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Contract Employee's Newsletter
Helping Contract Professionals
Manage Their Careers
May 15, 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.
Featured Topic
Please Don't Confuse Hyperskilled Contract Professionals
With Deskilled Temporary Employees.
In the next several issues I will discuss issues relating to
the recent rise of contingent work in America and the factors that
have contributed to the phenomenally rapid, pervasive, and insidious
growth of staffing agencies in the corporate arena, especially with
respect to highly skilled and highly compensated Contract Professionals.
In this first installment I contrast high-end Hyperskilled Contract
Professionals and low-end Deskilled Temporary Employees.
Early 1970's picture of work
Thirty years ago the workforce looked very different than it does
today. The workforce was comprised almost entirely of regular, full-time,
salaried, and fully benefited employees, organized in many vertical
layers of managers and supervisors.
Companies valued those employees who demonstrated job stability
and longevity. Gaps in employment were suspect, and job-hopping
was a negative personality trait on a par with alcoholism and spousal
abuse.
Corporate heroes prior to the 1970's were employees who started
in the mailroom and worked their way up through the ranks to become
Chairman of the Board. Organization charts resembled Egyptian pyramids.
And every employee was potentially on a "career track"
to the top.
Contingent workers formed a very thin patina on the surface of
the corporate workforce. At the high end were highly skilled, self-employed,
project-oriented consultants. At the low end were less skilled,
low-paid, clerical, light industrial, and seasonal temps.
Contingent workers were but a very small component of the total
workforce.
Recruiting firms operated exclusively in the realm of full-time,
executive employment. And temp agencies operated exclusively in
the realm of less skilled, low-paid, clerical, light industrial,
and seasonal temps.
The temp agencies had not yet "discovered" highly skilled
and highly compensated contract professionals who operated exclusively
as highly skilled, self-employed, project-oriented consultants.
The new millennium picture of work.
In today's workplace the emphasis is on flexibility, not stability.
And to achieve greater flexibility companies are downsizing their
core employees and replacing them with ever-greater numbers of contingent
workers. Work is less open ended and more project-oriented. And
corporate hierarchies are flatter.
Today, it is primarily the contingent workers, not the full-time
staff, who absorb the shock of economic volatility, making recovery
and growth of a new workforce more convenient.
Two populations of temporary workers.
Today the contingent workforce consists of two very distinct populations
of temporary workers with two very different sets of characteristics.
They are:
- High-end Hyperskilled Contract Professionals
- Low-end Deskilled Temporary Employees
I coined the term Hyperskilled Contract Professionals to
mean contingent knowledge workers whose skills are so specialized
that they cannot last long in one work environment before they exceed
the ability of their employer to fully utilize their skills and
expertise. Hyperskilled Contract Professionals are nomads who move
from one project to the next in order to keep their skills sharp
and their sanity intact.
The term *Deskilled Temporary Employees* was apparently
coined by Harry Braverman in his controversial book Labor and
Monopoly Capital (1974). Robert E. Parker, author of Flesh
Peddlers and Warm Bodies (1994) explains deskilling as follows:
"Braverman's central thesis is that given capitalistic control
of the workplace, there has been, and continues to be, a long-term
tendency toward the mechanization, fragmentation, and rationalization
of work. The result is an increasingly deskilled workforce, .
. ."
"Over time the gradual deskilling process has acted as a
fundamental social force that has permitted (indeed, driven) temporary,
part-time, and other forms of contingent work to flourish."
"The progressive deskilling of occupations has enabled the
temporary help industry to become prominent and highly profitable
in the 1990s. The industry's current success exploits many millions
of workers employed at unskilled and semiskilled jobs. Then as
the deskilling process continues to unfold, eroding workers' traditional
training and skills, more occupations become accessible to servicing
by the temporary help industry."
The populations of Hyperskilled Contract Professionals and Deskilled
Temporary Employees differ with respect to marketability, billing
rates, independence, job conditions, and job satisfaction.
- Marketability
- Hyperskilled Contract Professionals are marketable because
they have highly specialized skills.
- Deskilled Temporary Employees are marketable because they
have interchangeable generic skills.
