Contractor vs. salaryman: Two types of worker enter, one gets work less often than the other in the current economy

August 6, 2009 2:49 PM

Are contractors and salaried workers being affected differently by the slow economy, specifically in the IT industry?

So, it appears the US economy is still worsening, but at a slower rate. However, unemployment is still going to hit 10%, according to that article. Who is it worse for: salaried employees or contractors? Any relevant stats?

posted by ignignokt to work & money (11 comments total)

I work for a very small (programming-related) consulting company. We are busier than ever.
posted by jrockway at 2:53 PM on August 6

I don't know what is really going on but I would think contractors would be the first to be laid off and the first to be hired back. Easier to let them go and less risk when hiring them because the are easier to let go.
posted by itsamonkeytree at 2:54 PM on August 6

I recently got hired as a contractor because my company is in a hiring freeze for new salaried employees.
posted by martens at 3:07 PM on August 6

Anecdotally, what I'm seeing is that it's affecting contractors and employees at about the same rate. But my industry is volatile, people are used to/accept the up-and-down nature of it, my state is very "pro-business" which means it's a right-to-work state and pretty non-union, etc. I've not seen any published statistics, though I think it would be very interesting to see some.
posted by Houstonian at 3:12 PM on August 6

I work for a major global firm that features IT services as one of our core offerings. I have seen contractor positions eliminated to provide work for employees who were on the bench (not on a billable project). I have also seen employees who were on the bench too long, and were too expensive relative to the value the firm perceived they could get out of them, laid off, their work handed over to contractors.

As the nature of the work tends to be project based:

Employees have a lot of carrying costs but are, generally, appreciating assets. They gain experience and increase in value usually faster than they are given promotions. But, they draw a salary even when there isn't any project work.

Contractors are usually only hired to fulfill a specific pre-defined role that already has project revenue associated with it. Thus they have a possibly lower carrying cost (but often it is quite the opposite). They are also a bigger risk as they don't specifically answer to the organizations view of things and when they find a better contract they leave the organization with no lasting value.
posted by dobie at 3:26 PM on August 6

Most companies will strive to have effective people working for them and being paid. Depending on lots of factors that could be salaried and could be contractors. I don't think there is a way to generalize this.
posted by meinvt at 3:31 PM on August 6

In some cases there will be companies with hiring freezes or a negative hiring environment that will be perfectly happy hiring contractors or freelancers. Since freelance work is project-based, it's easy to make the case that "we need an x now so the project gets done" when it might be much harder to make the case that "we need an x for the foreseeable future."

This is all of course from the perspective of project-y industries like design and advertising firms, where the work is often feast-or-famine.
posted by lackutrol at 3:59 PM on August 6

Not exactly the IT field but I went freelance just before a big round of animation industry layoffs in the 90's. It was good not to be looking over my shoulder during downsizing or be subjected to weird performance evaluation procedures.

Downturns seem like a generally good time to be a freelancer if you have a previously established reputation in an industry. I wouldn't be wanting to be coming in fresh at the moment and trying to get someone to take a chance on me.
posted by bonobothegreat at 4:27 PM on August 6

Part of the answer to your question depends on the specific industry. My wife works in IT for a large manufacturer of construction equipment. The downturn meant 100% of the contractors at her facility were let go. She (salaried) has 4 weeks of furlough.
posted by achmorrison at 5:24 PM on August 6

I've found that large clients are actively looking to IT for revenue generation information, in this economic downturn. Some clients running large BI (Business Intelligence) applications like Cognos, are weathering the downturn pretty well, by effectively minimizing costs and protecting or enhancing revenue at better accounts. Therefore, they are building more kinds of BI applications, and pushing the reporting/results generation activities further down the business hierarchy, which has the effect of expanding BI projects, both in numbers of users and in granularity of product provided. Result: revenue growth for supporting specialized IT contractors, too.
posted by paulsc at 8:43 PM on August 6

I do freelance mobile and desktop architecture and programming (i.e. everything but web dev).

I haven't found a fucking project in months. Well, that's not quite true... but, the people I did work for earlier this year still haven't paid me.

Nobody's starting new projects, as far as I can tell. The very little work I see passing by on once-fertile job boards is, invariably, web or iPhone. I should just give up and buy a damn iPhone.
posted by Netzapper at 11:00 PM on August 6