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Contract Employee's Newsletter
Helping Contract Professionals
Manage Their Careers
April 01, 2002
Edited by James R. Ziegler
A Companion to:
The Contract
Employee's Handbook
www.cehandbook.com
Sponsored by:
P.A.C.E. - Professional
Association for Contract Employment
www.pacepros.com
About The Contract Employee's Newsletter
The Contract Employee's Newsletter is a free e-mail publication
for technical and professional contractors containing news, commentary,
tips, links to useful resources, nuggets of wisdom submitted by
readers, and anything else that seems appropriate at the time. The
CENewsletter is distributed bimonthly or whenever issues warrant
and time allows. The subscriber list is confidential and will not
be disclosed outside this organization.
In This Issue
Read recent
issues of The Contract Employee's Newsletter.
Suggest A
Topic For The Newsletter
Ideas Anyone?
Thank you for your excellent suggestions for future newsletter
topics. Keep 'em coming. Chances are, if a topic interests you as
a Contract Professional it will certainly interest the majority
of our readers.
Guest Appearances
I would like very much to publish short guest contributions
to the Contract Employee's Newsletter. Maybe a marketing tactic
that works for you, or a true story of agency madness? I'll cite
your name, your e-mail address, and a link to your professional
website. I can't pay you, but I'll make sure that everyone who reads
the Contract Employee's Newsletter knows who you are and what you
do. It can't hurt, and, who knows, it might help your consulting
career. Contributions should be of general interest to all Contract
Professionals.
Mail your suggestions to suggestion@pacepros.com.
Return to Table of Contents.
Contract Employee's
Workshop
It's This Saturday at Concordia University, Irvine,
CA
The next CEWorkshop is scheduled for April 06, 2002 in Irvine,
CA, in the heart of Southern California's "Technology Coast"
and Orange County at beautiful Concordia
University.
The meeting room will accommodate only forty participants, so make
sure that you reserve your place early to guarantee a spot. There
will be a waiting list, and we will notify late registrants in the
event an opening becomes available.
When put into action, the practical information you receive in
the CEWorkshop can be worth tens of thousands of dollars in increased
earnings during the coming year. You cannot afford not to
register for this valuable workshop.
Visit the CEWorkshop
Information Page for registration information and directions.
Visit the CEWorkshop
Agenda to view topics covered during this valuable event.
In the meantime watch this space for details on upcoming CEWorkshops
in a community near you.
I am always open to your suggestions. E-mail your ideas and suggestions
for the CEWorkshop to Workshop@pacepros.com
Return to Table of Contents
Featured Topic
Musings On The Subject Of Offshore Consulting Firms
Globalization, facilitated by high-speed Internet communications
and IP telephony will increasingly drive down the rates charged
by American consultants. The impact will be felt especially strongly
in the areas of generic coding, web-enabling of legacy systems,
and website design. Less affected will be jobs that are best performed
by native speakers of American English such as technical writing,
website content development, and marketing communications. Also,
jobs that require a strong on-site presence will continue to generate
high rates.
Ask yourself, "Can my job be performed as well or almost as
well by off-site personnel?" If the answer is yes you have
two choices:
- Identify opportunities to add more value to your basic value
proposition as an on-site consultant. How can you identify and
sell to prospective clients the advantages of working on-site
with you? Are there real and immediate risks
associated with outsourcing to off-site or offshore consulting
firms? What are there real and immediate advantages
of working onsite with you? If the risks of outsourcing are low,
and the costs are low, companies will outsource. And the growing
trend toward outsourcing that is fueling the boom in contingent
work knows no boundaries.
- Identify skills that are best carried out onsite and obtain
training in those skillsets. Consultants must always train to
stay ahead of the curve, and sometimes the best way to stay ahead
is by jumping to a new curve. This is not a new concept
for veteran consultants. Tried and true consultants are always
prepared to add new tools to their toolkit, adopt new methodologies,
and enter new markets as market conditions change.
Ironically, the same forces that are driving the increase in the
number of American consultants is also driving the increase
in the number of consultants worldwide. If it makes sense
for a company to outsource a project to a consulting firm in Fargo
ND, it makes even better sense to outsource the same project to
a firm in Dublin Ireland for less money.
