Contractor vs. Full-time Employment — Which Is Better for Software Engineers?

It’s an excellent time for anyone to build a career in tech. Year after year, the merit-based tech industry has established its popularity among high-potential grad students as the least stressful and most sought-after field to pursue a career and attract high-paying jobs.

Tech is diverse, flexible, and innovative by nature, and despite the recession and downsizing, it is currently booming. With career opportunities in tech at a record high, the industry is growing at a pace significantly faster than every other profession. As per the U.S. Bureau of Labor Statistics, an estimated 316,000 jobs are expected to be created by 2029.

Not to mention, transitioning as a tech professional is incredibly easy. With specialized skills, one can pursue job roles in top tech companies like FAANG, Microsoft, IBM, Intel, among others.

Compared to other professions, there are also great opportunities to pursue contract work over full-time employment, which more and more companies and individuals are opting for these days. As per an internal report, Google had 121,000 TVC (temporary, vendor, and contractual workers) globally in 2019, outnumbering their 102,000 full-time employees at the time.

If your career choices are not determined by the stability and predictability of a job prospect, contract work could be an ideal choice for you. Therefore, before accepting your next IT role, you must explore the advantages and disadvantages of full-time employment vs. contract employment to extract full potential out of your IT career.

To that end, let us compare software engineer contract jobs and full-time jobs to determine when and whether you should pursue contract employment and full-time employment, respectively.

Full-Time Software Engineering Jobs

As the title suggests, full-time software engineers are permanent employees a company hires at a definite rate to work for a set number of hours every week. They receive benefits like medical insurance, dental, retirement savings, legal protection, and paid sick leaves and vacation days, among others. Full-time employees are heavily dependent on their employers and vice versa. They trade-off flexibility for long-term benefits, stability, and marketing opportunities, by being loyal to one employer who reports their taxes and advocates them in networking circles.

Let’s discuss the advantages and disadvantages of full-time employment:

Advantages

1. Job security and benefits: Companies and full-time software engineers are mutually dependent; companies depend on full-time employees for continuity of services, dedication, and expertise, while full-time employees benefit from additional perks, job security, and legal protection. As full-time employees, you are paid a fixed amount as salary even if you take time-off, sick leaves, vacation days, maternity/paternity leaves. It’s also common for companies to offer equity to employees and a steady salary as they are on the company’s payroll.
2. Career advancement opportunities: Working long-term with a company opens doors to climb the career ladder and pursue lucrative job opportunities with higher pays. Companies also invest in providing training and mentorship to employees to help them grow in their professional careers.
3. Personal development: Working as an independent contractor can be an isolating experience as opposed to full-time employees who are exposed to several social avenues to help you grow personally. Furthermore, when you are associated long-term with a top tech company, it imparts a deeper sense of purpose.

Disadvantages

1. Work hours: Employees don’t have a say in their work hours. Even though there is a minimum number of weekly hours a full-time software engineer is expected to put into their work, in practical terms, it usually means working as many hours it takes to get a job done. This is especially disadvantageous because full-time employees earn a fixed salary, and there is little scope for overtime payment in the tech industry.
2. Lack of control: As full-time software engineers, you have little control of a project’s proceedings unless you are in a management position. You usually have to comply with the instructions and guidelines set by senior officials. As opposed to contractors, full-time employees also can’t hire assistants.
3. Lesser awareness of the latest market trends and technologies: Even though companies invest in employees’ professional growth, they are less aware of market trends and tools. To attract higher-paying jobs, an IT professional is required to upskill themselves by joining courses or pursuing higher education to pursue competitive opportunities.

Contract Software Engineering Jobs

Contract workers work on a short-term basis with one or more companies at a given time to perform a specific task at a specific rate of pay. This rate is generally higher than industry rates for full-time employees. As contract workers aren’t a part of an organization’s staff, an employer doesn’t cover their taxes, provide benefits, or invest in marketing them. They give up job security and full-time benefits for greater flexibility in managing their schedule and pace, higher paychecks, and a chance to work with multiple companies through their careers. This makes them well-aware of the latest trends and technologies in the market.

A contractor and a company agree to a specified length of time during which a contractor will provide his full potential to a specific job. This can range from a few months to a year, sometimes more, depending on the project requirement and mutual interests.

