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Tuesday, February 23, 2010

is a contract position worth the risk?

A reader writes:

I am trying to decide if it is too risky to leave my current position for a better one that is a contract position.

I'm currently underemployed. I'm making $30,000/yr less than I did before I was laid off, but at least I'm working in my field. I don't enjoy my job, my department is quite dysfunctional, and I don't make enough to keep my head above water. If I don't find a new job soon, I will have to foreclose on my house. On the bright side, my job is very secure. My company was recently awarded a large government contract so we are safe from lay-offs for at least 4 years.

I have an opportunity to take a better position with a fabulous company. The job is more aligned with my long term career goals. The downside is it's a contract position for 1 year. The salary is close to what I used to make. It would be enough to allow me to keep my house and work my way out of debt, even after I factor in that I would have to buy my own health insurance.

I'm torn between sticking with the security of my current job, even though I'm in the red every month vs. a job that would cover my expenses but has the risk of being unemployed a year from now. I know you don't have a crystal ball to predict what the economy will be like next year. I just want to make sure I'm not missing something when I weigh the risks vs. benefits. I feel like I'm so concerned with the money that I'm overlooking something else. What am I missing?

I'd take the contract job. Here's why:

If you stay in your current job, you know you will lose your house. That's guaranteed, and that's a big deal. Yes, you have employment for four years, but it's employment that you don't like and which isn't paying you what you're worth somewhere else. So you'd be signing up for four years of low quality of life. (There's also no certainty that you'll be secure there for four years, despite the contract. You could clash with a boss, they could lose the contract, etc.)

If you take the contract job, you push yourself forward, professionally and financially. You know it only lasts a year, so you can spend that year networking and building relationships -- and your savings -- so that when it's time to move on, you have a safety net waiting for you.

Anyone want to disagree?


Rosezilla said...

I thoroughly AGREE. With some big exceptions (like working on a project with an absolute end), contract work often leads to a regular position, if you impress your employers. Its as if, instead of having a couple interviews, you have a solid year to prove that you're invaluable. You should obviously work your tail off, because in the worst case scenario, you want to show how awesome you are and earn glowing recommendations.

Even if you don't land that position, you can usually apply internally for other positions.

And of course, do not stop looking for work. Contracts don't mean that you are obligated to stay for the whole year. You don't want to burn bridges, but if you find something at the 6 month mark, you can negotiate with both companies and maybe even secure your current position with some gentle pressure. In my experience, people understand that contracts are a little stressful and won't begrudge you looking for other work if you are very professional about it. Good luck!

Goodman Ager said...

I agree completely. What a dreary existence to come to a job that you don't like, which will lead you to financial difficulty, and won't advance your career. What comfort is security in that situation?

Brian said...

Go for it!

I did something similar last year. Wasn’t underemployed and wasn’t having financial issues, though – had been there three years and was making a good salary, but took the risk on a contract position anyway. Take-home pay was about the same after COBRA (self+wife+kids = big $$$$), although it also meant no bonus by not staying at the old job and not being eligible for one as a contractor.

Contract position was supposed to be for eight months but it only lasted five… because they converted me to a full-time employee!! They decided I was awesome and didn’t want me to start trying to line something up for when the contract ended. New salary is also a bit higher than the previous salaried position, which I was okay with considering the economy and current job market.

I know my one example doesn't mean everyone will have the same result, and kudos to the OP for taking _something_ to help out, but the OP's situation sounds like a downward spiral regardless of the contract position, so I say again...

Go for it!

Anonymous said...

I have to agree with the other comments. I too had a very stable job, even liked it but felt it was time to leave because I no longer enjoyed the new boss. Who BTW ended up leaving shortly after I left (no one left to do her work).

I stepped out on faith with 2 infants and a hubby that just started his own biz (not yet bringing in any money). The position was supposed to last 1 year. But after 6 mo. it ended which was a surprise.

However, in that position not only did I have a schedule I loved, but the work grew my experience/exposure to other areas that I now LOVE. I also got a raise of $15K (after paying my own health care).

A month after that position was over I was offered a FT job by an international firm doing more of the new work I loved, excellent commute, and making those same big $$$. The time I spent as the contractor taught me a lot about myself, broke me into a higher salary bracket, and makes me that much more effective in my current position.

Sure it's scary but take the leap and remember, don't stop looking once you're in your new contract position.

Unemployed Gal said...

This is one of those situations that benefits from a “worst case” comparison.

What’s the worst that will happen if you stay at the current job? Your salary won’t cover the mortgage and you lose your house.

What’s the worst that will happen if you take the contract? In a year, you’ll be unemployed. You’ll be unable to pay the mortgage and you lose your house.

If the worst case is the same, take the option with the greatest chance of success. The contract job is worth the risk.

Anonymous said...

I'd recommend some serious number crunching first. At first glance the contract salary might look a lot higher,but you have to compare apples to apples by factoring in benefits, income taxes, hours spent working, etc. If the contract position still comes out ahead go for it.

Rebecca said...

Take the contract job. The security of the job you have now is moot if it doesn't pay enough to cover your expenses.

(And, really, "job security" is a thing of the past. You could lose either job at any time, for any reason.)

Chad said...

We hire people for contract jobs all of the time. I expect that for the foreseeable future contract openings will become even more common that ‘regular’ job. The secret that I can never tell my candidates is that most likely a third of them will be hired on anyways at the end of the contract. I can never tell them that since it is little comfort to the other 60% but it has pretty much held true.

I do tend to point out to people that employers look favorably on candidates that have recent experience in their field. Which implies that the job that you hold over this next year might seriously affect what positions you will be considered experienced for down the road. Therefore one year could turn into two in the job you like, or four years could turn to eight in the career you do not.

Anonymous said...

I agree with everyone's posting. The basic fundamental purpose of a job is to perform a job for a wage; all the other intrinsic benefits have to be secondary to the primary purpose of a job (look as Maslow's hierarchy of needs – you have to be able to meet your basic need for food and shelter first). If you are in a job that doesn't produce a wage that can support you, security of the job is meaningless; you might as well be working for free.

Take the job that can meet your basic needs first.

Suzanne said...

This is the OP. Thanks for all the advice. I was leaning towards the contract job. I just needed some reassurance that I wasn't overlooking something in making my decision.

If AMM does another "Where are they now?" next year I'll let you know how it goes.

FinancialRADDeveloper said...

I agree with the jump to contract, esp as it avoids the house forclosure. I have blogged about deciding whether to leave a perm job for a contract one (with a UK bias) here :

Hope this helps people whether the decision is worthwhile after the risk and loss of benefits is taken into account.

Patsy Gillispie said...

Thanks so much for this article. I'm a web designer who has a very stable job but I'm completely unhappy after our merger with another company. No room for advancement at all and I had to take a pay cut. I'm looking at a contract job that only lasts 4 months but it's almost 3 times my pay now. I'm scared about what the future may hold but I can also get caught up on bills and credit cards just in case something happens. I do get concerned because my field is so saturated that there may be someone better but you know, I can't worry about that. Again, great article. I was thinking along the same lines but it's nice to see others who agree.

Lani said...

I would take the contract job, but keep looking for permanent employment, and cut back on all unnecessary spending and put as much money as you can into savings just in case you need it at the end of the contract.

good luck!