So You Want to Work as a Consultant or Contractor?

This will be old hat for those that have experience in this arena. But for those who've historically worked in more traditional roles, here's an overview of the contractor and consulting arena.

I divide things up into 4 general categories; I'll use an HL7 integration analyst as an example.

Scenario #1: Hospital employee, W-2, full-time, salary, benefits, vacation, etc, minimal travel. Makes $80K

Scenario #2: Full-Time Consultant Type, W-2, full-time, salary, benefits, vacation, etc. Probably travels a fair amount, works for consulting firm, or vendor, probably makes more, $90K perhaps, maybe bonus.

Scenario #3: Fixed Duration Consultant, W-2, salary, maybe benefits, probably minimal, since only on payroll for length of a particular assignment, won't be around long enough to warrant wait period on health insurance, or accrue any vacation, etc. Paid hourly, perhaps $50-60/hr.

Scenario #4: Contractor, 1099. Hourly, no benefits, incorporated, pays own taxes. Can be all-inclusive hourly rate (pay own travel expenses) or hourly plus expenses.
Maybe $65-70/hr plus expenses, or $75-80/hr all-inclusive.

The numbers above are examples only and strictly for comparison purposes. It gives you an idea of the relative compensation for a similar skill set employed in different capacities. In a nutshell, you will tend to be paid more for situations which are more short term, which require more travel, for which you receive less benefits and for which you bear more administrative burden (taxes and bookkeeping).

Traditional employees are (or appear at least) more secure, tend to have less travel, more benefits, and the employer takes care of the bookkeeping, so they make the least.

Self-employed contractors tend to travel, are at the most risk for abrupt cancellation or termination of engagements, handle their own taxes and bookkeeping and tend to be compensated the most for taking on those risks and responsibilities.