Ask HN: First Contract Job, what to do?

https://news.ycombinator.com/item?id=7735124

by hacknat • 12 years ago

10 12 12 years ago

news.ycombinator.com

I've been working at a "normal" company for the past 3 years. I just accepted a startup's offer to do contract-to-hire with an equity grant if the company survives the next 6 months. I've never worked on a contract basis before. What should I be aware of and do?

loumf2• 12 years ago

Assuming you are in the US:

You have to pay your end of FICA (the employer portion -- 6-7%) -- so factor that (at least) into your idea of your salary. Also, medical insurance -- since your job is changing, you are eligible to get insurance from the exchanges (I think) -- certainly from an agent.

Taxes aren't being withheld, so you have to file estimated tax every quarter.

What other kind of things do you want to know?

hacknat2• 12 years ago

Health insurance isn't an issue, my SO provides our benefits. I have to file taxes quarterly?

loumf2• 12 years ago

If you were getting regular paychecks, your company would withhold taxes and give to the government on your behalf -- on April 15, you true up against those estimates.

As a contractor, you get the full amount with no taxes withheld (but you still owe tax). Pick a reasonable number that you think you owe the government and make an estimated tax payment (to your state too, if you live in a state with income tax).

It's simple paperwork, not a full tax filing. You can do it online.

tptacek4• 12 years ago

I'm confused by this offer structure. What does the company's survival have to do with your equity grant? If the company fails, your grant costs them nothing.

A six-month contract-to-hire term is way off the market. I'm biased (I think all temp-to-perm arrangements are so far off the market that they're essentially exploitative), but my observation says "weeks" is a more typical term.

I can understand a very shaky company not wanting to assume payroll obligations that they can't meet, and respect the notion that your contacting offer is made more in a spirit of candor than in hedging, but it should be possible to get your vesting clock starting now.

Also, the 'loumf comment is golden. I'd add that you should plan on engaging an accountant, and factor that into your costs. Also, are you planning on running out your COBRA during this period? Your health insurance costs are going to go up sharply.

hacknat2• 12 years ago

Benefits aren't an issue for me at this point in my life (my SO gets them for us currently). Good to know on the equity grant, I'll make sure that's part of the deal.

tptacek4• 12 years ago

This may be me thinking with my "hiring manager" blinders on, but what you just said shares an equivalence class in my brain with "compensation isn't an issue for me at this point". To the employer, this is just a question of fully loaded headcount cost. If your cost structure is lower, and we're in a seller's market, why does the company get to capture the surplus?

lauradhamilton• 12 years ago

It seems a bit weird to get an equity grant "if the company survives the next 6 months." By definition if the company doesn't survive 6 months then the equity is worthless, so there's no harm in issuing the equity now.

You should talk to an employment lawyer.

tptacek4• 12 years ago

What's an employment lawyer going to tell him? No employee is entitled to equity.

pzb• 12 years ago

If the company is working to ensure that you are seen as an independent contractor, then they may require you to provide your own tools, such as computer and cell phone. You should also expect that expenses incurred independent of specific performance of the contract will not be reimbursed.

So take your target salary, add the costs of cell phone, computer, laptop, etc plus all your routine costs (internet access, cell phone, business phone, etc) plus all benefits (time off, sick pay, life insurance, health insurance, disability insurance, retirement plan contributions, etc) plus your downtime costs (it is highly unlikely you will contract 40 hours a week every week for the whole year, so you will have unbillable time while you search out your next gig).

You will have to do the math for yourself, but it probably comes to an additional 50-100% of your current salary rate. This calculator is a good start: http://www.rakkar.org/ContractPayCalculator.html

lifeisstillgood2• 12 years ago

Things I wish I had done:

1. Thought it would last longer than one month. I assumed (still do) that they would realise I was faking it and take it all away. So I paid extra for temporary access to things (rented a car not bought). A year later I still was. Stupid. Assume you are now a contractor for five years. You probably will be these don't sound like people to stick with.

2. Think of yourself as a business. Not a contractor - a business who needs to market and build a "sales pipeline". Who are you going to work for in six months time? doing what? How will you find them in the next three months and persuade them to wait?

3. taxes. Oh shit taxes. Get a accountant and do not leave their office on the first day until you have written a spreadsheet and calculated your own basic tax return. know this stuff inside out. You are now running 4 tabs on a spreadsheet and carrying over from one to the other:

Business Income > Business Outgoings > Home Income > Home outgoings. Make a spreadsheet like that today. Fill it in.

4. Blog - it's probably the best middle path for marketing yourself. But choose your story, your unique take on things. Are you techie through and through? A Brogrammer? An outdoorsy hiker, a Beethoven lover? What is your (oh god) tribe? Talk to that tribe - somewhere there is a hiring manager who is also a member of your tribe. Probably quite a few - talk to her through your blog.

5. Never ever ever ever lie for anyone ever. Politics is a hard game especially in companies that are changing a lot, like startups. As a contractor you can have a professional armour - you have an obligation to give unbiased advice and opinion.

Not the companies problems are not your problems. Do not take on board their views of "if only we can hit this deadline we can make the sales and hit 100M..." - you should give your real views on the state of the codebase, the likelihood of hitting the deadlines and the tech debt.

Go read the clean coder (with an r) by uncle bob martin.

5. be your own project manager - that is track in your own system the tasks needed to achieve the requirements and the likely ship dates. Don't keep this a secret but don't rely on someone else tracking this for you. I recommend fogbugz these days (it's for pay). Don't touch Redmine with a barge pole. Basically know that the two week estimate the sprint just made is bullshit. Be clear on what your estimates are - no need to be shrill, just be clear, polite and consistent.

6. Be calmer than everyone else and realise this all takes time.

7. Don't take career advice off random people in the Internet :-)

tptacek4• 12 years ago

This is great, but I don't think he's trying to start a consulting company; he's trying to navigate a temp-to-perm offer. :)

lifeisstillgood2• 12 years ago

Sorry I got a little carried away (then noprocrast stopped me reediting.)

Anyway, if I was to give our hero here any advice, it would be to see himself not as an employee but as a consulting company - if POV at Parc Xerox was worth 40 IQ points, in our business I would say POV is worth 40k pa.

Ask HN: First Contract Job, what to do?

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