I want to double-dip, for the same company.

March 26, 2008 9:30 AM

Can I be a contracted consultant for the same organization that already employs me full-time?

I work for the incorporated American subsidiary of an EU-owned Ltd. There is an opportunity for me to do about six months' part-time consulting work on a project for the Ltd. The work would have almost nothing to do with my stack for the Inc. side.

For various financial and business reasons, I would prefer that the consulting gig be wholly separate from the day job. My accountant says there's no real tax issue, as long as I plan to declare the additional income and am prepared for the big chunk that will go out of the consulting pay as SE tax. Fine.

But I'm thinking more about the legal and logistical issues, and what I should make sure gets put in a contract. Or any EU/UK work laws about which I might not be aware, that would make this an unattractive option for my company (I know they'd rather I just did the Ltd. work for free, or that they paid me a bit of extra compensation via Inc. instead of the fair market value of the consulting, so their eye will be toward finding reasons not to go this route). I checked my own work agreement and all it states is that I can't moonlight for third parties.

I know you're not a lawyer, and if you are you're not my lawyer, so don't worry about that (although all IAAL advice is welcomed!). Although it should probably be said that I don't intend to retain my own separate employment attorney for this, since the consulting gig isn't lucrative enough to justify the expense, IMO.

There's plenty in the AskMe archives about making the switch from full-time employee to independent contractor, or vice versa, but not much about how to be both simultaneously (other than this one which is mostly focused on the tax issues.). Thoughts?

posted by pineapple to Work & Money (4 answers total)

I know that in the company I work for (U.S. public company), employees exempt from overtime being paid extra for consulting caused a big brouhaha with HR. I think the idea is that if you are exempt, you just work all the time :).
posted by elmay at 9:37 AM on March 26, 2008

I work for a consulting company that will occasionally contract me as a freelancer, usually for small copywriting jobs. This works out for me because I get more work; it works out for my company because they don't have to find and train a freelancer for a small isolated job; and it works out for the client because we bill writing as an outside cost, so my rate as a freelancer is considerably cheaper.

Sort of a specific scenario, but it can work. The comment about overtime is probably accurate though - so far it's just been a small time deal for me. Taxes are kind of a bitch though.
posted by Prevailing Southwest at 10:02 AM on March 26, 2008

I have freelanced for my organization (which employs me full-time) quite a few times, and it's always worked out well. The work is for units other than the one that I work for, so there is no cross-over. There is nothing in my job description that includes working for other bosses on other projects, so it's clear that this is independent work.

The only hold up occurs with HR and payments and it happens almost every time. Whenever I send an invoice, HR looks me up in the vendor list, doesn't see me, and asks for my tax info. I send it to them, but add that I'm an employee, so they already have the info. They ignore that part and enter me as a vendor, which somehow causes a problem in that it conflicts with tax info of an employee. After a few weeks of head scratching, they eventually figure out that I need to be paid through payroll, which I actually prefer as they take out the taxes, savings, etc.

All this means is that payments take six weeks instead of four, even if I include this explanation.
posted by ochenk at 10:29 AM on March 26, 2008

The only thing I can think of is that the IRS is very interested in whether someone is truly an independent contractor or is actually an employee; the main determinant is whether the employer controls only the result of the work, not how you produce it. Still, I know that submitting both W2s and 1099s with a tax return can be a bit of a flag (I got mail audited once), and I don't know how the IRS's system would flag a return that had W2 and 1099 from the same employer ID, or if they'd inquire with the company first; they seem equally interested in companies that incorrectly classify employees as contractors.

The IRS discusses the topic from the employer's perspective, and also has a form [PDF] that employers fill out when the IRS decides to investigate. You may also find a checklist [PDF] helpful when figuring out how you'd likely be classified.
posted by catlet at 1:05 PM on March 26, 2008