- Billing Rates
- Hyperskilled Contract Professionals have billing rates ranging
from $35 per hour to the "sky's the limit". And
$75 to $100 per hour is common.
- Low-end Deskilled Temporary Employees are typically billed
out at billing rates between $15 and $25 per hour.
- Independence
- Hyperskilled Contract Professionals are either independent
contractors or agency employees.
- Deskilled Temporary Employees are virtually always agency
employees.
- Job Conditions
- Hyperskilled Contract Professionals, for the most part,
enjoy comfortable, interesting, and challenging work environments,
and are respected by clients.
- Low-end Deskilled Temporary Employees, on the other hand,
have mostly boring, repetitive, non-challenging, or outright
dangerous jobs, and have no special cachet with their clients.
- Job Satisfaction
- Hyperskilled Contract Professionals overwhelmingly view
the contracting lifestyle as a positive career choice.
- Deskilled Temporary Employees overwhelmingly view temping
as a stopgap measure until they can land a full-time job.
Unfortunately, the contingent staffing industry combines both groups
into a single business model that is completely inappropriate for
highly skilled and highly compensated Contract Professionals.
In the next issue of the CENewsletter I will discuss how the
IRS and Congress have contributed to the rise of the contingent
workforce. I will also sketch the incentives that have made it possible
for the contingent staffing industry to dominate and control virtually
all access by Hyperskilled Contract Professionals to client companies.
Return to Table of Contents.
Marketing Tips
Create a Killer Three-minute Presentation
In the April
15, 2002 CENewsletter I discussed how to create a Seven-second
Introduction to promote your consulting services to everyone you
meet. I expanded on that idea in the May
1, 2002 CENewsletter by describing how to build on your Seven-second
Introduction to create a Thirty-second Pitch that you can deliver
whenever the other party expresses interest in your Seven-second
Introduction.
Your Seven-second Introduction works like a tagline to elicit interest
in your consulting services, and your Thirty-second Pitch doubles
as a compelling Summary of Experience for your marketing collateral
(brochures, cover letters, proposals, professional skills profile
or functional resume).
Now I want to show you how to expand this concept further to create
a focused Three-minute Presentation that you can use to describe
the value that you deliver to your clients. Your Three-minute Presentation
is appropriate for discussions with colleagues over lunch and for
interviews when you are selling your services to prospective clients.
Employ your Three-minute Presentation to warm up the client at
the beginning of an interview. It is followed by directed questioning
by you to extract precisely what the client needs. First, you establish
your expertise. Next, you let the client tell you how you can apply
that expertise to the client's problems. During an interview the
client thinks that he or she is interviewing you,
but you must never lose sight of the fact that in reality it is
you who is interviewing the client.
Your Three-minute Presentation simply sets the stage for the fact-finding
session that follows.
Here is a useful approach. When you are introduced to the client
say the following:
"Thank you for inviting me in to discuss your needs. Respecting
your time, I want to take this opportunity to describe very briefly
how I deliver value to projects like the one we are discussing
today. I have prepared some bulleted notes to help me move through
this quickly, and I will give them to you for your files when
we are done here."
It is perfectly OK to work from prepared notes. It shows that you
are organized and that you have spent time preparing for your interview.
Here is the Three-minute Presentation that I give to people who
want to know all about P.A.C.E.:
Seven-second Introduction:
"P.A.C.E. helps consultants make more money."
Twenty-seven-second Add-on:
"We do this by setting up each Contract Professional in
their own business unit within our corporation. That way they
enjoy all the freedom and financial advantages of self-employment,
all the security and continuity of corporate employment, and the
best benefits package available to any employee in any company
in the USA."
Two-and-one-half Minute Add-on:
- P.A.C.E. helps Contract Professionals earn more money because
our service fee is only 5% of collected revenues plus the employer’s
share of payroll taxes. That means that our margin is never more
than 15%. So, a Contract Professional who bills $10,000 a month
through P.A.C.E. earns at least $2000 more per month than a staffing
agency temp whose agency bills the same amount.
- P.A.C.E. helps Contract Professionals manage their careers
because our Division Managers participate fully in contract negotiations.
