Contract employees do differ from other temporary employees: A contract employee
has specialized job skills usually not available within the client company. They also
are paid a higher rate than the full-time in-house staffers. The hiring agreement can
include a fee for a specified project or a commitment for a certain number of days of
These arrangements are often handled through a recruitment firm or headhunter. The
firm's client company does not handle employment taxes and benefits: The independent
contractor is not their W2 employee. The Internal Revenue Service has strict rules for
defining "independent contractors" and imposes penalties for employers who misclassify
employees as independent contractors.
Dependent vs. independent
At one end of the spectrum are agency-dependent contract employees. Agency-
independent direct consultants are found at the other end. All contract workers fall
somewhere on this continuum.
Control differentiates the two. In the agency-dependent model, the agency locates
the assignment, recruits the contractor, and negotiates with and bills the client. The
agency withholds applicable taxes from the contractor's regularly scheduled payroll
check. The difference between the client bill rate and the contractor pay rate (minus
taxes) is the agency's revenue.
Just where a contractor settles on the continuum is a personal decision that has to
do with comfort level and immediate circumstances. But most of all it has to do with
the free agent's understanding of how the contracting industry operates and how he or
she uses that information to its best advantage.
Income and professional security are strongly influenced by where you fall along
the continuum. For someone who wants to retain 100 percent of the fees from the
assignment, he or she would ideally work as an independent contractor. However,
independents are responsible for finding assignments, billing for time, and paying all
applicable taxes and liability insurance.
Find representation or go it alone?
In considering a stint as a temporary worker, you must decide whether to be agency-
independent or agency-represented. Both hold advantages. Millions of troops in the
alternative workforce army prefer working with an agency. Someone else -- the agency
recruiter -- is scouting the temp-assignment horizon. Employers routinely hire temps to
perform Web maintenance or coding or to fill in when e-commerce loads increase --
during the holiday shopping season, for example.