Here is another irony. Do you like to work from home? Keep in mind
that every time you work from home you are demonstrating to the
client that your job can just as easily be done by a consultant
from anywhere in the world, be it Fargo ND, Dublin Ireland, the
Ukraine, India, or China.
I recently received an e-mail with the following headline:
Rates starting at US18 per hour
For more info...CLICK HERE!!!
Phone: 888-555-9999
Cost effective IT solutions
Experienced teams of specialists
The ad continued with the following message:
We are pleased to deliver cutting-edge solutions to your IT challenges
at a quality that is better to that offered by domestic companies,
but at a fraction of the cost of on shore development.
We represent a number of well-established companies staffed with
over 1000 qualified developers backed by our on shore asset
[emphasis mine]with a record of successfully completing hundreds
of small and midsize projects and tens of wide-scale projects
for Fortune 100 corporations.
What's the lesson here? One lesson is this: If you loose your livelihood
as a consultant to offshore consulting firms you can become an onshore
broker of offshore consulting firms. If you can't beat 'em, join
'em. You gotta love those brokers!
Return to Table of Contents.
News and Views
Contract Professional Magazine Finally Shows Its
True Colors
I never trusted Contract Professional Magazine.
I judge a magazine by the quality of its advertisers.
How can one expect a magazine that is filled to the gills with agency
ads to represent the best interests of Contract Professionals. I
always felt that CP was an agency rag whose sole purpose was to
feed Contract Professionals to the agency sharks. To that end, the
content was just good enough to attract hapless shark chum who either
paid the subscription price or obtained complimentary copies through
agency websites.
An early sign that CP was not friendly to independent-thinking
contractors was the termination of Janet Ruhl as a featured, outside
columnist. She was axed for writing content that was deemed "offensive"
to the magazine's advertisers.
[Sidebar: Janet Ruhl is a pioneer advocate for Contract
Professionals. She began as a forum leader on CompuServe in the
late 80s, and for the past several years has managed Real
Rates, home of The Real Rate Survey where you can search thousands
of computer consulting rates and tech salaries, find consultants
and contracts, and order Janet's books on computer consulting.
The Real Rates Computer
Consultant's Message Board is (in my humble opinion) the single
best online discussion group for Contract Professionals. The Message
Board offers forums on the subjects of "Books, Web Sites
& Resources", "Dealing with Brokers", "Dealing
with Clients", "Insurance, Taxes, and Legal Questions",
"Political Issues Relevant to Consulting", "Questions
about Contracts", "Technical Queries", and a forum
for chit chat called "The Water Cooler". There is a
forum where you can talk about the Message Board itself, and another
forum dedicated to "Flame Wars" (mostly political rants).]
Janet's "Workbook" column first appeared in CP
Magazine in the March/April 1997 issue with a piece called "How
to Determine Your Going Rate", followed by "How
to Write a Winning Proposal" and "Using Contracts
to Avoid Payment Problems". Janet's fourth column, "Protect
your Software Rights when Negotiating Computer Consulting Contracts!",
was summarily axed when she refused to remove a suggestion that
contractors take measures to protect the ownership of their proprietary
code. Janet Ruhl has posted the "offensive" article on
the Real Rates website. Read Janet's
article and judge for yourself whether the content warrants
censoring.
The rise and demise of an artful dodger.
The responsibility to cut Janet's column and authorize a kill fee
fell upon Tony Bogar. It was one of his first duties as incoming
Editor in Chief.
The move reinforced my opinion that the real valued customers
of CP Magazine were the Recruiting Firms that paid good money to
advertise. To hell with the Contract Professionals who paid to buy
subscriptions.
CP Magazine's editorial policy has always been firmly aligned with
its advertisers. This was never more evident than in an article
on agency rates in the July/August 1998 issue. The article, "Agency
Fees: The Untouchable Topic", written by regular CP
columnist and attorney Joseph B. Darby III, attempted to explain
(read "justify") the exorbitantly high margins taken by
the recruiting firms.
Editor in Chief Tony Bogar must have taken a lot of flack for that
article. In an apparent attempt to win back outraged subscribers
Tony commissioned a follow-up article, but this time from the contractor's
perspective.