Here are the advantages and disadvantages of contract employment:

Advantages

1. Flexibility and freedom: Possibly, the primary reason that drives professionals towards contract employment is the freedom they have to pursue job roles of interest and prioritize work as per their schedule and pace. Being able to say “no” to projects that you don’t want to work on or charge a higher rate in order to work on them is a unique advantage that contract employment offers.

Contract workers also can work remotely or from the premises of an office that isn’t managed by the company they are working for. However, if the work requires on-site work, the details are sorted while drafting a work contract.

You also have the flexibility to opt out of work for weeks or months if you choose to. In this manner, you may choose to grind for a month and take the consequent month off.

As per Dominic Holt, CTO of Valerian Technology, “Every bit of effort you put into your own business is somehow directly benefiting you. The attribution for being able to actually do the work and know that all of that is coming back to you, growing your own success, and being your own boss, all of those things are very positive. You have this feeling of limitlessness.”

2. Contractors get paid more: Since contractors are hired on a short-term basis for specific jobs that they specialize in, their rates are higher. They also handle their own taxes, marketing expenses, and health care needs, which enables them to quote higher charges.

3. On-the-job exposure and upskilling: As they work with multiple companies in a short duration of time, they are exposed to a wide range of tools and technologies. This helps them stay updated with the latest tech trends and leverage on-the-job skills to drive better results for the next company they work for. Companies are aware of the diverse portfolio of experience a contractor brings into the job, which gives them the incentive to hire them as well as pay them higher salaries.

Furthermore, as contractors work with many large-scale businesses and startups, they are exposed to new and innovative ideas, which presents an opportunity before them to transition into a more profitable career in the long run.

Disadvantages

1. Difficulty in landing work: Contract workers find themselves constantly hustling for lucrative work opportunities that are relatively difficult to come by, especially if you are a beginner. They are required to be extremely resourceful and persuasive with strong communication and negotiation skills. A lot of their work opportunities are a result of effective networking and referrals from existing and former employees. If you don’t have access to these, your workflow might suffer and could go for months without decent work. There is always the option of relying on commonplace work markets like Fiverr and Upwork for a steady source of income but you’ll find that the rates here aren’t as competitive, nor do you get any closer to building a network of industry professionals. You need a long-term plan to maintain consistency with respect to work and cashflow.

2. Missing out on organizational benefits: Contract job software engineers don’t enjoy the same benefits as full-time employees, such as health care insurance, paid time off, 401(k) matching, maternity/paternity leaves, etc. They also do not benefit from the mentorship and training from senior professionals that permanent employees have regular access to. One might even say, contract job workers serve as full-time employees to a company for a short duration of time but avail no benefits of full-time employment.

3. Unwillingness in companies to hire contractors: Contractors may bring top-notch quality to a job, but their employment duration usually ends with the deployment of project deliverables. Post this, their availability towards providing maintenance and support is questionable, which isn’t an optimum fit for software development. Contractors are only as loyal to a company and its goals as the length of their contracts.

Types of Software Engineer Contract Jobs

Even though software engineer contractors work autonomously as sole beneficiaries of their services, they are broadly classified into two categories:

1. When contractors work on different projects and with different clients as part of an agency, they are called Agency Contractors. Contractors are usually associated with agencies on a recurring basis and are under the control of the agency albeit a significant amount of discretion with respect to project proceedings lies in their hands.
2. Contractors who work independently, choosing clients depending on their schedule and pace, handling logistics operations, and managing their own business are called Independent Contractors. ICs are essentially independent business people. Independent contractors are sometimes hired by agencies.

Contractor jobs in software development are quite prevalent today. From software testing, QA engineers, Gaming engineers to DevOps engineers and data scientists, there are currently over 15000 job opportunities listed on Indeed at different companies in various locations. Nearly 350 software developer contract jobs  were added on Glassdoor in the last 30 days alone, ranging from data engineer, senior full-stack software engineer, Azure cloud engineer and Android engineer, to name a few.

Why Do Contractors Get Paid More?

The pay structure of an independent contractor is far different from a full-time employee. Since they work on a per project or per need basis, they bill their employers by the hour, or on a per project or daily/weekly/monthly basis. This enables them to charge a higher flat-rate or hourly rate.

Furthermore, independent contractors are personally responsible for handling tax liabilities, healthcare benefits, insurance, and marketing expenses. Therefore, their rates are higher than full-time employees. For most companies, not having to provide benefits, handling income taxes, or covering insurance and security is a profitable trade-off for higher rates of contractors. In addition to this, with onboarding costs eliminated, companies can free up millions in funds to direct towards artificial intelligence-based services or core business applications.

