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RE: Salaried Postition vs Contract Labor --- 3 Questions

Aug 1 '11 32 Last Comment
jmanganelli
Aug 1, 11 6:37 am

In the span of a month, I recently ran into and/or had lunch with one former employer and two former colleagues.  They each mentioned a trend they're seeing of firms in our area (SE) operating with a skeleton crew of senior people who are salaried and the majority of the architects and drafters hired only as contract laborers.  They mentioned this trend both with regard to local firms and some large, national practices with a local presence.

can anyone corroborate this as a national trend?  a regional trend?

If yes, does it seem a temporary change or a structural shift in practice?

Is the path to obtaining these contract jobs different or the same? 

 

technophobia
Aug 1, 11 8:55 am

I've noticed this trend talking to recent graduates fortunate enough to have found work after school (Los Angeles area). Those working right now only have their jobs for a period of months and they've already begun the job hunt anew. They tell me that contract jobs are starting to replace long-term jobs because firms can't guarantee that they will have enough work for another permanent employee (one person I know was in limbo for a bit because his employer didn't know if she would have any work for him to do).

It could easily become a permanent trend since firms would technically be choosing not to renew a contract than "laying off" employees. Also, I could see this as a very attractive route for firms as the rules regarding employee benefits would change with more temp workers.

MixmasterFestus
Aug 1, 11 10:06 am

This is a pretty exciting development...

 

...because it sounds like it would be that much easier to poach the best talent from other firms if you are hiring.  With such casual ties, it's not like your future hires would have had any kind of loyalty to a firm that clearly had no loyalty to them (or was not able to afford it).

That said, the trend seems like it fits the uncertainty of the time in which we exist right now.  It's not a very good long-term trend for architecture in general, though, since your firm and its product is only as good as the people you have in your firm (and how well they work together, which requires a longer-term stability).  Whenever things wind up stabilizing, I could only see this existing as a sort of 'introductory' position, where they see if you are a good fit with their firm.

quizzical
Aug 1, 11 10:31 am

Personally, I think this is a short-term response to the sudden, and frightening, decline in  business that architecture firms experienced in the 2007-2009 timeframe. Once business returns to some reasonably sustainable level and firms have a somewhat stronger belief that they can predict their operations going forward, I think you will see firms wanting to have "permanent" employees once again.

I believe this trend towards 'contract' comes, in part, from the intense pain arising from all the layoffs in recent years. Most firms don't want to go through that pain again and don't want to subject their employees to it either. When you can't predict the future, it's better for everybody when the relationship has a clearly defined end-point. That way, everybody can plan, without making assumptions, and there are fewer chances for surprises.

jmanganelli
Aug 1, 11 10:33 am

It seems necessary/beneficial to employers in the short-term, and at least employees know where they stand, but that in the long-term it seems, if it perpetuates, it will drive talent out of the profession.

urbanity
Aug 1, 11 11:00 am

This is not a new trend...it's happened after every recession that I have encountered since the early 80's out here in California.

 

jmanganelli
Aug 1, 11 11:18 am

That's actually a bit reassuring, Urbanity.

toasteroven
Aug 1, 11 11:49 am

I also really hope this trend doesn't continue when things pick up.

 

I did contract work for a while in 2008/2009 - I went from someone who was willing to go the extra mile for "the team" to feeling like I had to constantly stick up for myself or else I'd get taken advantage of.  I really don't like the feeling that I can't trust anyone I work with - but I think that experience taught me how to be better at pushing back.

urbanity
Aug 1, 11 12:39 pm

If you are working in the office of a firm that controls and directs your work, using their computers and programs, collecting a bi-weekly check, etc. you are more than likely what is termed a "statutory employee".

http://www.irs.gov/businesses/small/article/0,,id=99921,00.html

Miles JaffeMiles Jaffe
Aug 1, 11 12:51 pm

This is a long-term trend.  All the benefits of an employee plus no retirement and health care, and you get to fire them when the project is over.