In his "Letter
From the Editor" column, November/December 1998, Tony
called for full disclosure of agency fees. He wrote:
"Full disclosure is a strong step toward the future.
But it cannot happen unilaterally. Agencies must be willing to
make such a change, but they will be motivated if you—the
contractors—are willing to work for that change, to raise
the issue with your agency, to press your concerns on the trade
associations, to open the dialogue."
In writing those words Tony was using his position as Editor in
Chief of Contract Professional Magazine to champion the rights of
his magazine's readers. [Careful, Tony. You're walking on thin
ice with the publisher.]
The same issue contained a compelling opinion piece by WashTech
organizer Mike Blain titled "We
Need Full Disclosure of Agency Bill Rates". [Oh
boy, Tony. You're really pushing the envelope now!]
The feature article, "Agency
Fees: The Untouchable Topic Part 2" blasted the agencies'
practice of hiding the billing rate from Contract Professionals.
The article cited the Contract Employee's Handbook and the Contract
Worker's Bill of Rights, and ended with these paragraphs:
"According to Ziegler's 'Contractor's
Bill Of Rights,' full disclosure is the best and only antidote
to the poisoned relationship between contractors and brokers.
'It is a basic right of the contractor to be fully informed of
all charges imposed by the broker in return for services the broker
performs as agent of the contractor,' writes Ziegler. 'Disclosure
of rates, fees, and charges is a hallmark characteristic of the
professional service provider. Hiding or refusing to disclose
service charges is fraud.'
For now, Ziegler seems to be preaching to the
converted. While few contractors take issue with his contention
that brokers should clearly disclose fee information and the services
they provide, not many brokers seem to want to follow suit. 'In
too many cases, the contractor/client relationship is a not a
good deal for either party,' concludes Ziegler. 'It's only a good
deal for the broker. That's why it's so important for full disclosure
agencies to enter the picture — only by telling contractors
exactly what they're getting will you develop a healthier relationship
among all three parties.'"
[Gosh, Tony. Keep this up and they'll exile you to the other
side of the world... like, to Australia.]
In the meantime Tony had commissioned yours truly to write the
lead-in article for CP's first Special Issue. The "1999
Rate Survey and Guide to Contracting" came out in December
1998, just one month after the infamous "Full Disclosure"
issue. My article, "The
Continuum of Contracting", introduced the idea of unbundling
the marketing function and the employer function. I wrote:
"Contract brokers, agencies, and employers of record
help contractors in their journey through the continuum of contracting
by providing one or more of the following services:
- job matching
- contract negotiation
- invoicing, collections, and payroll
- cash flow management
- employer of record service.
Each service contributes incrementally to the overall rate
charged by the agency. You can avoid unnecessarily high agency
charges and significantly increase your net income by selecting
a broker that will agree to provide only the services you actually
need."
And I suggested that:
"Conceivably, an IC [Independent Contractor] could use
a marketing broker to locate a direct assignment and then use
a different 1099 pass-through agency for billing and payroll.
Similarly, a W-2 contract employee might combine the services
of a marketing broker with the separate services of a W-2 pass-through
agency or umbrella service."
This was pretty subversive stuff for an agency rag. Tony had already
placed his head in the noose by supporting the interests of Contract
Professionals in the November/December issue. In all likelihood,
my article, published just a month later, kicked the chair.
The January/February issue has Tony once again defending his stand
on full disclosure in his column titled Full
Disclosure: It's Up to You. But to no avail. By the March issue
Tony was gone.
And where is Tony now? Last month Tony Bogar emigrated to... Australia.
Diversity in the face of adversity.
Now the story starts to get interesting. In September 2000 New Work
Media, the publisher of Contract Professional Magazine, introduced
a new magazine called Purple Squirrel, "An industry term
referring to the impossible-to-find job candidate." The
masthead declares that "Purple Squirrel is the strategy
magazine for the IT staffing/services industry."
Brilliant strategy. First you sell advertising space in Contract
Professional Magazine to staffing agencies, then you create a new
magazine for the IT staffing/services industry and do it all over
again, but this time the agencies get to sell to each other. Yeah,
it doesn't sound so brilliant after all when you think about it.
Purple Squirrel came out just when the tech economy began it's collapse,
and you can guess the rest.
