Hourly Employee vs Independent Contractor

Which One Should You Choose?

By Jerry Lambert

Hello, and welcome back to The Brown Parachute Club.  This week I thought I would go into greater detail about the job classifications that are out there.  If you have been unemployed for a while, you may want to look into becoming an Independent Contractor as a way of bringing in some extra income.  Either on your own, or working WITH, but not FOR a company like Uber or Lyft.  I’ll illustrate the differences between being an Hourly Employee and an Independent Contractor.  Many of the Side Hustle and Work From Home jobs I have featured on this blog are Independent Contractor positions.

Saw cutting a hole around a piggy bank

First a little background.  As you already know, back in 2008 the country went through a major financial crisis.  Many banks, insurance companies, and brokerage houses either went out of business or were bailed out by the U. S. Taxpayer.  Losing millions of their client’s dollars in the process.  Names like Lehman Brothers, Bear Stearns, Goldman Sachs, and AIG were all over the news.  To learn more about this event, watch the film, The Big Short.  That movie scared the crap out of me!

In response to this financial crisis, many companies took advantage of an opportunity they had been waiting for.  “How do we decrease the size of our workforce, without appearing weak to our stockholders, or the business community at large?”  The Crash of 2008 was a gift to many companies who had been wanting to cut back their staff for years.  However, if they resorted to layoffs, it would make the company look financially unstable.

Mature man using a computer at home

I heard about this scheme from an article in the Huffington Post by James Altucher.  In his article, 10 Reasons You Have to Quit Your Job in 2014, he explained how this plot was hatched.  But more importantly, he explains why the old business model no longer works and why you should consider striking out on your own.  He was talking about becoming an Independent Contractor or starting up your own business.

There are definitely Pros and Cons for each classification.

Pay: If you were an Hourly Employee at your previous job, more than likely you were paid every two weeks.  Because of sick days and vacation days, many times you were paid for NOT working.  As an Independent Contractor, you are paid for the job or project you have agreed to perform for a company or individual.  Period.  Your pay is based on the quote you gave for the job.  Think about a plumber giving you an estimate to fix the leaky faucet in your tub.

Hours: A full-time Hourly Employee can expect to work a minimum of 40 hours per week.  If part-time, then those hours vary, but are usually 30 hours or less.  An Independent Contractor (IC) puts in as many hours as needed to finish the job.  Since his pay is not hourly, it behooves him to do the job right and finish as quickly as possible.  Then he can move onto the next job.

Benefits: Hourly Employees can expect to receive a host of benefits from their employer.  These range from health care to dental care and vision care, etc.  An IC must take care of these expenses on his or her own.  With the soaring cost of health care, this is a major consideration.  However, there may be group plans that ICs can join that will hopefully bring down this cost.

Retirement:  As an Hourly Employee, you may have a fully-funded, partially-funded, or employee-funded retirement plan provided by the company.  In addition to that, you pay into FICA (Social Security and Medicare), which is also a source of retirement funds.  As an IC, you are on your own for your retirement funding and you still have to pay into FICA.

Flexibility:  This is one area where an IC has it made over an Hourly Employee.  As an IC, you set your own hours and work when you want.  In the plumber example I gave earlier, if the plumber is an IC and not an employee for a plumbing company, he determines his own work hours.  As an Hourly Employee, your hours are set by the employer and you’d better be to work on time!

Tax Considerations:  As an Hourly Employee, all of your taxes and deductions are withheld by your company and forwarded onto the recipients for you.  When you’re an IC, you are on your own for taking care of your taxes and any other deductions.  On the bright side, when you get paid, you get a check for 100% of the job quote.  Not like the net income check that an Hourly Employee gets.  If you are working with a company like Uber or Lyft, they will provide you with a Form 1099 instead of a Form W-2.  That form will detail the income you earned with them for the previous tax year.

Freedom:  This is when being an IC really beats being an Hourly Employee.  The only problem is that your time off is unpaid.  However, when you need a day off, take it!  When you want to go on vacation, go!  When the weather is crappy, stay home!  The Hourly Employee doesn’t have that luxury.  Need a day off? Clear it with the boss.  Want to go on vacation?  Sure, if someone is there to cover for you.  Feel like crap and just can’t make it into the office?  No problem, if you have any sick days left.  You get the idea.

Security:  The Hourly Employee has the satisfaction of knowing that every two weeks, like clockwork, he is going to be paid for his hours worked (or not worked if sick or on vacation).  The IC gets paid only for the work that was done.  No work, no pay!  After many years as an Hourly Employee, this is the toughest thing to get used to as an IC.

I guess for me, what it all comes down to is the old formula: Time vs Money.  If you don’t have a job at all, you have plenty of Time, but no Money.  If you are an Hourly Employee, you are giving up a substantial amount of Time for Money.  However, as an IC, if done correctly, you can have the perfect balance of Time AND Money!  That is the elusive Golden Ticket that all ICs are looking for.

I hope this article has helped to clear up any misconceptions about the difference between these two types of work classifications.  In preparing this blog, articles from Salary.com and BankRate were very helpful in explaining these differences.

DISCLAIMER:  As usual, before making any financial decisions based on the information I have detailed above, be sure to check with your tax professional and / or retirement planning specialist for more information.

If you like what you’re reading on TBPC, please leave a comment and share the website with your friends.  Also, if you would like to be notified of new posts to this blog, please click on the “Follow” button in the lower right corner.  Until next week, may your parachute fully deploy, and may you have a soft landing!