They always know the billing rate. Typical staffing agencies hide
this information so that their temps never know how much their
skills are worth on the open market, or how much the agency is
taking off the top. P.A.C.E. Division Managers receive a written
report that shows where every penny of collected revenues goes.
- P.A.C.E. helps Contract Professionals manage their risks because
P.A.C.E. covers each Division Manager with General Liability Insurance
and Errors & Omissions Insurance up to $5,000,000 aggregate
coverage. This level of coverage is almost impossible to get as
an individual contractor.
- No company in the United States gives their employees better
benefits. P.A.C.E. Division Managers receive FREE, guaranteed
issue, long term, disability insurance that pays 60% of gross
wage. And this summer P.A.C.E. Division Managers will be able
to insure every member of their extended family up to and including
their grandparents-in-law for long term care insurance to cover
nursing home, assisted living, and in-home care.
Naturally, P.A.C.E. provides excellent group health and dental
insurance, and our contractors can purchase it with pre-tax dollars.
In addition, P.A.C.E. reimburses its contractors with tax-free
dollars for out-of-pocket medical expenses, including private
insurance premiums.
- And P.A.C.E. gives every contractor the best retirement savings
plan available in the United States. This year, P.A.C.E. Division
Managers can set aside an amount equal to 25% of their gross wage
as tax-deferred retirement savings up to a maximum of $40,000.
They can invest their savings in any stock, bond, or mutual fund
available to any retail customer of Charles Schwab. No company
in the United States offers a retirement plan with more investment
options than P.A.C.E.
- Finally, P.A.C.E. contractors have the same tax advantages as
self-employed independent contractors. P.A.C.E. reimburses its
contractors with tax-free dollars for the widest possible range
of out-of-pocket, business-related expenses -- virtually any expense
that an independent contractor might write off on IRS Form Schedule
C. This completely eliminates hassles with the IRS.
I could go on, but I would like to learn a little more about what
you need that I can help you with. Do you have any ideas on that?
At this point you hand a copy of your "data sheet" to
the client. While you are handing over the sheet you immediately
ask your first question. For example, you might ask:
"What is the driving issue that you are seeking a solution
for?"
When you are through with the question, button your lips and wait
for an answer. This type of question invites the client to open
up and lay out their plans and concerns.
Be quiet and listen intently. The client is telling you what
you need to know to win this contract. You must remain silent
while the client is talking. Take notes, and ask additional questions
about the project only after the client has completely stopped.
Take time to think after each answer. Use you note pad to write
down notes and create "quite time" after the client has
answered. Silence on your part is golden, as in gold bullion.
You will sell more projects with your silence than you will
with fancy sales pitches and hard closes.
All of which brings me back to the bulleted list of benefits in
your Three-minute Presentation.
Hopefully, you have researched the client, the client's products,
and the client's competitors, and you have organized your bulleted
list so that it resonates with the client's environment. Your benefits
should relate to what you believe are the client's overriding concerns.
Keep your bullets brief and to the point. It is not your goal to
use these bullets to sell your value proposition. After all, you
can't even create a value proposition until you fully understand
the client's needs. And that can only happen after you have
completed your interview of the client.
Your Three-minute Presentation is merely your way of letting the
client get a feel for your overall ability. It is really nothing
more than a data sheet or product spec sheet about you.
Data sheets simply qualify the product. No one ever bought an expensive
product or service based on the contents of a data sheet. That is
why you move through the material quickly and then proceed immediately
to your interview of the client.
Can you organize the value that you deliver your clients into a
succinct, bulleted list of benefits? You are the marketing manager
of your own consulting business. What will you include in your data
sheet?
Return to Table of Contents
Survival Tactics
How To Work A Room: Secrets Of Effective Networking
Want to learn how to work a room? This fun XPLANATiON
by XPLANE | The Visual
Thinking Company teaches you the secrets of networking.
XPLANATiONs are simple, visual, “picture stories” that
put a message in context for the appropriate audience. Because it
is visual, it is simple and easy to understand. And because it is
also a narrative, it can convey complex information without “dumbing
it down.”