Fortunately, the advertising geniuses at New Work Media had a back-up
plan. In September 2001 New Work Media launched The Talent Economy,
"a field guide for corporate executives designed to help
them navigate the many flavors of outsourcing."
New Work Media now covered all three bases: contractors, staffing
agencies, and corporate buyers. But who's watching home? In this
case, home base is the base of advertisers. New Work Media is out
to hit a home run by using one advertising department for all three
magazines.
I learned in Marketing 101 that to be successful one must focus
on a narrowly defined target market. So, with three vastly different
classes of readers is New Work Media focusing on a narrowly defined
target market? You betcha! New Work Media's target market is the
advertisers. To hell with the readers. They get puff and propaganda.
"You know what", shouts the rookie ad rep, "This
is so crazy, IT JUST MIGHT WORK!"
But wait. It gets better, and more Bizarre. In a final stroke of
infinite genius New Work Media has rolled all three magazines into
a single publication!
Oh boy! If you paid good money for a subscription to Contract Professional
Magazine you now get a skinny little zine called The Talent Economy
that is one-third about how to be a better staffing agency, and
one-third about how to be a better buyer of staffing agency services,
and one-third about what? How to be a better agency temp? Well,
actually the three stories in the CP section of the February 2002
issue don't actually push agencies at all. (It would be too
perfect if they did.) One story is subtitled "Short-Term
Tactics For Survival", and doesn't deliver a single survival
tactic. The other two stories are feel-good pieces about a couple
of guys who became contractors. Whoopie.
Wadda concept. Put the foxes and the hounds and the chickens in
the same pen in order to save space, and then expect them to peacefully
coexist. Ya gotta luv those guys in the suits.
Return to Table of Contents.
Marketing Tips
Post Your Rates On Real Rates
I urge you to post your rates and salaries on Janet Ruhl's Real
Rates website. Get your colleagues and coworkers to post their
rates and salaries too. This valuable resource is way underutilized,
yet it offers by far the most reliable and the most comprehensive
listing of rate data on the Web. There is simply nothing like it
anywhere.
Access both the Rate Survey and the Salary Survey from the left-hand
menu bar on the Real
Rates home page.
The economic downturn has significantly reduced the number of postings
on Real Rates. Is it because teckies are out of work? Are they too
embarrassed by their lower rates lately? Are they too depressed?
Posting is anonymous, so there is really no reason to be shy. If
you are not currently working, post the last hourly rate or annual
salary that you had at the last place you worked.
Why is this information important to you? Because Real Rates
lists real rates, not the watered down rates posted by agency
recruiters to justify their low pay rates. When you post your rate
you help many other contractors learn what they are really
worth on the open market. I solidly believe that what goes around
comes around. Benefit right now from the "come-around".
Visit Real Rates.
Check out what technical professionals with your skillset are making,
and then add your rate or salary to the database.
Be sure to submit Rates to the Rate Survey, and submit Salaries
to the Salary Survey.
You can search the database for rates by skill and location. The
results are organized by the following criteria:
- Skills: languages, databases and packages, operating systems
- Location: city, state,
- Rate paid to contractor
- Industry
- Job description
- Whether brokered
- On/Off Site
- Length of contract
- Whether extension of previous contract
- Contractor's tax status on contract
- Contractors rate on previous contract
- Rate paid by client (where known)
- Contractor's experience, including years of experience, credentials,
and other qualifications
- Contractor's age, gender, and immigration status (these are
optional fields)
- Contractors estimated annual earnings
In addition to the raw data, Janet provides an exhaustive statistical
analysis and charts of the data collected during the past year.
The January
2002 Rate Survey Data Analysis reports on all rate data collected
during the year 2001. There is a charge for the full survey, but
a lot of the summary information is free.
The Salary Survey is organized much like the Rate Survey.
While you are at Real
Rates posting your rate data, stick around and visit the Computer
Consultant's Message Board. Tell 'em Jim Ziegler sent you.
Return to Table of Contents
Ask Dungaree Dan
Find Sample Independent Contractor Agreements On
The Web
Q: Dear Dan -- Is there information in The Contract Employee's
Handbook or on your site as far as contracts between an independent
consultant and a company using his services. I understand from friends
that you need to be careful about when you get paid and how expenses
are handled. Hopefully, there are contract templates out there somewhere
that I can model. -- Signed: JF
A: Dear JF -- Fortunately, there is lots of information
available to you on the subject of independent contractor agreements.
