulting firms? What are the advantages of contracting? What are the drawbacks of contracting? How many people make a long-term career out of contracting? Where does contracting fit into long-term computer career planning? Can I work part time as a contractor? Can I do contract work for remote clients from my home? What is the single most important thing to remember about contracting? Will contracting remain a viable career option for the next twenty or thirty years? Can you recommend any magazines I could subscribe to in order to learn more about contracting? My goal is to become a real consultant, the kind who sells advice. How does contracting fit into these plans?
CAN I BE A CONTRACTOR? 19
What are the minimum qualifications you need to become a contractor? What kinds of skills are most valuable? How important is it to have paid experience? How much total experience do most contractors have? Can I become a computer contractor by taking a mail order course? How do consulting firm recruiters evaluate skills? How technically savvy are the recruiters who read my resume? How do I determine if there is a market for my specific technical skills? Where can I find out more about conditions for contractors with skills like mine where I live? Can I be a contractor if I am not a programmer but have other computer-related skills? Is it a good idea to begin contracting straight out of college? Do some types of personalities do better than others as contractors? I have a lot of bills. Could I pay them off faster as a contractor? Is taking a salaried job with a consulting firm a good way to break into contracting? Won't I learn more about the consulting business working as an employee of a successful consulting firm? My spouse isn't crazy about the idea of my giving up a steady job. Will they change their mind when the money starts rolling in?
W-2, 1099, OR CORP? 33
Do I have to establish my business in a particular legal form? What is a W-2 Contractor? What are the advantages of working as an employee contractor? What formal steps are required to work as an employee contractor? What is a sole proprietor? What is an 1099 Contractor? What are the benefits of being an independent contractor or sole proprietor? What legal steps do I have to take to become a 1099 contractor? What do I do if a company sends me a 1099 statement with an incorrect amount on it? What is involved in incorporating? What is the difference between a C-Corporation and an S-Corporation? Can I start out as a C-Corporation and then change to an S-Corporation later? If I have to incorporate should I use an online service that promises to incorporate me in my home state for $200? Is it a good idea to incorporate in another state where incorporation is cheaper than my home state? What is a Limited Liability Company? Would it make sense to form a partnership? How do you decide which form to use? Why do firms vary so much in what employment status they demand? What exactly does Section 1706 do? What happens if you violate the IRS guidelines and work with the wrong status? Where do you find consulting firms that will work on a 1099 or corp-to-corp basis? Does my employment status make a difference in how much I earn? Should I hold out for independent status? Will 1706 be repealed? Can I change my status from W-2 to 1099 or become a corporation in the middle of an existing contract? Have thousands of independent computer contractors been reclassified as employees as an agency recruiter told me? Why did the consulting firm tell me I need to buy expensive insurance before they'll let me work as an Independent? Does my homeowner's policy cover my computer equipment at home? What is disability insurance? Where can I buy the business insurance I need? Will I have problems finding health insurance if I'm working as a W-2 contractor? Is it easier to buy insurance if I am incorporated? What about continuing in my old employer's plan under COBRA? Can I get health insurance through a consulting firm if I am an hourly rate W-2 employee? Do I have to choose a business name if I am a contractor? How can I ensure that my business name is unique? What business expenses can I treat as tax deductions as a W-2 contractor? What business expenses can I claim as tax deductions as an independent contractor? Can I deduct the cost of my health insurance? Can I deduct the expenses of maintaining a home office? Would I save money leasing a car for my business and then deducting the expense on my taxes? Will I have credit problems if I become a contractor? Can I get the benefits of independence working as an employee of an umbrella company?
WHAT RATE? 63
WHICH CONSULTING FIRM? 91
What is a consulting firm? What is a broker? What is an agency? What is a Big Six Consulting Firm? What are Vendor Consulting Firms? What about the consulting firms I see in the magazines and online? What about the traditional temporary and employment agencies now placing technical contractors? What about smaller, local consulting firms? Do consulting firms earn obscene profits? How do consulting firms pay their recruiters? Are the most successful consulting firms those that best understand technology? Who keeps the consulting firm in business, the client or the contractor? What kinds of problems do contractors cause consulting firms? How do I find a good consulting firm? What about consulting firms that post jobs on Internet job boards? How do I find a good out-of-town consulting firm? What kinds of problems should I be looking out for? The reputable consulting firms in town won't interview me because I'm currently employed by a large area firm they have contracts with. What can I do? How paranoid do I have to be?
