Heather Kilbourn

The past couple of years have been brutal in the tech industry as once-solid full-time (FTE) jobs have evaporated in mass layoffs. This downward pressure in tech employment also reached into contract (also known as vendor) jobs, which many tech firms use to supplement FTE roles. The good news is that while FTE roles still appear to be constrained, the contract recruiters I’ve been talking with seem optimistic for contract role growth.

With more people caught in past layoff waves looking at the days pass without income, I’m seeing more people who used to work FTE look for contract work. Contract work is different than FTE work in many ways, including how you go about finding jobs. I wrote something a few months back in the Out in Tech Slack about the nuts and bolts of finding and working contract and thought I’d share it here. I also highly recommend Bill Pearse‘s LinkedIn newsletter, Gig Work for insightful views on working contract and the nature of work itself.

I’ve worked both FTE and contract in places like Microsoft, Amazon, and Starbucks and been on both sides of the hiring table for FTEs and contractors. I was impacted by a layoff in December 2022 when my contract job at Microsoft was cut short, plunging me into unemployment. The good news for me was that I was able to land a different contract role in Amazon Web Services within two months and then I shifted back to a different contract role at Microsoft in July 2023 for Azure Quantum working for Simplicity Consulting.

Contracting can be a bridge between FTE work, a way to test a new career path, or create some flexibility in your work life. Whatever the reason you’re pursuing contractor work, you should know some things beforehand.

Contract employment money matters

There are two forms of contract work: 1099 or W2, each with their own tax and benefit implications.

1099 employment is self-employment. You are a true independent contractor and you’re on the hook for everything from paying for self-employment and social security taxes to health insurance to supplying your own hardware and software.

W2 employment is working for the contract company and they take care of the tax and benefits side of things, assuming they offer benefits. Benefits as a W2 contract employee can range wildly from almost nothing to fully-paid health insurance and 401K retirement contributions. In my experience, most fall somewhere in-between and there can be a 3-6 month waiting period before benefits kick in.

Contract work often pays more than FTE work salary-wise because you don’t have the benefits of an FTE, which can be 25% or more of total compensation. But your higher contract rate compared to an FTE can quickly get eaten up by taxes or benefits payments.

For example, my current gig is a W2 contract, and my employer has a health plan and matching 401K. But my health plan cost plus its deductibles work out to about as much as my mortgage payment(!!). So while on paper I’m earning more than I did in equivalent FTE roles, cash-flow wise it’s less. Your mileage may vary.

Contract companies make money by earning a placement fee when they get you a contract job. The mechanics of this vary depending on their contract with company they place you at from a lump sum up front to a percentage of how much they charge on a periodic (usually monthly) basis.

In some cases, you may find a contract on your own. I know several people who contracted back into groups they used to be an FTE in and they only use the contract company as a vehicle for billing to avoid the often byzantine, laborious, and sometimes expensive process of becoming a certified vendor. In these cases, which are often 1099 employment, you will be negotiating with the contract firm for how much they charge you for their services. Remember that you are bringing them free money that they didn’t have to prospect for and negotiate accordingly.

Pay is talked about as an hourly or monthly rate, depending on the company. Be sure to ask about the pay cycle. I get paid once a month, which is hell on my cash flow, but maps to the monthly invoice my contract firm sends to the employer.

You should never have to pay to get placed. If someone asks you for money up front to get a contract gig, run, don’t walk away.

Finding contract companies

Where there are tech employment hubs, there are contract companies supplying contract labor. The Seattle area has a ton of these agencies that service MSFT, AMZN, FB, GOOG, etc. They range from local, boutique firms often led by former FTEs of the companies they mainly supply to national and international companies.

So how do you find a contract company? I’d start by canvassing your network asking them what agencies the companies they work for use for contract or contingent staffing. If you’re working now at a larger tech company, the corporate address book or directory can be a wealth of information as to who works for whom. LinkedIn is another good place to look.