There are firms that do nothing but supply architectural temp labor.

quizzical
Aug 1, 11 1:59 pm

Despite what is written by many here on Archinect, in my experience most design firms want - and benefit from - having long-term employees. They tend to be more committed, more productive and stronger contributors. In the long-run, permanent employees  (even when provided with standard benefits) are not more expensive than contract employees-- all things considered, permanent employees probably are more cost effective.

However, in a highly uncertain economy, contract relationships can make sense.  It's sort of the ultimate "fear of commitment".

Gregory WalkerGregory Walker
Aug 2, 11 11:26 pm

i tend to agree with quizz on this - for both the economics as well as the ability to sell consistency of your firm to potential clients (maybe it's just our markets - more institutional than commercial). at least, our client base wouldn't look favorably (at all) upon a lot of churn in project team members and especially leaders at the PA or PM level. also, i'd think you'd have trouble attracting people to your firm unless you were a rockstar or were paying much higher salaries to get top tier talent. 

 

that said, it's definitely something that is a broader trend in professional services firms (not just architecture) at the more entry/lower levels where client contacts/management isn't a part of the job. clearly there are some firms that are operating largely like this (mostly small, where the risks are greater should work or payments slow down quickly), but i just don't think the best firms will operate this way. 

 

lastly - on health insurance. i listened to an interesting episode of planet money (the podcast) while traveling to the jobsite today. they traced a very brief history of employer based healthcare - basically, it was a fluke born during wwii, when companies were legally prohibited from raising salaries for a time. companies responded by 'inventing' the modern fringe benefits system to help differentiate themselves. on health care specifically, though, it really does make no sense - why would you tie something that critical to your employer? they (and i concur) think that the long term solution to fixing health care will be to strip it away from employer based but allow individuals to pool into groups that would give them leverage like companies have now. any rate - enough hijacking of the thread...

jmanganelli
Aug 3, 11 7:00 am

Thanks for the feedback.

Donna SinkDonna Sink
Aug 3, 11 7:46 am

Greg, headed to listen to that podcast right now.  Coincidentally my dad just told me that history a week ago - the idea of the government prohibiting salary increases is still something I can't get my head around!

Miles, I do know several firms who hire people legally classified as employees but don't pay either retirement or health care for them - those two benefits are not required and tend to be (especially health care) very expensive to give.  If ANY good comes out of health care reform it would be, IMO, de-linking it from employment.

Rusty!
Aug 3, 11 10:53 am

Donna and Greg, this American Life also covered the topic of history of healthcare about, oh, 2 years ago. One of their best episodes ever.

Healthcare coverage is probably one of the most oppressive things about employment in America. I'm freelancing for a number of firms up here in Canada right now, and I have to say I actually prefer it over 'full time' employment. My schedule is flexible, and I am appreciated more... I would not feel very good about doing the same in the US if my health care premium was $900/m (last time Cobra plan was offered to me).

But yeah, de-linking health-care and employment (at least the basic parts, let the massage therapy and acupuncture be an add-on) would be a revolutionary move.

Donna SinkDonna Sink
Aug 3, 11 11:14 am

Exactly, rusty.  Which is why pro-business people in the US - like, supposedly, Republicans - should be all for removing this enormous burden from business and shifting it over to government.  I could actually expand my business and potentially HIRE someone if I didn't feel like health insurance was such an enormous burden (which, at $1,200/month, it is).

Here is the Planet Money covering lots of basic but really great economic stuff: Planet Money

Sorry to threadjack.

Rusty!
Aug 3, 11 11:30 am

Donna, healthcare is a huge, entrenched industry in the US. Moving to a more reasonable system WOULD hurt a lot of people financially. There's just a lot of middlemen who make a living off the current system. And I'm not even talking rich doctors or administrators here. Do we just say fuck-em? 

To tie it to the other thread about 'second-tier cities' in America, I've been to too many cities that boast health-care as their primary industry. Scary stuff. Like a pyramid scheme that trades inefficiency for economic well being.

btw, this is not threadjacking. Health-care is the essence of the issue of salary v. contract work in architecture. 

MixmasterFestus
Aug 3, 11 11:32 am

+1 on shifting the burden from the employer for health care.  I remember when I left my first intern job for grad school, the COBRA premium was something like a third to a quarter of my paycheck.  Given that there are other taxes and expenses I didn't see as an employee, I was actually kind of shocked at how much more expensive I was than I originally thought.