Another factor contributing to the higher rates of contract workers is that competitors of a company may be willing to offer higher wages and greater stability with respect to work. Contract workers can leverage these opportunities for even better job prospects.

Contractor vs. Full-Time Employment—The Best of Both Worlds

It’s clear to anyone opting for a full-time software engineering job that they are in it for the job security, stability and predictability. However, that’s not all there is to it. Full-time employees have a better chance of landing job roles at some of the largest tech companies in the world, for instance, FAANG companies.

Apart from having health care benefits and employment insurance, there is the added benefit of working on the latest technologies and with cutting-edge software tools. There are plenty of opportunities to upskill yourself and choose job roles as per your interests.

Therefore, for someone who relishes the modicum of security that is associated with working at larger companies, seeks financial stability and structure, and adequate career advancement opportunities, you are best suited for a full-time software engineering job.

As for contractors, who mainly work with startups and mid-size businesses, the sky is the limit. You move from one gig to another, garnering diverse experience levels and skills set along the way.  You also advance rapidly and with a fierce intensity, learning and adapting hard and soft skills and gaining competence in the latest technologies and tools. For instance, a year-long gig with a high-growth startup can tremendously accelerate your career and provide you with equivalent experience working at a larger enterprise.

After enough gigs, most top tech companies are even willing to onboard independent contractors if that’s your goal. If not, exposure to the latest tech and experience working with numerous startups is enough footing to start a business of your own. Plenty of contractors and freelancers claim to have picked up sales and marketing skills and product design knowledge during the course of their jobs.

According to Chris Dwyer, VP of a research and consulting firm, “There are six-month CFOs or two-year CEOs who do what they need to do. Then the person goes on and starts new projects.”

When contractor jobs first emerged, they were assigned substitute roles to fill in for entry-level employees on holidays or emergency leaves. However, software engineers today are choosing to pursue software development as contractors and successfully attracting steady, high-paying tech roles. Even with opportunities as lucrative as data scientists which start bidding wars, contractors are equally a part of the race. What’s more, they even get to charge higher rates to do the same job!

So, if you are wondering when to consider a full-time software engineering job or when to consider a contractor software engineer job, there’s no right answer to it. At the end of the day, it’s really a matter of personal preference as to whether you choose a full-time role or become a contract job software engineer.

How To Prepare for Software Developer Jobs?

Whether you are looking to pursue software development as a permanent role or on a contract basis, it can’t be easy to land one at a top tech company.

As a professional in the IT industry, you can pursue high-profile job roles within your company or competitive companies by leveraging professional relationships, past experience, and in-demand technical expertise. Since tech companies already invest in professional growth and development, and you have access to networking avenues, it can help you get your foot in the door.

Post this, you need to go through a comprehensive interview preparation plan with adequate time devoted to learning technical concepts, polishing coding skills, and mock interview sessions. Participating in coding competitions and bootcamps can further increase your chances of success at landing a lucrative software developer job.

Since tech companies also evaluate full-time employees for being a cultural fit in their organization, it is important to research the company you are applying for and familiarize yourself with their interview process and work environment. To do so, you can speak with hiring managers, ex-employees, or current employees to get insight into their inner workings.

Contractors on the other hand, usually target startups and small to midsize businesses to scale their services. Therefore, they are required to market themselves adequately to attract gigs from top tech companies. The technical aspect of the job prospect will likely remain the same which means companies will be judging you on your knowledge of data structures, system design and coding abilities. However, since you would be serving them for a shorter duration, there will be a lot more specificity with respect to required technical knowledge.

However, it should be noted that there is fierce competition among top tech companies such as Google, Facebook, Amazon, and Netflix to hire in-demand talent. However, with a diverse portfolio gleaned from professional experience, you can successfully stand out from the crowd. Due to a shortage of skilled software developers, companies are a lot more willing to hire software professionals on a contract basis.

As per Cheryl Liew, a recruitment consultant, “The hiring market is crazy competitive. I’m not sure it’s been like this before. You can send 100 emails, and maybe 10 respond. There is far more demand than supply. Because there is such a shortage, companies are more willing to hire on a short-term basis.”

So, whether you are a contract software engineer or a full-time software engineer, there are abundant career advancement opportunities in tech, provided you are willing to upskill yourself and work dedicatedly towards it.