Some firms specialize in the types of roles they fill, so I recommend doing some research on LinkedIn and the web about them before contacting them. For example, if you’re an engineer, contacting a firm that specializes in placing marcom people isn’t going to be much help to you and will be a waste of time. You may find that some firms don’t have publicly-visible open contract job listings or just a handful. Many contract openings are never posted to a website for discretionary or competitive reasons; don’t let that dissuade you from contacting a firm.

Working with contract recruiters

Now that you have a list of firms, the next step is to track down their recruiters to set up some interviews. LinkedIn or their company’s website is the place to find their contact information. But before you do that, you should have already done your homework by having your resume and LinkedIn up to date. Recruiters and recruiting firms get paid by the employer and they exist to place people into jobs, not help you tweak your resume to get you placed. If you have multiple skill areas, I’d recommend having a different resume version for each.

I’ve found recruiters at contract firms are almost always willing to meet to discuss openings and add your resume to their pile for current or future consideration. It’s literally their job to build a network of potential hires. Plus, it’s great interview practice.

Be clear on if you’re looking for 1099 or W2 employment, full-time or part-time work, the minimum rate you can accept, and the shortest contract you’d be willing to do. (I’ve seen contracts as short as three months.) This will help them narrow down potential opportunities.

Sometimes it’s clear if you are or aren’t a good fit for their agency based on who they work with and the types of roles they receive. If there’s no fit or they have no open roles they think you’d be a fit for, ask them what other firms you might contact. Recruiters, like the rest of us, change employers so this shouldn’t be an awkward ask as they’ve maybe already worked there or might in the future.

Keep in mind you are the talent and have multiple options. Contract recruiters expect you’re talking to other contract recruiters. I have connections with several contract recruiters on LinkedIn and repost their job openings when I see them to remind them that I’m still around and help build goodwill.

There are also tons of sketchy firms out there. If you see or feel red flags, move on.

Good recruiters will take 15-30 minutes to talk to you, review your experience, talk about how many and how often they’ll have openings that match your skillset, and tell you if they think they could place you based on your experience and employment requirements. Bad ones will ask you for personal information right off the bat, keep everything in email, and use you as a stalking horse in negotiations with other contractors to drive down how much they have to pay them. Every firm has its own personality, so find one that feels comfortable.

One really important thing to find out up front is what happens when your contract is up. Sometimes contracts will renew with the same employer, sometimes not. Be sure to ask the recruiter what their process is to renew or re-place you at the end of a contract and when to kick that process off.

Interviewing for contract roles

If a recruiter finds a contract they think you’d be suitable for, you will likely interview with the company it’s at. Sometimes these are competitive interviews where you are interviewing against other potential people from your or other contracting firms. Sometimes it’s just so the company can vet how you present yourself and see for themselves if your skills match what the recruiter told them. I’ve had contract roles where I got the job without the hiring manger ever looking at my resume based on the strength of the recruiter’s recommendation. I’ve also been in competitive situations. Ask the recruiter beforehand; they should be transparent about this.

Remember that interviews are a two-way street. The manager at the company you work for can be a crapshoot, so if you have red flags when you talk to them in an interview, pass that along to the recruiter.

All the roles should have a clear statement of work (SOW), which detail the duties, expectations, and deliverables of the role, sometimes with milestone dates. It’s the job description. Before being put forward for consideration or interviewing, you should know what’s in the SOW because it’s the contract requirements for the contract work. If a recruiter is being cagey about the SOW, that’s a red flag.

SOWs can range from highly detailed and specific with dozens of bullet points to more general, and that can cut both ways. When I get to the interview stage, I like to ask the hiring manager about the SOW to understand how flexible it is, what the percentage breakdown of time on task is for the deliverables, and how they stack-rank them. I use the answers as signals to highlight areas during the interview where I’m strong and get a sense if I’m going to be micro-managed.