Thank you to CENewsletter subscriber Karl Tunnell-Braun, who submitted
the link.
I hope you enjoy the show.
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.
Form of business
The formal legal status of a business. The primary forms of business
are sole proprietorship, partnership, limited liability company,
and corporation. The form of your business has consequences with
respect to your taxes and to the level of protection you have from
lawsuits and creditors.
Free agent
This term dates from 1955 when the baseball pitcher Catfish Hunter
won the right to negotiate freely a new contract with any team.
Today, the term is applied broadly to include self-employed individuals
who sell their services under contract to companies and organizations.
Free agents include sole proprietors, one-person corporations, consultants,
freelancers, temporary workers, home-based business people, independent
contractors, solo practitioners, and operators of micro-businesses.
Free agency
The state of being a free agent.
Freelance
To operate as a free lance or free agent. Of, relating to, or being
a freelancer, as in freelance writer, freelance work.
Free lance
Free lance is a synonym for freelancer.
Freelancer
Freelancer is another name for free agent. The term apparently derives
from the medieval practice of giving a free lance to mercenary soldiers.
A freelancer is a person who acts independently without being affiliated
with or authorized by an organization, or a person who pursues a
profession without a long-term commitment to any one employer.
Full-time employment
Generally speaking, full-time employment means working at least
32 hours per week at a salaried, fully-benefited job. By contrast,
part-time employment means working less than 32 hours per week,
and temporary employment means working full or part-time for an
indeterminate time. Part-time employment is frequently hourly-paid
with minimal if any employee benefits. Temporary employment is almost
always hourly-paid with no employee benefits.
Fully loaded labor cost
The fully loaded labor cost of an employee is the direct cost of
labor (e.g., hourly pay, or annual salary) plus appropriate load
factors consisting of all the overhead costs associated with the
care and maintenance of an employee. For fully-benefited employees
in a mature company the fully loaded labor cost can easily reach
1.3 to 1.5 times the direct cost of labor. In other words, if your
annual salary is $100,000 per year, it is likely that your employer
must pay a total of $130,000 to $150,000 to support you as an employee.
Contract Professionals must pay the load factors out of pocket.
Thus, if you want annual gross earnings of $100,000 you will have
to set your billing rate such that your total billings for the year
total $130,000 to $150,000.
FUTA
FUTA is short for Federal Unemployment Tax Act, the law that establishes
federal unemployment taxes. Federal unemployment tax is assessed
on the first $7000 of wages, and is paid by the employer. The basic
rate is 6.2% of gross wage, but employers receive a credit of 5.4%
if they pay their state unemployment taxes in full and on time.
Consequently, FUTA tax is usually just 0.8% of gross wage, or $56
per year per employee.
Return to Table of Contents.
Contract Employee's
Workshop
Look For The New, Online CEWorkshop
- Beat the recruiting firms at their own game.
- Get better gigs.
- Make more money.
- Keep your independence.
I am developing an online presentation that will allow anyone with
a telephone and a browser to attend live presentations of the CEWorkshop
over the Internet. The online CEWorkshop will consist of four, one-hour,
weekly sessions, each covering a different aspect of marketing your
consulting services.
Weekly sessions will cover the following topics:
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Week 1:
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Identify and Package
Your Core Competencies.
What are you selling?
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Week 2:
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Short Term Marketing
Tactics.
How to get work in a hurry.
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Week 3:
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Corporate Intelligence
and Research.
How to get inside prospective clients.
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Week 4:
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Long Term Marketing Tactics.
Build your credibility and your reputation.
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New e-book on marketing
I am developing a new e-book called Nuggets in a Nutshell:
Marketing Tips for Contract Professionals. This invaluable
resource has over 250 proven tactics used by experienced recruiters
and seasoned consultants to land contract assignments directly with
client companies.
Every participant in the online CEWorkshop will receive a free
copy of this useful resource.
The online CEWorkshops and the e-book will be available within
the next 30 to 60 days. I'll let you know in the CENewsletter when
we are ready to roll them out.
Would you like to see me cover a specific topic? E-mail your ideas
and suggestions to Workshop@pacepros.com
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
USA
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
Return to Table of Contents.
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