HOW DO I WORK WITH CONSULTING FIRMS? 109
When should I contact consulting firms? How many consulting firms should I contact? Should I first contact firms whose employees recommend them? Should I look for consulting firms that pay a sign-on bonus? What is the best way to approach a consulting firm? What should be my goal in the initial contact? What kinds of questions should I expect the recruiter to ask? Should I discuss rates during the initial contact? Should I tell them what rate I want? Should I ask about tax status at this point? What should I do if the consulting firm wants a face-to-face interview? How should I dress for an interview? How do I handle the consulting firm interview? Should I deal with a recruiter who is a technical idiot? The recruiter gave me a contract to sign at the preliminary interview. Should I sign it? Can I ask to see their regular contract now? What kind of r‚sum‚ should I send a consulting firm? What comes after the first contact? The recruiter has an interview for me. What now? What happens at the client interview? Who will be interviewing me? Should I discuss rates at the client interview? Should I discuss the start date at the interview? How much can I find out about the contract at the interview? This is just a six week contract, so why worry? The contract they've got for me is "temp to perm." What does that mean? How can I optimize my chances of getting the contract? What should I do if I can't find out much at the interview? I'd like to interview for more than one contract before I decide on one. Can I do this? What should I do when I get an offer? What should I do if the recruiter tries to lowball me? I can't make up my mind about this offer. How do I handle this? How can I improve my negotiation skills? Do I have to negotiate? Besides my rate and status what else must I negotiate? How do I accept the offer? When should I give notice on my old job or contract? Should I start working for the client before I sign the contract?
WHAT'S IN MY CONSULTING FIRM CONTRACT? 133
Do all consulting firms use written contracts? Who supplies the contract? What parties are bound by this contract? Since I'm not contracting with the client, what contract binds them? What should I do if the consulting firm doesn't send a contract? How negotiable is the consulting firm contract? Do I have to accept everything in the contract to take the job? How do I negotiate a clause? How do I modify a contract clause? What clauses should I expect to find in a contract? How do W-2 contracts differ from 1099 and corp-to-corp contracts? How does a corporation's contract differ from that of a 1099 IC? Are computer consulting contracts covered by Federal law? The consulting firm is located in a state other than the one I work in. What state's laws prevail? The consulting firm representative says that theirs is the standard NACCB contract and that they cannot change it. Is this true? What if I can't figure out what a clause means? Can you show me a sample of each clause I can expect to see? I've heard that overly broad clauses will get thrown out in court. Does this mean I can ignore the most abusive ones? How frequent are lawsuits by consulting firms against contractors? What happens to my contract if another firm buys the firm I sign with?
Do I have to be an entrepreneur to work without agencies? How do I market myself? What's the easiest way to find direct clients? How can I get old employers to hire me? How can I work direct for clients I met through consulting firms? How can I make the most of my existing contacts? How do I find new clients? What kinds of companies will hire contractors directly? What is a preferred vendor? Can I become one? What kinds of firms don't use preferred vendors? Why do clients hire from body shops when they can get better talent hiring direct? Why do so many companies prefer to hire from agencies and consulting firms when they can find my resume on the Internet? How do I find out which companies in my area will hire direct? Is it worthwhile to send a mass mailing to area managers? How do I present myself as an expert? I've found a manager who is interested in hiring me for a direct contract. What now? What status should I work under? The client insists that I work through a pass-through agency. What's that? How do I negotiate my rate? What should I watch out for when negotiating directly with managers? Who provides the contract when I work direct? What should my contract include? What do I do with the contract? Can I work without a formal signed contract? What is an invoice? What should I do when I get paid? What should I do if I don't get my check? How do I terminate the contract?
How do I give notice at my old job once I've found a contract? How do I start my new contract? How long do I have on a new contract to figure out what's going on? The work isn't what was described at the interview. I'm out of my depth. Help! There's nothing for me to do! The employees here work a thirty-five hour week. Does that mean I can only bill for thirty-five hours? The manager asked me to compete in the United Way Bowlathon. Do I bill for the time I spend on that? This project is headed for disaster. Help! I could save this project. Why won't anyone take my advice? With my high rate, it's hard to justifying taking time off. How can I stop working so many hours? The client wants to hire me as an employee. Should I do it? I am going to miss my deadline. How should I handle the situation? I have been assigned to work with another contractor who is an imbecile. How can I keep his mistakes from making me look bad? I've been assigned to work with a client employee who is an imbecile. What do I do now? In a few weeks the term specified in my contract will end. What should I do? I'm stuck in a contract that just seems to go on and on. Should I take a third extension? Can I ask the client about what they are paying before I negotiate an extension? What kind of paperwork should I expect to see if I accept an extension? Today, without warning, the client terminated me. I had five months left on my contract. Can they do this? Can a client or old employer give me a bad reference? I just discovered that the rate the consulting firm is billing my client is four times what they are paying me. Can I do anything about this? Is there any way I can get out of my consulting firm contract? The recruiter says I'll be blacklisted if I leave this contract early. Can they do this? The client wants to hire me direct and cut out the consulting firm. Can we do this? I found a new contract that pays a lot more than my current one. When I told the consulting firm I was leaving they offered to match the new rate. Should I stay? The project is over and my client is very pleased with my work. How can I make the most of this? I want to take a vacation before I begin my next assignment. How do I do this? The consulting firm won't pay my last invoice. How can I make them pay me?