The SOW should also cover if it’s an in-office, hybrid, or remote role, and what, if any, travel and expenses (T&E) are covered. I’ve had remote contract roles where mileage and ferry fare (I live on an island) for in-office meetings were covered under T&E and others that were not. T&E is negotiated between the contracting firm and the employer, so when T&E isn’t in a SOW, I’m quick to tell hiring managers for remote roles that I’m paying out of pocket to attend in-office meetings and that’s going to make me reluctant to come into the office.

Some companies, Microsoft in particular, have changed how they hire contract staff and require contractors to submit personal information when they put you forward for consideration. I am a personally-identifiable information (PII) minimalist, and I only share this once I have an established relationship with a recruiter. I’ve had contract recruiters I’ve never met message me on LinkedIn telling me I’m a great fit for an open role and ask for my PII right off the bat. I suspect they’re scammers. I always push back and ask for a phone call to discuss the role and to get a sense of them. For those that agree to a call, if they’re pushy on the phone, I thank them for thinking of me and move on.

Signing your contract

If you’ve found a good contract recruiter to work with, gone through an interview, and then been told you got the job, congratulations! At this point, you’ll get a contract to sign. As my grandfather, a very shrewd man who knew his paperwork, taught me: READ EVERYTHING BEFORE YOU SIGN AND DON’T SIGN ANYTHING YOU DON’T UNDERSTAND OR AGREE TO.

It’s very easy to get caught up in the euphoria of landing a new job, especially if you’ve been out of work. It can make it easy to rush through this step and get right to earning money.

Contract employment contracts are different than FTE employment contracts. Critical things to look for in the contract paperwork:

• Does the SOW match what you saw when you were interviewing? I’ve had SOWs change between interview and contract!
• Is the pay rate correct? Are the pay periods what you were expecting?
• Is the contract term correct?
• Is the hiring manager/reporting manager different than represented? Sometimes contracts on the company’s part are handled by finance and this is who you roll up to. I’ve also had hiring managers change jobs before I started work, which felt very bait-and-switchy.
• Are the benefits (if any) detailed correctly and what you expected?
• Are you on the hook for any incidental expenses like T&E or hardware and software?
• Are the renewal terms, if applicable, correct?
• Are any time expectations, like maximum number of hours per week or on-call hours, correct?

It’s also a common practice for background checks to be performed before hiring, so keep a lookout for paperwork on that along with any confidentiality/non-disclosure agreements (NDA). Examine NDAs closely for the term and what is an isn’t in scope. I tend to avoid in perpetuity NDAs, but that’s just me.

If something is or looks amiss, don’t sign. Talk to the recruiter or whoever is handling the paperwork at the contract company. I had a contract where there were two sets of paperwork because it turned out the contract was being paid out of two separate budgets at the hiring company, and it took a few days to untangle why I received what looked like duplicated paperwork for a rate way below what we talked about.

Working as a contractor

Unlike the FTE hiring process, you are unlikely to meet with people other than the hiring manager of the group you’ll be working in before you start working, so you’re walking into a culture you know nothing about. I’ve had managers and FTE coworkers treat me like a serf because I was a contractor. Balancing that out are the people who treated me as another FTE.

It’s important to remember you work for the contracting firm, not the company you work at, so if you’re experiencing interpersonal conflict you should talk to whoever is your account representative at your contract company.

You’ll also often be excluded from FTE-specific information and events. This can be a big plus, as it can insulate you from office politics. The downside is that you can get surprised by changes in direction that seem to come out of nowhere and have no context and it can suck when you have to work while the FTE team is off on a fun morale event. Also, you may often have more restrictive systems permissions, which can make getting some things done harder.

If you’ve been an FTE at a company that you’re now a contractor at, this status shift can be a big adjustment. There are too many other nuances to working as a contractor vs. FTE to cover here, so I’ll just say that when in doubt, fall back on the terms of SOW, your professional judgement, and your contracting company’s account manager.

In conclusion

I hope you’ve found this guide to contract work helpful! If it helps you in your employment journey and you’re feeling so inclined, maybe buy me coffee? 🙂