I think this doesn't prepare us well for being contract employees, because we are actually not seeing a lot of our 'pay' when we are regular employees (due to a large amount of it being eaten up by benefits). Thus, we tend to undervalue ourselves when we freelance/contract out.

I'm actually fairly optimistic about the long-term effects of this period of contract employment we seem to be going through, provided it's not permanent (and that it's undertaken with the correct mindset).  It's not really good for anyone right now ('life on the edge' for the employee, inability to retain talent for the employer), but I think there may be one potential positive side.  As (theoretically) independent businesspeople who are charging for our time, it's almost like running a small business.  As the economy normalizes, we may have a better sense of business, which will position us well (within the profession compared to people who haven't had to be independent businesspeople, and outside of the profession as we get a better sense of what our time is worth - although making that 'worth' into a larger number is probably a different discussion topic.)

won and done williams
Aug 3, 11 1:38 pm

By "de-linking" health care to employment, I assume you mean that the federal government would then pick up the expense? In that case, you can assume that everyone from the individual to the corporation will be paying much higher taxes to afford a universal health care system. This doesn't work for me. The employer health care system puts the burden where it fairly should be put, on the employer, and removes the expense from the individual. It's one of the few ways that corporations be held responsibile for the well-being of their employees. Do you really think that if government took over universal health care that employers would return to their employees the money that they had previously paid out in health care benefits? Not likely. The balance of competition still stands that employers must offer health care benefits to retain talent. Until that balance shifts (which I doubt will happen any time soon despite the observations of this thread), the current employer-based system is more effective in putting the health care expense on the corporation rather than the individual. The challenge for a government-regulated (not -run) health care system is how to manage health care costs for everyone and then provide the same level of service to those not covered under employer health insurance. Obamneycare attempts to do that, but we will see how it plays out in its implementation.

Donna SinkDonna Sink
Aug 3, 11 3:16 pm

The employer health care system puts the burden where it fairly should be put, on the employer....

This phrase is circular logic.  A cat-based healthcare system puts the burden where it fairly should fairly be put, on cats.  Likewise the plankton-based system for plankton.

The question is: what is the benefit, to the society, of an employment-based health care system in the first place? 

Rusty!
Aug 3, 11 4:36 pm

won and done, the rest of developed world has figured this shit out. It's not that hard if you really think about it. Current situation favors employees over independent workers. Very non-American me thinks.

jmanganelli
Aug 3, 11 4:48 pm

not to hijack my own thread, but...donna and won's comments remind me of something...not saying these are your views, just that your comments reminded me of something i've thought about, so please do not feel I am (mis)interpreting you.

It can't be true that the current healthcare plan is both as awful or as great as the respective sides claim.  There has to be some underlying truth somewhere, and as far as issues go, it seems this should be a non-controversial issue because there are so many case studies to draw upon.  we probably do not need to invent any fundamentally new policies/services in this instance, just perhaps study what others are doing, figure out what works best for us and incrementally improve.  importantly, there are a few dozen countries whose healthcare is considered better than our, (almost) all of which are single payer systems, so finding exemplary options should not be difficult.

and yet to listen to the debate as presented by elected officials, you would think that someone was proposing colonizing the sun and those in congress were charged with figuring out the logistics of doing so -- resulting in intense fights about whether it could or should be done at all and even if so, resulting in wildly different projections of cost and impact.  a lot of the uncertainty and fear-mongering on both sides swirling around this issue seems completely unnecessary and detrimental to businesses and individuals.

personally, i work with at least as many people from overseas as from the US and have not heard any of these foreign-born colleagues say our system is better than that of their home country, no matter where they come from.  I have heard, however, these colleagues wonder at how our system could be so much more convoluted, expensive and deliver worse results than that of their home countries.

Gregory WalkerGregory Walker
Aug 3, 11 9:00 pm

jmang - "these colleagues wonder at how our system could be so much more convoluted, expensive and deliver worse results than that of their home countries." exactly. it's not a better or best question, it's a 'how can we improve this' question.

