Your Job Search: What Type of Work Arrangement is Right for You?

By: Bob Skladany | Source: AARP.org | November 3, 2008

Before you launch your job search, it's important that you understand what type of employment you want and what type of job you want. Your employment status can directly affect how you're paid, how you're taxed, what your benefits are, and what level of employment security you have.

Regular Employment

Regular, or direct, employment refers to a relationship in which you are a "W-2" employee. At the end of each year, you receive an IRS form called a "W-2 Earnings Statement" that summarizes your earnings and withholdings. Your employer withholds federal, and sometimes state and local, income taxes; your contributions toward the cost of any benefits you may receive; and Social Security (FICA, or Federal Insurance Contribution Act) taxes. You pay 7.65 percent of taxable income in Social Security taxes, and your employer pays the same amount. In total, the contribution is 15.30 percent of taxable income.
 
As a regular employee, you may have an employment contract with your employer. However, most often, you will be an "employee at will." This phrase means that you or the employer can terminate employment at anytime for any reason. It is assumed that your employment is ongoing. This type of employment relationship used to  be described as "permanent," but now this word is seldom used. Employers shy away from it because of the implication that "permanent" means "your job is guaranteed."

You receive a periodic wage or salary as a regular employee, and you may have the option to receive the benefits (whether in the form of medical insurance, a 401(k) plan, a stock-savings plan, or other perks) offered to eligible employees.
 
Regular employment is the type of relationship we generally mean when we talk about "getting a job."

Working as an Independent Contractor
 
"Independent contractor" or "self-employed independent contractor" status means that you perform work but are essentially self-employed. You are not paid as an employee, but as a contractor providing goods and services to others. "Independent contractor" could apply to a guy operating a one-person landscape business or a lawyer or consultant charging hundreds of dollars per hour.
 
Before you get excited about working as an independent contractor, consider the financial consequences. You may get paid a higher hourly rate, but you must pay the full Social Security tax yourself, or 15.3 percent, in the form of "self-employment tax," and regular income taxes. Also, you will generally not be eligible for any benefits offered by your customer to "regular employees." As the term suggests, you are a truly an independent contractor.
 
As a contractor, you will receive an IRS form 1099 that shows your earnings. This is why people working as independent contractors are often referred to as "1099 workers." Employers typically use 1099 workers for short-term or specialized tasks that are not needed on an ongoing basis.
 
 
Employment With a Temporary Staffing Agency

Millions of people obtain work through temporary staffing agencies, such as Manpower, Robert Half, Adecco, Express Employment, Kelly Services, Spherion and Randstad. In these employment relationships, you become a regular (W-2) employee of the staffing agency, which then "places" or contracts you out to employers requiring short-term (typically one-week to one-year) workers. In this scenario, the temporary staffing agency is your primary employer.
 
Your pay as a temporary contractor is generally based on hours worked. You may be eligible for benefits, including health care, savings plans, life insurance, disability insurance, unemployment insurance, and paid time off, such as holidays and vacations. You will receive a W-2 earnings statement at the end of the year that will reflect your taxes withheld. So, simply stated, you are a regular employee who behaves like an independent contractor, moving from one assignment to the next. It offers the best of both worlds and it is a great way to "try out" various positions and employers.
 
 
Work Schedules and Hours

While contemplating the two possible types of employment (having a regular job or working as an independent contractor), you will also need to consider the work schedules and hours you prefer.

Depending on the industry and the vacancy, you may have one of the following standard schedules:

• Full-time – Typically 35 to 40 hours weekly
• Part-time – Typically fewer than 35 hours weekly; more often, 12 to 30 hours
• Annual – Year-round, with varying hours
• Seasonal – Typically two to four months during a year; often during the summer or during the holidays
• Flexible schedule – Compressed work weeks, varying shifts, varying days. (If you have special scheduling needs, employers may be able to accommodate you with this type of schedule.

Spend some time thinking about how many hours you want to work and whether you would prefer a direct employment arrangement or contract work. Remember to consider your personal and family responsibilities as you think about the type of position you would like to seek.

Next, we’ll focus on researching specific employers and jobs.