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This is a follow-up to this discussion:

Working as a contractor--questions

I still would like to get more info on the following points, when working as a contractor as opposed to direct employee:

  • Housing: for short-term contracts (let's say 6 months or less) that are not in your home area, where and how do you search for short-term, flexible housing? Especially since an employer would typically want you to start immediately, so you don't have the time to go out and explore. Also, would you typically look for furnished apartments because the cost transporting your own furniture for a few months is not justified?

  • Work hours and pay: are contractors more strictly supervised (as far as getting specified work done) because they get paid by the hour? There are also supposed to get overtime pay (at a higher rate) if they work more than 40 hours per week, does this really happen? Or do they work unpaid extra hours just like many regular employees?

  • Some potential employers have mentioned paying the "per diem", which is essentially a non-taxable daily allowance, which is supposed to be used for living expenses. This money gets subtracted from you per-hour rate, but the advantage is that you pay less tax. However, from the information I have seen, the per diem can only be paid if you maintain a "permanent" residence you intend to return to. Is this checked in practice, and if yes, how?

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closed as too broad by MichaelT, gnat, mattnz, GlenH7, Dan Pichelman Aug 26 '13 at 16:29

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2 Answers

Housing: for short-term contracts (let's say 6 months or less)...

One thing some contractors do is get a pickup truck and a travel trailer, like a "fifth wheel", and go from gig to gig staying in RV parks. One guy wanted to self-fund a startup, and he pulled it off by doing this for a couple of years and taking the highest-rate gigs he could find. I haven't done it myself, but it might be a fun way to see the country and make a bunch of money.

Work hours and pay: are contractors more strictly supervised (as far as getting specified work done) because they get paid by the hour?

Not in my experience. However, other than bathroom breaks or maybe grabbing a cup of coffee, you should only do things related to your contract while "on the clock". If you need to do anything unrelated to work, take a break that's noted on your time sheet, and preferably leave the work area. Managers will notice and appreciate that level of professionalism.

There are also supposed to get overtime pay (at a higher rate) if they work more than 40 hours per week, does this really happen? Or do they work unpaid extra hours just like many regular employees?

I've never heard of a contract programming gig in the US paying a higher hourly rate beyond 40 hours.

But you do get paid for exactly the hours you work, no matter how many they are. So if your rate is $50 an hour, and the company has you work 60 hours in a week, you get $3000 for that.

I'm much more cheerful as a contractor. If a manager wants me to work extra to compensate for somebody else's screw-up, I'm not irritated - I just smile and think, "Cha-ching!"

[T]he "per diem"... is essentially a non-taxable daily allowance, which is supposed to be used for living expenses... However, from the information I have seen, the per diem can only be paid if you maintain a "permanent" residence you intend to return to. Is this checked in practice, and if yes, how?

I doubt most employers would deliberately check, but I can think of several ways a tax dodge like this could be "outed" to them. One way would be to give a "permanent residence" address that wasn't on your credit report, or that Google Maps showed was really a Mailboxes Etc.

Also, if you pulled this dodge and were ever audited by the IRS, they'd likely find it and hit you for back taxes, and probably penalties and interest. If the total exceeded $10,000 and you couldn't pay it immediately, they'd start slapping liens on your stuff. That would be on your credit report and you'd be explaining it for years.

One of the most important assets a contract programmer can have is a reputation for integrity. You can make plenty of money as a traveling contract programmer; it's not worth cutting corners and damaging your career in the future to make a little more today.

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Most apartment complexes will happily rent apartments on a month-to-month basis, charging you for the privilege, of course. If you're bringing furniture, that's generally the easiest option. As you're aware, you can also look for furnished apartments. If you want to invest the time to save money, you can also look for people that are looking for roommates (possibly with a coworker if you're getting a contract through a contracting company) where you're likely to need less furniture because they already have furniture in the shared areas.

Whether to store your furniture or move it depends on a variety of factors. The cheapest option housing-wise is generally to drive the U-Haul from place to place getting non-furnished apartments. But that's a fair amount of work particularly if you're moving within a larger geographic area.

Overtime pay will depend on the organization. Obviously, if you're a 1099 contractor to the organization you're working for, you have more flexibility to negotiate terms. That makes it easier for you to cause yourself pain by doing fixed-price bids that require overtime if you underestimate. Or it makes it easier for you to negotiate a higher rate for overtime. If you're working for a contracting company, it will depend on the company and the project manager. It's certainly not unheard of that the contracting company would underestimate the project and suggest that folks work overtime without billing it to cover up the deficiency though that's not supposed to happen.

Supervision, too, will depend on the organization. Contractors are a separate line item, so there is definitely more visibility from management that the contracting company is delivering value commensurate with their bill. There contracting organization probably isn't going to supervise individual contractors particularly closely -- that's the responsibility of the contracting company (assuming you're going to be employed by a contracting company and not going out on your own). You can end up with quite a bit more supervision if you're managing client expectations and the expectations of your project manager.

The only group that is likely to care about whether you're eligible for a per diem is the IRS (I believe you're in the US). But they're going to be exceptionally unhappy if you shield income from taxation. Since there are tax implications, you probably want to chat with an accountant since it may influence other decisions like whether you transport your furniture or leave it in storage.

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Thanks for all your responses! The RV idea, in particular, sounds fun! –  universe_hacker Apr 12 '11 at 4:07
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