 

i completely agree it's a big deal in terms of being contract or not. the only time in my career i truly did contract, fortunately, i didn't have to worry about insurance (still had it through school). but it's one of the things that could help shift the power equation more towards an employee - right now, the contract rules are largely stacked in favor of the employer. yes, there's the labor and oversight rules but in terms of taxation, insurance, long term benefits (retirement), etc. it's much easier (and with insurance more necessary) to join a firm. 

 

won - there's no reason decoupling insurance from employers would mean it has to go to single payer. i'm actually not a fan of single payer at the federal level - it would be too large, complex and easy to eff up. i actually think it could work at the state level (which is really about how big most european countries are) and would be a better incentive to try and attract businesses than tax breaks. it would also create big enough pools to even out population swings. and, for the republicans, it could encourage real competition - the state could mandate the benefits people are willing to pay for. the only people who hate this system are the insurance companies, which will suffer (and may they burn in hell anyways).

 

even if it doesn't go to single payer, all you'd really have to allow is individuals to join large, self organizing pools, exactly as they can do with car insurance, to help create enough buying leverage and risk spreading. right now, legally, i can't set up a national buying pool for the purpose of purchasing insurance.

jmanganelli
Aug 3, 11 9:20 pm

i suppose that is a great point, Greg.  (about the single payer system not being the only way)  Reminds me of an advertisement or news bit here locally about faith-based organizations in which members pool their own resources to set up a health co op upon which they can draw.  Not sure exactly how that works but the prices for family coverage they quoted were much cheaper than corporate health insurance policies and seemed to cover a lot of what insurance covers.

anyway, i did not mean to privilege the single payer system.  just to say this seems like an issue for which there are lots of ways to go, lots of points of reference, and clearly lots of systems providing better service more cost-effectively than our own, so it seems that improving ours could be handled pragmatically instead of ideologically and that the projections and predictions should not be so wildly disparate. 

won and done williams
Aug 3, 11 9:54 pm

even if it doesn't go to single payer, all you'd really have to allow is individuals to join large, self organizing pools

I agree with the principle of pooling buyers to leverage lower rates from the insurance companies (isn't this what large employers do already?), but for me, the fundamental question is, "Who is responsible for paying for health insurance: the individual, the employer or the government?" The left will say it is an inalienable right; the right will say it falls on the individual. I believe as broken as it may appear to be the current system has it fundamentally right with the responsibility falling on the employer. The employer has both a business interest and a social responsibility to look out for the health of his or her employees. It's only recently that corporate greed and skyrocketing health care costs have thrown this into question. What are the alternatives? Putting it on the individual at a time of high unemployment and downward pressure on wages and benefits? Going to a single payer system at a time when we are running massive deficits and are having enough trouble paying for Medicare and Social Security? Even if it were to somehow fall on the states to fund and administer, do you realistically think that they can afford such a system without massive tax hikes? They are having a hard enough time funding the public school system. The responsibility, both idealistically and pragmatically, must fall on the employer with the government's role to ensure that health care costs do not impede job creation, clearly a major challenge.

Gregory WalkerGregory Walker
Aug 3, 11 10:37 pm

won - lot's of different issues in there and it may deserve another thread altogether. in general, and in support of the actual topic at hand, this article is a pretty good primer on how overall tax burdens work within our system and compares it to smaller social democratic countries (norway in this particular piece). for a startup (or as a consultant), you have to look at a bigger picture than simply tax rates and government spending in a vacuum. most government spending, by the way, goes right back out to the 'private sector' via distribution payments (medicare, ss, medicaid), contracts (all the services, etc.) salaries (all gov't positions) and purchases (goods). very little, actually, goes to places where it goes down the drain. we've elevated to near mythic proportions this idea that all government spending is some kind of black hole from which it never escapes. what's completely fair is asking: is what we're doing the most efficient or best way it can be done. but everyone asks that and the answer which propels us forward is 'no'. (i also, though, have a secret gut feeling that we're simply too big as a country - we're like the eu  but with a much bigger central government...)