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The Work From Home Chronicles: Episode 1

Can You Earn Decent Money From Home?

By Jerry Lambert

Hello again, and welcome back to The Brown Parachute Club.  Well, here it is, as promised.  My first list of WFH Jobs that don’t suck.  Hopefully.  I have decided to turn this into a featured part of my website, hence “The Work from Home Chronicles” title.  I’ll probably turn this into a page of its own, depending on how it goes.

Female sitting outside with laptop

Anyway, I have researched several WFH opportunities for you to have a look at.  I admit that I haven’t signed up for any of them yet, but I am leaning towards a couple of them pretty hard and I’ll let you know which ones they are.

Most of these jobs I found reviewed on the Dream Home Based Work website.  This is a terrific website run by Lashay H.  She has done much of the hard work for you, by researching and recommending companies that she trusts.

I don’t know if I mentioned this before, but if I have, it bears repeating.  You have to be extremely careful when signing up with a work from home company.  Since you will be working for them, they will more than likely want some of your personal information.  I can only imagine the number of scams that are out there, trying to collect your information so they can suck your savings account dry and run up huge credit card charges in your name!

I signed up for LifeLock a few years ago and I don’t regret it.  It gives you peace of mind, and that is hard to come by these days.  Plus, if you are signing up for WFH Jobs, this gives you a layer of protection you wouldn’t have otherwise.  If you sign up for LifeLock, use the promo code 10Now to save 10%.  If this code has expired, just click on this link for current LifeLock promo codes.

is09an5qdJust one more thing.  All of the jobs that I will be listing will be using PayPal to pay you.  That means that many of these jobs will pay you almost instantly, which is a very nice perk.  Some of the jobs I looked at take up to 4-6 weeks to pay you.  The heck with that!  There are plenty of jobs that payout using PayPal within 24-48 hours.  You can’t beat that!  Click here to get your own Personal PayPal account!  The only drawback is that PayPal will take a small cut out of each payment you get.  That is the price you pay for safety since you probably don’t want to give these companies your bank account number, even if it’s just for deposits.

Enough of that, you say, what about the jobs?  I have looked at a wide variety of jobs.  Two of them are phone-related.  Since I spent the last 3 years on my previous job fielding calls in Technical Support, that is the LAST thing I want to do.  However, these jobs seem like a good way to earn some extra income, without having to sell anyone anything.  That’s hard to beat.  Here are the jobs.

Intelichek: This phone job is what is considered a “Mystery Shopper”.  What the job entails is providing quality assurance checks for automotive suppliers.  You call a company and ask for a price on a specific part or parts.  That’s it.  It pays .90 per call.  That doesn’t seem like much, but when the average call takes no more than 5 minutes, that translates to $10.80 per hour.  Not bad.  However, this job has a 10 hour per week work minimum, so keep that in mind.  You can set your own hours between 8 am and 7 pm.  You get paid bi-weekly by check, as opposed to the PayPal option.  It’s worth checking out if you don’t mind being on the phone for a few hours each day.

Call Center QA:  Another phone job in the “Mystery Shopper” category.  This looks like a good opportunity to make some decent money.  You get paid $5 per call.  If each call and survey take about 15 minutes, that’s $20/hour!!!  Plus, you get paid via PayPal within 7 business days, so that’s cool!  There is no minimum number of hours, but you do have to make your calls during business hours.

Humanatic:  This is a Call Reviewer job.  You know, when you hear the message, “This call is being recorded for quality assurance”?  You’re the one reviewing the call!  This seemed interesting.  You listen to recorded quality calls and answer some questions based on the call.  Plus, they have a link to PayPal to sign up for an account!!!  However, I just checked and it looks like this only pays between $1 and $4.50 per hour!  You probably want to skip this one!  I included it here so you have an example of doing your homework before signing up with one of these companies!

UserTesting:  I know what you’re thinking, “What gives?  Where are the good jobs?”  This might be a good one!  This is a quote from their website.  “How it works.  Get $10 via PayPal for every 20-minute video you complete.  UserTesting pays you to visit websites or apps, complete a set of tasks, and speak your thoughts aloud.”  I’m no math whiz, but I think that translates to $30/hour!  Now there may be downtime in between, but this seems promising and appeals to my IT background.  I am definitely going to check this one out!

Clickworker:  For those of you with an office / clerical background, Clickworker might be for you. They help companies by breaking down large projects into bite-sized pieces.  How much you get paid varies on the job being done and how quickly and accurately you get it done.  You are paid via PayPal, though the time period seems a little fuzzy.  It starts at 7 days but can go up to 21 days.  However, if this is the sort of work you are used to doing, it might be right up your alley.

Well, I think that’s enough for this week.  Hopefully, I’ve given you one or two jobs you will want to check out!  I plan on making this a regular feature.  I will continue to write articles on Side Hustles (not necessarily Working from Home), Productivity, and Lifestyle.

DisclaimerI am not affiliated with, or compensated by, any of the companies I have mentioned.  They just looked promising to me and I thought I would pass them along.  That’s all.

If you like what you’re reading on TBPC, please leave a comment and share the website with your friends.  Also, if you would like to be notified of new posts to this blog, please click on the “Follow” button in the lower right corner.  Until next week, may your parachute fully deploy, and may you have a soft landing!

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