Ok, I’ve been asked, and as of next week I will have worked as a consultant in all three different types of arrangements.Â I thought it might be a good idea to explain the pros and cons of different consulting positions.
To sum it up, there are three different types of consultants.Â Â The W2 (Or Salaried), The 1099 Direct, or the 1099 Corp-to-Corp.
Â In this post, I’ll discuss the first type.
The W2 or “Salaried” Consultant
The W2 consultant (or “Slave”) is one who works for a firm and who gets the full benefits package.Â While this can be a good thing, the drawbacks can and usually are many.
Salary – Having a salary is great during low periods or lulls in work.Â Â Maybe you can get the company to spring for a refresher course or two to keep you marketable, etc. during this time, but it’s nice to know that no matter what your paycheck is coming in.Â
Benefits – healthcare being what it is, a family can always depend on the Consulting firm to provide health benefits.Â They may be more expensive than a “joe-job” but it’s good to have around.
Salary – Yes, this is a pro as well as a con.Â Salaried employee gets paid a fixed amount per week / two weeks / pay period.Â This means that any overtime he works is on him.Â Since the firm is usually billing hourly for the consultant’s services, there is a lot of motivation to push consultants into overtime.Â Of course, the consultant can say no, but that doesn’t keep you employed for long.Â
Non-Compete – The most painful part of any Employer/Employee agreement is the “Non Compete Agreement”Â Now in most states it’s largely unenforcable.Â An employer can’t keep an employee from working in their field of expertise.Â However, most consulting firms will require that you sign one and it will be horribly restrictive.Â
I’ve been in the situation with a my first consulting firm, CTS, Inc.Â (who I have no problem naming as they don’t exist under this name any longer) where I had to move across the country in part because the non-compete I signed specifically said that the agreement was (to paraphrase) “restricted to the metropolitian area where services have been performed”Â Well I was a consultant in California, and during that time had worked in Los Angeles, San Diego, Burbank, Phoenix, AZ, and Denver, CO.Â I moved to Washington DC.
I still got sued by CTS for breaching the non-compete agreement,Â and it cost me over $8,000 in legal fees (as I had to defend myself in a Georgia Court) before they blushed and effectively said “Oops, sorry, my bad.” and withdrew their complaint.Â They knew they had no case but wanted to make leaving painful, probably as an example to others who might leave.
The same thing has happened with the most recent one I worked for, though in this case, since I went to work for my previous employer (not as a consultant.)
The non-compete is used to bully employees from making positive career moves (which are definately not going to happen as long as a consultant is billable, see my point below.)
Career Path – A Salaried consultant who is consistently billable has no career path.Â I say it again – NO CAREER PATH.Â There is no motivation to keep the consultant moving forward, because moving a billable resource into a management position makes them increasingly less billable.Â Therefore, it’s the people who don’t/can’t cut it as consultants who end up managing the ones who can.Â As long as you’re bringing in the cash, you’re career is dead in the water, and of course, as to the above point, it’s not like you can quit and go to another consulting firm for the promotion can you.
Anyway – In my next installment I’ll profile the 1099-Direct, and why this can be one of the best ways to consult.