Gregory WalkerGregory Walker
Aug 3, 11 10:47 pm

here's the backside link to the article above - it takes a comparative look at the expenses a business would have in new york and oslo. just something to make you think...

elinor
Aug 4, 11 4:56 pm

 

although i agree that having committed, long-term employees is in the best interests of a firm, i'm not sure i'd agree that it's always in the best interests of the employee.  contract/temporary labor has always been good for me--i can control my schedule, bill for ALL the hours i work, do independent work alongside, fit in personal commitments or a day at the beach, and avoid the entire 'personal relationship' aspect of full-time employment, which invariably ends up getting me shafted. i am really not interested in being 'friends' or 'part of the family' at a place where i work.  i'd rather be treated respectfully and fairly, paid for my efforts, and NOT expected to prove my loyalty with unpaid overtime, free labor, forgoing raises, etc. etc.  i don't mean this cynically at all...i just think the quality and timeliness of my work should be enough to demonstrate my respect and loyalty to the firm, but these days this kind of professional relationship is seriously lacking from most arch firms...

health insurance does complicate this quite a lot, but since many firms don't even try to offer it as a benefit anymore, one can make a fair comparison without considering it.

elinor
Aug 4, 11 5:03 pm

but i didn't answer your questions--i think it is a structural shift, though probably more pronounced in times of recession.  i don't think full-time jobs will disappear, but there will be far fewer of them.  i think employment agencies/headhunters will probably play a greater role in temp staffing than in permanent staffing, since the work of constantly finding temp employees places too much of a burden on firms.  and since employers will then be paying staffing agencies in addition to temp employees, one wonders where the savings really are...

 

jmanganelli
Aug 4, 11 5:07 pm

thanks again, everyone, for the feedback

 

quizzical
Aug 4, 11 5:33 pm

IMO, much of what elinor writes above reflects the particular market in which she lives and works (NYC, as I recall). I think it would be a mistake to extrapolate her views as representative of many - much less most - markets for architectural labor in the US.

Gregory WalkerGregory Walker
Aug 4, 11 5:41 pm

elinor - the great thing is that the market's big enough to accommodate both positions (and a whole lot in between). what you describe can certainly work if you're enough of a specialist and/or assassin to line up enough work. for a majority, though, i'm with quizz - the uncertainty factor of being a hired gun is too much for most people. they actually want the stability and structure of being at one place 'full time'. so, what you've got going is a niche - how big it gets will depend on a lot...

 

 

J. James R.J. James R.
Aug 5, 11 1:18 am

The employer has both a business interest and a social responsibility to look out for the health of his or her employees.

Sorry, Won, that's a weak argument. It's much cheaper to train new employees than it costs to keep existing employees alive.

They are having a hard enough time funding the public school system.

The cost per for of service in the U.S. is somewhere between $800 to $4000 per student. With the average cost being about $854. Currently, 55% of all students (around 26,000,000) in the U.S. are transported by bus. Roughly $22,204,000,000 is spent on bus service.

At around $500,000,000,000 (on all levels) spent on primary and secondary education, that's about 4%. Remove debt payments, capital outlays and special programs, the regular operating budget shrinks to $412,000,000,000. Bus service, at a operation budget standpoint, makes up a little bit under 5.5% of the total education budget. It's about as much as schools spend on supplies or contracted services or regular school operation or nearly 3 times what is spent on servicing debt.

Obviously, the big scary elephant in the room is salaries, pensions and benefits. But this point is that this really is a first-world problem. We're not ready to willing or have been forced to make serious enough concessions regarding fundamental structures of society, like infrastructure or the purpose of the city, to really change very much of anything.

 

And this is what makes this relevant to this discussion. It's a "good enough" system but not really a *great* system. And being a consultant, contract worker or even a wage worker makes you realize these discrepancies when you become responsible for them yourself. As many companies are utilizing the full extent of wage theory and have an increasingly transient talent pool to choose from, many people are becoming acclimated to said responsibility and putting pressure on the government to act accordingly.

These are the same very forces that have built cities up like London, New York, Rotterdam, Venice and even Shanghai (a particularly modern example). But these cities only function if they have significant safety nets.

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