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?

Read an update to this letter here.

{ 26 comments… read them below }

  1. Rosezilla*

    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!

  2. Goodman Ager*

    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?

  3. Brian*

    Go for it!

    I did something similar last year. Wasnt underemployed and wasnt 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 didnt 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!

  4. Anonymous*

    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.

  5. Unemployed Gal*

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

    Whats the worst that will happen if you stay at the current job? Your salary wont cover the mortgage and you lose your house.

    Whats the worst that will happen if you take the contract? In a year, youll be unemployed. Youll 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.

  6. Anonymous*

    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.

  7. Rebecca*

    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.)

  8. Chad*

    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.

  9. Anonymous*

    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.

  10. Suzanne*

    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.

  11. Patsy Gillispie*

    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.

  12. Lani*

    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!

  13. Andrew (UK)*

    I havent read through all the comments but reading the scenario, the one factor I would mention is that many companys, when taking on contractors, are often addrressing a sales pipeline that often indicates they are doing well and dont have the neccessary time to go through the normal rigoruous recruitment process. Often this means they ‘try before they buy’ with contractors, which means if you do well and your ‘face fits’ they will offer you a health full time position further down the line… good luck and hope it all goes well! : )

  14. Miserably stuck contracting*

    Contracting is a miserable dead end. Having a FT job and putting some years in is the absolute best way to go. There’s the old saying “sh-t rolls downhill” and there’s a reason for it. As a contractor you are the bottom of proverbial ladder. You aren’t on the ladder at as a matter of fact. You are the garbage the ladder stands on. Anyway, stick it through and only jump to a contract position if all else fails.

  15. Always have an end date*

    I agree with the previous post in that contracting can be a dead end. If the assignment has a set ending date, there is a possibility to renew the assignment and possibly renegotiate the terms. I work as a contractor in a department where the assignment is indefinite. We have been told to expect no further pay increases despite the fact that some of us have worked there for years and have acquired significant knowledge and experience. Many of the same responsibilities as the employees we work with are expected of us. I plan to leave next month whether or not I have found another job.

  16. Contracting is the worse*

    KEEP YOUR FT JOB!…. Contracting is a vicious cycle that will only lead to stress and eventually depression. Like the previous poster mentioned sh_t rolls down hill and you aren’t even on the ladder. You’re simply a resource (and normally you’re surrounded by visa workers as well). I too have the same responsibilities and more as the full timers….. Sad part is I get watched as how many hours I am in the office as I watch the full time folks walk in at 9:30-10 and leave at 4….

  17. Gregory*

    The last three comments here are well kind of shocking to me, if I’m considered the garbage the ladder stands on so be it but I’ll smile everyday of the six months a year I’m off and spending the 100k+ a year or better yet six months it took me to make it contracting. Your secure jobs can end tomorrow just as mine did some 7 years ago. Walk in one morning and they say they’re closing the doors. Different strokes for different folks is all I can say.

  18. Anne Szeto*

    I just want to share and make a comment that even nowadays a FT job is not guarantee. A small company could last few years but then eventually the employees there will become unemployed. So I think the most important things is how competitive that you are after spending few years in the company. Some of the employee might have a very good looking/big profile resume but in fact they are working for facebook every early morning.

    For those who really believe that a PT job is better than a FT job, I think the most important thing is that you don’t just look at the figure and say you are in the game. A company who needs a PT employee usually has it’s urgency about that position. (i.e Project manager). It will be stress as task has to be completed in a fix time frame.

    However, it’s your choice.

  19. steve*

    I’ve noticed most , if not all of the above responses considered the point that the contract awarded to you is full and final. I had a case where I was awarded a 1 yr contract and just when I resigned from my FT position the new client too rolled back on the contract I was offered. With such frightful situations possible, I’d always say full time are the better option, though they may not be much to our liking.

    I’m in that situation right now where my consulting company id not challenging the client for jeopardizing my situation nor paying me for any bench time. Any suggestions or ideas what I can do now are welcome.

  20. Jim*

    I’ve been rejected for approx. 8,000 permanent and contractor jobs over a five year period. Unfortunately, the only 3 jobs that I have landed during this time have been contracts. I just landed another contracted position that is supposedly scheduled for a year duration with no promise of any extension. I have been drastically underemployed and my dreams of owning my own home and having children are drifting away for my wife and I.

    That being said, you have to take a chance on a contract job because it can lead to something bigger and better. For my last position, I loved what I was doing and was even offered a permanent position; but the division closed. I was then offered a permanent position at another division, but the offer was rescinded when that division also closed! I was so close! I could see the light! LOL

    This economy is brutal and most people have no clue how people are suffering.

  21. John*

    Don’t leave a real job for a contract job on the IT industry.

    Contracting is a roller coaster and IT firms bulk up with contractors ad then let them go at projects end. Some may be kept, but thats not the norm.

    1. Agreed But*

      Roller coasters are fun and exciting….. IT contracting in the 21st century is a train wreck…. If you NEED a check then go for it but after dealing with slimy recruiters, some who can barely go to happy hour, contracting peers who can’t speak English and of course PMs who refer to you as “just a contractor” enough is enough. There’s nothing more delightful than filling out 3 time cards every week after spending 6 years in college.

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