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Assuming:

  • The employee and company are parting on good terms
  • The new company is OK with a little contract work as long as it doesn't distract from the new job
  • The former company wants the help and the employee is willing to work a few hours a week

Is it a good idea to do contract work for a former full time employer?

Has anyone ever done this? How did it work out for you? I can see some possible pitfalls, so I wonder how good an idea it really is. What difficulties do you encounter doing development work outside the office and on a different schedule from the rest of the programming staff and how can they be overcome?

If I do go forward, what would be a fair amount to request as compared to current salary?

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For the amount, take your new salary and calculate an hourly rate based on it. Adjust it a little for off-hours, distance, etc. –  Marcelo Aug 12 '11 at 18:54
    
The old rule of thumb was to take your Direct salary, drop three zeroes off the end, and that gave you your Contract hourly rate. The rationale is that you are going to spend about 50% of your time "on the beach", between contracts, hustling for the next gig, and you need ROUGHLY the same income. This rule of thumb does not take into account the fact that your expenses as a contractor will usually be significantly higher than your experiences as a Direct employee. –  John R. Strohm yesterday
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4 Answers

up vote 11 down vote accepted

Lots of people do this. We have two people that I know of doing it right now for our company. The key is to keep the work separate from the new job and make it clear you will be working on this only after hours and that you are not available for questions during hours when you are at your new job. Whatever you do, you don't want to risk your new job, so make it clear that if your new job tells you that you can no longer do this, you will be giving notice. Keep everything in Source control of course and make sure the repository is kept up-to-date in a branch that you update after each work seesion, so the old company can access the code you are working on if something becomes too urgent to wait until you can work on it that night. Negotiate how long this will go on if you only want to do this for the short-term until someone else gets up-to-speed. You can usually get them to give you a higher hourly wage than when you worked for them as well.

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+1 Good tip on source control and checking everything in, I hadn't thought that far into things –  DKnight Aug 12 '11 at 14:33
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I've done this and not particularly well. Here's some tips from experience:

1) Don't go dark. HLGEMs answer of checking in every day is a great one. Also bill promptly or on a pre-established schedule. In many cases the trust you've established as an employee erodes quickly as a contractor, you want to be as transparent and visible as possible. Also consider any travel or deadline obligations you might have with the new position and how that might affect your ability to do two jobs. Set expectations accordingly and live up to that standard.

2) As far as staying synched up with the rest of the team, make sure you send regular emails/IMs/wiki updates just saying what you're working on and reminding people you're out there. In a less formal way, try to get a couple former coworkers to keep you in the loop. Depending on how much of a problem this is, you might commit to taking a late lunch once a week and calling someone just to "water cooler chat" and keep the communication channel open.

3) Decide how long you want to do this. If you want to work two jobs, I would suggest setting up a retainer and/or an agreed support level (Up to x hours a week/month). Unlimited support on two jobs will burn you out and there will always be priority conflicts. If you're just helping out, you should provide incentive for your former employer to replace you quickly so you can move on. In that case I would charge at least 3x your previous salary as your hourly rate. That's fairly standard as they're no longer providing you any benefits other than a paycheck. If you want to stick with it for awhile you might pick a smaller number.

4) Assuming this is in US, familiarize yourself with 1099s and how this will affect your tax situation. There are a lot of wrinkles that aren't obvious if you've been a "normal" employee all your life.

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Thanks, good info. On the 1099s, other than setting aside extra money for the taxes was there any thing that tax software couldn't handle? –  DKnight Aug 12 '11 at 17:10
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@Dknight - I had no problems using the more expensive Home & Business version. The big thing for me was quarterly checks for estimated taxes to the IRS - your situation might be different. –  Steve Jackson Aug 12 '11 at 18:00
    
thanks for that I'll look into it if this comes up. –  DKnight Aug 12 '11 at 18:32
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Sometimes this is the easiest client to start off with. You really have to make sure to identify how the ground rules have changed. You can also do this to if you are reluctant to leave in the middle of a project. Offer it as a suggestion if you feel you're going to be downsized, but make sure you're able to look for a full-time job.

Even if you have no intentions of going back, the people at your old firm can be a great source of referals.

It really gets interesting when they don't want to use you as a consultant, something goes wrong (they thought they could do it without you) and now they want to 'hire' you. They may think they can pay you the same salary and not factor the differences between an employee and the over-head a consultant has to cover. They feel taken advantage of in their time of need.

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Make sure the IP section in your employment contract and your freelance contract are compatible with each other. If not, try to get them changed. If your employment contract says your current company owns all the work you do, that could start an ugly legal fight later. Example: one of the companies gets acquired, and the acquirer demands said company own all the IP rights, but the other company refuses to sign any legal document. For best results, get an attorney to review both contracts.

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