You can find sample contracts on the Internet. Enter the keywords
< sample contract independent contractor agreement > into
your favorite search engine. I like Google.com.
I did a search in Google.com using these keywords and the search
returned 43,700 web pages.
Try this also while adding keywords for your type of work, e.g.,
"software developer", "network engineer", "budget
analyst" to see if you can locate contracts specifically for
your field. When I added < software developer > to the string
of key words my search returned a more manageable list of 2,360
web pages.
One of the links returned in my search referred to Software
Development -- A Legal Guide, by Stephen Fishman. This book
includes a CD with various fill-in-the-blank forms, among which
are consulting agreements for software developers that favor both
the hiring firm and the consultant. It would be fun to compare the
two sample agreements, wouldn't it?
Additional books containing sample contracts will undoubtedly show
up during your online search.
Appendix
A of The
Contract Employee's Handbook lists a few books on consulting
that contain sample contracts. To locate the books search the PDF
document (binocular icon) for the words < fishman > and <
holtz >. Both Stephen Fishman and the late Herman Holtz have
published several books that discuss independent contractor agreements.
It is essential that you understand independent contractor agreements
inside out when you work as a self-employed independent contractor.
And it helps a lot if you have your own agreement customized for
your particular skill set and method of contracting. Many companies
will sign your agreement with little or no modifications, while
other companies will insist that you sign their agreement. You will
invariably end up adding your own language to the client's contract,
and it is immensely helpful to be able to cut and paste the appropriate
language from your own contract.
Your knowledge of contracts is really important if you subcontract
through a recruiting firm. Recruiting firm agreements invariably
contain very creative language intended to intimidate you and lock
you into overly broad and abusive blanket noncompete agreements
and other nonsense.
As a subcontractor or employee of a recruiting firm you will never
be allowed to review the firm's contract with the ultimate client,
even though the client's contract specifies the conditions under
which you will be working.
In sharp contrast to the practices of recruiting firms, P.A.C.E.
invites its Division Managers to participate fully in client-vendor
contract negotiations. P.A.C.E. Division Managers review contract
language and suggest changes to the client's contract. P.A.C.E.
never signs a contract without the Division Manager first approving
the contract language.
You may contract direct to the client as an independent contractor.
You may subcontract through an agency. Or you may work as the employee
of a progressive employer of record service like P.A.C.E. But, however
you work as a Contract Professional, it is imperative that you understand
about contracts. -- Signed: Dungaree Dan
Questions for Dungaree Dan
Send your questions about contract employment to Ask
Dungaree Dan. We will try to answer all of your questions, and
we will publish the most interesting ones in The Contract Employee's
Newsletter.
Return to Table of Contents.
Contract Employee's
Glossary
Terminology For Contract Professionals
More terms from Appendix
B: Glossary of Terms for Contract Professionals of The
Contract Employee's Handbook.
E-mail discussion groups
The Internet is host to thousands of e-mail discussion groups, whereby
users place themselves on electronic mailing lists. Mailing list
software automatically distributes an e-mail message from one member
of a list to all other members on that list. Thousands of lists
in the form of digests, electronic journals, discussion groups and
the like are available covering every imaginable topic.
E-mail list
The list of subscribers to an e-mail discussion group or newsletter.
E-mail newsletters
An e-mail newsletter is like a one-way e-mail discussion group.
An e-mail newsletter is sent to all members of a subscription list,
but unlike a discussion group the members may not reply. Large lists
are managed by mailing list software that automatically subscribes
and unsubscribes list members and checks for duplicate entries.
Employee
A worker employed for wages or salary by another entity that is
required to pay certain government mandated payroll taxes out of
pocket and also collect and pay additional government mandated payroll
taxes plus withholding taxes from the worker's wages.
At the end of the year every employer submits an IRS Form W-2 to
the IRS for every worker they employed during the year. The W-2
form reports gross wages paid to the employee, and in this regard
it is similar to IRS Form 1099-MISC. Additionally, the W-2 form
also reports federal, state, and local taxes withheld from the employee's
paycheck. The W-2 form distinguishes a bona fide employee from an
independent contractor. Employees receive a W-2 at the end of the
year; independent contractors do not.
