It recently occurred to me that I haven’t talked about contracting on this site.  Contracting is a very important aspect of the job search, especially if you’re in IT.  So, I’ve decided to do a 3 part series on contracting this week and next.  We started last week with common questions regarding contracting; today we discuss considerations one should make before contracting; and we’ll finish up with a post on what it means to be a Sole Proprietor.

Recruiters and contracting agencies tend to throw around a number of terms.  Let’s talk through a few of them and discuss considerations related to them.

Contract to Perm

Many times contracts are proposed to candidates as “contract to perm”.  This means that there is a stipulation in the contract that the client company may hire the contractor.  Notice the word “may”.

Just because a contract is “contract to perm”, doesn’t necessarily indicate an intention on the part of the client to convert the contractor to a permanent employee.  Further, many times recruiters will use the fact that a contact opportunity is “contract to perm” as an incentive to a candidate.  Why not, it’s a selling point right?

Think of this from the company’s perspective.  If you’re the company, and you need 10 people for a project that will last 6 months and you know you’ll need to keep 3 of them after the contract expires, what would you do?  Wouldn’t you want your choice of the contractors at the end of 6 months?  I would.

In that case, the company would be stupid not to stipulate that all the contracts are “contract to perm” even though the company knows from the beginning that they’re only interested in keeping a small percentage of people.

If you don’t understand what “contract to perm” means, you stand a good chance of being disappointed at the end of the contract!

What’s more, the company is under no obligation to tell anyone how many contractors they will convert.

From the contractor’s perspective its easy to think this is unfair.  The fact is, as a contractor, you’ve signed an agreement to work for the company until X date.  You know for certain that there is a high likelihood that your contract will end on X date.  That’s a lot better than some employees (who are waiting on a layoff) have it right now!  At least a contractor has a good idea when there work status will change.

Conversion

What happens when a company decides to hire a contractor as a permanent employee?  What should you know in regard to conversion before signing on with a contracting agency?

Many times contracting agencies stipulate the company will pay a fee when a contractor is converted to a permanent employee of the company.  If we’re thinking of this from the contracting agency’s point of view, it makes perfect sense.  Once the contractor is permanent, the agency’s stream of revenue is gone.  There’s got to be an incentive for the company to continue in a contract relationship until the end of the contract.  Or rather, there’s got to be a disincentive for the company to convert the individual.

What about after the contract is over?  Can’t the company freely hire the individual at that point?

Most of the time, the contracting agency still charges a fee (albeit a lower one).

If you’re the company, you’re happy to pay either fee because it’s usually less than it would have cost you to recruit the individual yourself!

What does that mean to us?  Well first, one contract is not necessarily as valuable as the next, even if they pay the same.  A contract to perm may be worth more to us than a contract with no chance for permanent employment.  A contract-to-perm without incentives may be worth more than one with them.

Stipulations

Aside from the stipulations above, its important to understand the contract you’re signing.  The contract is a legally binding document.  If there is ever a dispute and mediation or judgment is needed, what the contract says wins.  Remember, a verbal agreement is as good as the paper it’s written on.

Some of the stipulations I’ve seen in these documents include items like notice that must be given by the contractor if he/she decides to leave.  Others include non-disclosure terms, non-compete agreements, and IP agreements.

It’s rare that a contractor going through an agency gets to read a contract before saying “yes”.  But just because you say, “yes” to a position doesn’t mean you have to sign an agreement that is fundamentally flawed.  READ your contract.  Ask questions.  Exercise your right to walk away if you don’t feel comfortable.

I hope these considerations help in your search and next contract.  Join us later this week for Part 3 of this series!