How can I improve my earnings as a contractor? I need new skills. Can I get them by signing on as a consulting firm employee? It costs a fortune to buy all the hardware and software I want to master! How can I pick up new skills? I already know an in-demand language and operating system. So why should I worry about upgrading? What about the packages you can't install and teach yourself? What is certification? How useful is certification? What does the Real Rate Survey data show about the value of certifications? How can I find out if it is worth getting an expensive certification? Why does it sometimes seem like the biggest b-s artists get the best rates? How can I improve my communications skills? How important is image? What are some ways to build a better image? I'm finding that my programming skills aren't good enough for me to make it as a contractor. What do I do now? Would relocating to another city be a good way to revive my contracting career? How can I decide if I'd like living in a distant city? What specific dangers are involved in relocating to take a contract? Can I get paid extra for taking a temporary contract away from home? How can I find a contract overseas? Do I need to speak a foreign language to work abroad? Do I have to be a gypsy to get the best rates and opportunities? Does it ever make sense to go back to being a regular employee? How can I convince employers I'd take a salaried job? They say my contractor's earnings are too high! I'm burning out on contracting but I don't want to be an employee. What are my other options?
HOW CAN I WORK DIRECT? 151
HOW DO I HANDLE THIS? 169
HOW CAN I DO BETTER? 185
INDEX 205
CHARTS
Tasks Contractors Perform 2
High, Low, and Median Rates - All Contracts 2
Clustering - All Rates 2
Length of Contract 6
Percentage of Brokered Contracts by Language 9
Percentage of Brokered Contracts by Database or Package 9
Percentage of Brokered Contracts by Industry 11
Percentage of Brokered Contracts by City 11
Number of Years of Experience - All Contractors 12
Percentage of Brokered Contracts in Selected States 13
Percentage of Brokered Contracts by Length of Contract 13
High, Low, and Median Rates by Years of Experience 21
Clustering - Rates by Years of Experience 21
Working Status of Brokered Contractors 43
High, Low, and Median Rates of Brokered Contractors by Contractor's Tax Status 47
Clustering - Brokered Contractors by Tax Status 47
Rate Frequency 68
High, Low, and Median Rates by Length of Contract 69
Rate Clustering by Length of Contract 69
High, Low, and Median Rates by Job Description - All Contracts 70
Clustering by Job Description - All Contracts 70
High, Low, and Median Rates by Job Description - Brokered Contracts 71
Clustering by Job Description - Brokered Contracts 71
High, Low, and Median Rates by Job Description - Not Brokered 72
Clustering by Job Description - Not Brokered 72
High, Low, and Median Rates by Language and Job Description 74
Clustering by Language and Job Description 75
High, Low, and Median Rates by Database and Package Used and Job Description 76
High, Low, and Median Rates by Operating System used and Job Description 76
Clustering by Database Used and Job Description 77
Clustering by Operating System Used and Job Description 77
High, Low, and Median Rates by Industry 78
Clustering by Industry 79
High, Low, and Median Rates by Selected States 80
Clustering by Selected States 80
High, Low, and Median Rates by City 81
Clustering by City 81
High, Low, and Median Rates by Contractor's Tax Status 82
Clustering by Contractor's Tax Status 82
Median Broker's Cut of Client Billing by Language, Database, or Platform 84
Median Broker's Cut of Client Billing by Status 85
Percentage of Direct Contractors by Status 160
High, Low, and Median Rate by Certification 191
Clustering by Certification 191
Cities Reporting 54% of All Contracts 200
FACT SHEETS
Web Job Boards 25
How to Find Local Consultants Online 26
Books About Incorporation 39
IRS 20 Factors for Independence 46
IRS Pub. 587 - Claiming a Home Office 59
Deductible Expenses for Independent Contractors 60
Sample Real Rate Survey Data 66
Consulting Firm Hall of Shame 106
Books to Improve your Negotiating Skills 131
Sample Invoice 167
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