Employee benefits
All benefits provided or made available to employees by an employer,
including group life insurance, health insurance, dental insurance,
short term and long term disability income protection insurance,
sick leave, annual leave, educational benefits, and pensions. Employee
benefits may be provided by practice or written policy, or through
an employee benefit plan.
Employee Retirement Income Security Act of
1974 (ERISA)
ERISA is a federal law that was passed to protect the pension rights
of employees. By and large, it provides a single federal standard
for employee benefits that ensures that employees receive the pension
benefits and other benefits that were promised by their employers.
ERISA and associated provisions of the Internal Revenue Code ensure
that tax-favored pension plans do not favor the highest-paid employees
over rank-and-file employees. Under ERISA, pension plans include
any form of deferred compensation such as deferred profit-sharing,
stock purchasing, savings plans, as well as pension plans. ERISA
also covers “employee welfare benefit” plans, including
all forms of health care, life insurance, prepaid legal services,
and both long and short term disability insurance.
Employer
An employer is an entity that controls the work of one or more paid
workers. Additionally, an employer collects and pays payroll taxes
and income tax withholdings. Another name for employer might as
well be “tax collector” because collecting and paying
taxes on your behalf is what makes someone who pays you an employer
and not a client.
Employer Identification Number (EIN)
The Federal Employer Identification Number (FEIN) is a nine-digit
taxpayer identification number assigned by the IRS for businesses,
estates, and trusts. Sole proprietors may use their Social Security
number as their FEIN. All other businesses must obtain a separate
FEIN. To obtain an employer identification number, you must complete
IRS Form SS-4, Application for Employer Identification Number. Each
state requires a separate State Employer Identification Number.
The State EIN is used to identify the business for the purpose of
submitting state income tax withholdings and state payroll taxes.
Employer of record
Employer of record is the general term describing any third-party
employer such as a temporary staffing agency, professional employment
organization (PEO), contract employment firm, recruiting firm, or
similar business that has a contract with a client or with another
agency to provide the technical or professional services of a specified
individual, in which that individual is an employee of the agency.
The term is used in the same context as the term agency of record,
in which case the agency provides the technical or professional
services of an independent contractor.
Return to Table of Contents.
The Contract Employee's
Project
The Contract Employee's Project is the larger context under which
the following interrelated vehicles operate to promote and defend
the interests of Contract Professionals:
Copyright and
Publication Info
Copyright (c) 2002, James R. Ziegler. All rights reserved.
You may copy or forward this free publication provided it is left
intact with all links and this notice unchanged. Any unauthorized
duplication, including republication in part or in full for commercial
use, is an infringement of copyright.
Published by:
P.A.C.E. - Professional Association for Contract Employment
1355 Willow Way, Suite 244
Concord, CA 94520
U.S.A.
http://www.pacepros.com/
Editor:
James R. Ziegler, Ph.D.
Executive Director
P.A.C.E. -- Professional Association for Contract Employment
(925) 680-0200
cenewsletters@pacepros.com
Return to Table of Contents.
Disclaimer
The Contract Employee's Newsletter is designed to provide information
in regard to the subject matter covered. Use is granted with the
understanding that the publisher and authors are not engaged in
rendering legal or financial advice. If expert assistance is required
you should seek the services of a competent professional.
The purpose of this information is to educate and entertain. The
publisher and contributors shall have neither liability nor responsibility
to any person or entity with respect to any loss or damage caused,
or alleged to be caused, directly or indirectly, by the information
contained in this Newsletter or by information contained in any
web site or resource referenced by citation or hypertext link within
the pages of this Newsletter.
Return to Table of Contents.
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Employee's Newsletter
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Return to Table of Contents.
Sign-off
I hope you have found the information in this newsletter to be
interesting, informative, and provocative. I encourage you to share
the CENewsletter with your friends, colleagues, coworkers, clients,
and agency recruiters.
Why clients? Because you need every ally you can get. Why agency
recruiters? Because they need to know the jig is up.
Wishing you success in your contracting career,
James R. Ziegler, Ph.D.
Executive Director
P.A.C.E. -- Professional Association for Contract Employment
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