The document outlines considerations for contractors looking to secure consulting contracts, detailing various types of firms and compensation structures. It advises caution regarding situations where payment depends on client payments and emphasizes the risks of being misclassified as an independent contractor when terms resemble those of an employee. Key scenarios highlight the importance of understanding contract terms and the potential pitfalls of certain hiring practices.

1. Where to Find a
Contract
What to Avoid

2. If you’re considering getting into consulting as a contractor, you
obviously have
to be prepared to secure new contracts.

3. Depending on the length of your projects, you may look for new
contracts from one to three times a year, on average.

4. Unless you’ve built your own client base, you’re
going to, most likely, make yourself available for
projects through a firm that specializes in finding
engagements that require people with your
background.

5. Below are a few different scenarios to consider:

6. 1. Consulting firm that hires consultants, as well as
contractors, as full-time employees of their firm on an asneeded basis.

7. 2. Contracting firms that will pay a salary, hourly, benefits to
W-2 employee or set up a subcontractor (Corp-to-Corp)
relationship.

8. 3. Contracting firms that pay hourly or subcontractor (Corpto-Corp) without providing benefits.

9. 4. Situations to avoid

10. Consulting Firm That Hires FTEs as Well as Contractors
There are consulting firms that hire their own employees as their
primary method of filling their client engagements.

11. However, these firms will find that, from time to time, one of their
clients may have a need for which they don’t have an available
employee.

12. Or there may be a situation in which a client needs a type of skill
set for which they typically don’t get requests.

13. Consulting Firm That Hires FTEs as Well as Contractors
In both scenarios, these firms may look to hire the services of
an independent contractor for a particular engagement with
both parties understanding that once it’s complete, neither the
consulting firm nor the contractor will have any obligation to
each other.

14. Contracting Firms That Will Pay a Salary, Hourly,
Benefits or Set Up a Subcontractor (Corp-to-Corp)
Relationship
This type of firm is set up to work with individuals on a contract
basis.
They have assignments and look for individuals who can perform
the task. They will work with you to find a new engagement, but
they typically won’t
engagements).
pay for bench time (time in between

15. Contracting Firms That Will Pay a Salary, Hourly,
Benefits or Set Up a Subcontractor (Corp-to-Corp)
Relationship
As a result, you should expect to earn a higher level of
compensation than if you were a full-time employee of a firm
through which bench time is provided.

16. Contracting Firms That Will Pay a Salary, Hourly,
Benefits or Set Up a Subcontractor (Corp-to-Corp)
Relationship
These firms will pay benefits as a part of your compensation plan
and they may, or may not, pay salary during the contract, should
you prefer a predictable form of compensation during the length of
your engagement.
In general, these firms offer more variety in terms of how they
compensate when compared to the following example.

17. Contracting Firms That Pay Hourly or Subcontractor
(Corp-to-Corp) Without Providing Benefits
This group is not much different from the previous group, except
that such firms do not offer the option of salary or benefits.

18. Contracting Firms That Pay Hourly or Subcontractor
(Corp-to-Corp) Without Providing Benefits
This is the case only because the firm prefers to pay hourly as the
work is being performed, as opposed to averaging out the
compensation over the course of the contract.

19. Contracting Firms That Pay Hourly or Subcontractor
(Corp-to-Corp) Without Providing Benefits
Since benefits are not offered, these firms tend to attract
contractors who already have their benefits in place.

20. Situations to Avoid:
You get paid when they get paid.
This occurs when the company or person offering you the contract
doesn’t have the money to pay you. Typically, these are
independent contractors with their own corporations. They are at a
client site and become aware of a client’s need. They know that
you can do the work, and since they already have an agreement
with the organization, they think it would be great to bring you in
as their employee and make a couple of bucks. More often than
not, this scenario will work out just fine. But here are a few things
to take into consideration before signing up for this type of
situation.

21. The problems you’ll face:
The client does not pay on time. This is an issue if you require
money within a certain timeframe. So, if you don’t get paid until
the independent contractor gets paid, even if the contract calls for
them to be paid in 30 days, you’ll have an issue if their payment
is delayed. I can tell you with 100% accuracy that 40% of clients
will not pay an invoice within the timeframe stated in the
contract. So, you have to be prepared to deal with this.

22. Next, what if the client is unhappy with the work provided and
decides they’re not going to pay for some or all of the work you
performed? If you’re working through a company that pays you
on a regular basis, this won’t be an issue for you, as the
company takes all the risk. But under “you get paid when we get
paid” terms, this becomes your risk. Is this something with which
you want to be concerned?

23. They want to classify you as a 1099 when you don’t have your
own corporation. 1099 is for an independent contractor. Let me
explain what a true independent contractor would be:
A company needs 200 order sets built. They have the
specifications in place. You go on-site one time to meet with
everyone and make sure there is a clear understanding of what’s
expected of you. You determine how long it will take you to do
what they need. You provide a flat rate to do the work, along with
a payment schedule. You also establish a date when you’ll have
completed and delivered the work. You leave and work at your
own location to complete the job.

24. Once a client decides to . . .
• pay you on an hourly basis as they do some employees
• require you to be at certain locations on a regular basis as
they do employees
• pay you whether or not you completed the work for which you
were hired
. . . then you are no longer considered an independent
contractor.

25. So why do these organizations want to classify you
that way?
They won’t have to meet payroll tax on you, which they would if
you were their employee.
As a 1099, you’re responsible for the payroll tax.
Typically, this occurs because these companies don’t have the
proper infrastructure to perform a regular payroll.
This, in itself, should be a concern.

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