The Disadvantages of Being a Contract Worker

Contract work does not always mean steady employment.

Working as a contractor offers flexibility, variety and sometimes greater financial benefits. But there are disadvantages that need serious consideration before deciding to be an independent contract worker. Your personality, work habits, time management skills and ability to work alone are all factors that will determine if contract work is a good choice.

Job Security

Contract workers are typically hired for a specific job with a set timeline for completion. There are no guarantees for continued work once the time limit has expired. In addition to performing the job duties of the current project, contract workers must always be exploring new opportunities for work to limit the down time between projects. Time management can become an issue if available projects overlap each other. It is up to the contract worker to negotiate start times for a new project if he is still completing a prior project. Contract workers must also be flexible about the location of jobs. To secure work, he has to be willing to travel or spend extended lengths of time out of town.

Benefits

In most cases, contract workers do not receive benefits on the job. You are considered to be self-employed, which means it is up to you to secure your own insurance and retirement plans. Though contract workers may be paid a higher wage for work, this can be offset by the costs of paying for your own benefits. Working as a contract employee also means you will not be paid for holidays or sick leave, so this should be factored in as well when negotiating pay.

Record Keeping

As a contract worker, you will be paid a gross wage with no deductions for taxes. The employer will issue you an IRS Form 1099 at the end of the year, so you will be responsible for paying taxes on those earnings. Some tax liability may be offset by self-employment deductions, so it is imperative to keep detailed records of all expenses. This includes mileage, travel expenses, insurance premiums, vehicle maintenance and any other business-related expenses you incur. If your income exceeds your expenses, you may need to pay estimated taxes during the year to avoid penalties.

Work Environment

Depending on the type of project, a contractor may work from home or at an off-site location. While permanent workers have the ability to form coworker relationships or build teams, the contract worker may be isolated. For those who enjoy working independently, this is not an issue. But if you previously worked in an environment that fostered work relationships, the change can require some adjustment.

The contract worker also must be disciplined enough to stay focused on the task without supervision. If you need continual feedback regarding your work performance, contract work may not be a good fit.

References

• BusinessKnowledgeSource.com: Full Time Temp Workers: The Advantages and Disadvantages of Using Them
• Radio-Electronics.com: Contract or Permanent Electronics, Software and Project Management Jobs
• IRS.gov: Self-Employed Individuals Tax Center
• WAHM.com: 4 Reasons Working as an Independent Contractor Can Be Tough

Resources

• Ohio State University; Employee or Independent Contractor; Tom Willett