Starting a new job comes with managing emotions, details, and important decisions. If you’re transitioning from contracting to taking on a full-time role, there are several key points that can help make your transition smooth and easy. While this resource does not offer legal advice, we will focus on need-to-knows for taking on a full-time position after being self-employed.
If this topic is not exactly what you are looking for in regards to Independent contracting, try these other posts from our blog…
From a financial standpoint, the biggest aspects setting employees apart from contractors are taxes and their eligibility for benefits. Many contractors in tech have a specialized skillset that allows them to take on short-term projects or work for multiple clients at a time. There is a type of developer that thrives in this working routine, but others prefer the opportunities and stability that can come with working for an employer full-time.
If you’ve been self-employed, you are familiar with how contractors are not subjected to tax or FICA withholding, but must pay their own self-employment tax quarterly. Also, contractors are not eligible for benefits like healthcare (usually), unemployment compensation or worker's compensation benefits. It’s fair to conclude there is more independence, but also potentially more risk in being self-employed.
Taking on a full-time role comes with substantial changes, but it can also mean a simplification of the side-hustle lifestyle. Working at one place of business, within hours set by the company, and being eligible for benefits, from healthcare to vacation, are major pros for those on team full-time. On top of that, employees are covered by federal and state laws such as overtime rules, workplace safety laws, and employment anti-discrimination laws.
With all of that to consider, it comes down to your personal career goals and the path you are trying to build. Often times, full-time positions come with built in pathways for leadership development and career growth, whereas in independent contracting that path may be less clear. If accepting a full-time role has been your goal, or is a logical next step, it’s time to focus on the details.
Fully understanding the difference between having a 1099 or a W2, and the laws surrounding each type of employment in the state you work in, is crucial for avoiding legal discomfort down the line. Refresh your 1099 versus W2 knowledge in our full post on the topic. Also take the time to read these resources from the IRS regarding classification of employees and independent contractors.
For the sake of clarity, a W2 form, also known as the Wage and Tax Statement, is the document an employer is required to send to each employee and to the IRS at the end of the year. This form reports the employee's annual wages and the amount of taxes withheld from their paychecks.
Employers also use W2 forms to report the Federal Insurance Contributions Act (FICA) taxes for their employees throughout the year. These forms must be filed on or before Jan 31st for the previous year to remain compliant with the IRS and other government organizations. Properly filing these forms allows you to file taxes accurately, and helps keep you in financially good standing as you transition from being a contractor.
From tech startups to enterprise companies, it’s common for businesses to utilize independent contractors for maintenance projects, bug fixes, short-term launches, or as part of other growth initiatives. As this trend continues, more tech companies will test out the “try before you buy” method. This arrangement eases individuals into the company to ensure a great fit before offering a full-time position.
From first glance, it appears as though companies want exceptional output without offering full benefits or other perks that employees get, but so far it is just one way to mitigate the high turnover rate tech has become accustomed to. Think of it this way, contract-to-full-time situations put less pressure on both parties entering into a relationship. If things are going well during the contract period, the hiring team and the contractor can begin onboarding that person full-time with confidence and excitement. If the job is not a good fit for the candidate, they have a chance to end the relationship at an agreed-upon time without additional complications.
The bandwagon of your new company, that is. We understand certain circumstances and career decisions influence candidates taking one offer over another, so ultimately it is about finding what’s right for you. Let’s say you’ve tried independent contracting, and are tired of the responsibility and steep rate of paying self-employment taxes. Alternatively, after a year away from people and offices, joining a team and forward-thinking culture could sound refreshing. Whatever your goals are, the reasons for transitioning away from contracting are diverse.
Working with a recruiter can be beneficial for aligning those goals and having someone advocate for you during your job search. From taxes to tech stacks, make sure to get all of your questions answered. After that, you are ready to dive into your new job. Congratulations!! Securing a full-time position in not easy, and your new team is thrilled to bring you on. If you have more questions or concerns about transitioning from contracting to full-time, reach out and we can help.
Here at BWBacon Group, we know and live what you are experiencing as an employer or job seeker in Denver, Boulder, Dallas, San Francisco, New York City or any of the other cities we work in. We believe great recruiting starts and ends with understanding people.
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