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wendigo23

Am I getting screwed in the transition from contractor to employee?

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wendigo23    512
Hello forums, long time no post. I've been working at company X for 3.5 years as a contractor. For legal reasons they've asked me to become an employee, paid hourly like I'm used to (also because I haven't worked full time in 3 years). Payroll takes one week to process and they don't want to predict that week's hours, so my paychecks will always be one week behind. Normal salaried employees are paid up to and including the day of payment every pay period, and in my previous life as a contractor I was paid (generally) the day after I turned in my invoice. But now, with this one week delay it's like they'll be holding one week of pay hostage, as the one week rolls from pay period to pay period, until I quit and recieve my last paycheck, where that week will finally show up. Am I crazy for thinking I'm getting screwed as soon as I become and employee? That week of pay could be invested or used as a down payment on a house.

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frob    44908
No, that is typical corporate workings. It is easier on the book keepers to handle it the way they do, especially taking in to account issues like sick leave and vacation hours that are submitted late. Just be glad they are on a two week cycle. It is normal to complete the end of the first work cycle then get a check on the next payday. Some places are on a one month pay cycle (schools are notorious). With a one month cycle, it can be as much as 60 days of work before you see a paycheck.

Actually, your contracting experience sounds atypical. Back in my contracting days we had net-10 or net-30 payment, or pay in advance for the less-than-reputable people.

As far as getting screwed because you are an employee, that is your own decision to make based on your own negotiation skills and world view.

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Oluseyi    2103
I've never had the luxury of working at a company where payroll is up to the day of invoice. My current job is a week behind, and that's a new experience for me: previously I'd been paid first and fifteenth (or business days preceding), or fifteenth and last business day. I don't know whether salaried employees at my current position are paid up to the day; I've been hired for a full-time, salaried position, but my transition from hourly pay to salaried has been stalled by a budget review in the parent organization.

You're not getting "screwed." In all likelihood, hourly pay is contracted out to a separate organization, which is why it's a week behind.

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Mike.Popoloski    3258
That's currently how I am paid. There is no way for them to know how many hours you are going to work, so they can't estimate how much to pay you. (Well, they could, but it would be weird).

I get paid every Thursday for the work that I did the week before. Also, I don't think you can look at it like they are holding your money, as they are most likely going to be processing the hours, getting paychecks set up, etc. It's not like they have the paycheck all drawn up and sitting there, and they are just waiting a few days to give it to you.

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frob    44908
Quote:
Original post by Mike.Popoloski
That's currently how I am paid. There is no way for them to know how many hours you are going to work, so they can't estimate how much to pay you. (Well, they could, but it would be weird).


My pay period ends three days *after* payroll is sent out. They send it off on Wednesday and the period ends on Saturday. I have often wondered what would happen if I quit on the Wednesday they send it to accounting. :-)

Of course, I also have a coworker who has been wondering what would happen if he started showing up for two hours each day (the parts with meetings) and see how long it takes for management to get around to firing him.

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wendigo23    512
So far the concencus between y'all and my IRL friends is that I shouldn't worry about it, so thanks for that. It's my first time being an hourly employee; prior to contracting I was salaried.

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Morgan Ramsay    179
Quote:
Original post by wendigo23
... in my previous life as a contractor I was paid (generally) the day after I turned in my invoice.
Talk about luck. I always expect Net 30.
Quote:
Original post by wendigo23
Am I crazy for thinking I'm getting screwed as soon as I become and employee?
Will you receive benefits as an employee?

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Jerax    126
Quote:
Original post by frob
My pay period ends three days *after* payroll is sent out. They send it off on Wednesday and the period ends on Saturday. I have often wondered what would happen if I quit on the Wednesday they send it to accounting. :-)

Mine ends 5 days after payroll (monthly), but as I'm salaried the amount is the same every month so no guesswork required.
Presumably if you quit, you have a notice period, so you wouldn't just stop getting paid on the Wednesday, it would be a week or month later, by which time they'd have calculated the correct amount of pay.

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Prozak    898
That is another thing that seems to be so particular of North Americans.

We europeans get paid by the end of the month. Here in Portugal we have 14 paychecks, 12 for each month of the year, 1 paycheck called "Vacation Paycheck" and a last one called "Christmas Paycheck" (VP & CP).

The VP is payed on the previous month of your first Vacation period. In other words, if you're taking two weeks off at the end of June, expect two paychecks in the last days of May (May salary and vacation paycheck for June).

The CP is mandated by law to be payed up until the 15th of December. Both the VP and the CP are of equal value to your salary.

Europe and America really differ on pay customs and vacation time. These are two of the things that should be in the mind of anyone going to work in America from Europe, or vice-versa, really different customs there.

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duilen    122
I wouldn't say a 1 week delay is bad at all. I think the real question should be how much are they paying you as a full time employee in relationship to how much you were making as a contractor. If it is the same maybe you were getting screwed as a contractor.

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Hodgman    51231
The one week delay really only screws you for the first week that you transition to that new system... But then at the end it's like you get a 1 week bonus!

I'm in Australia, and I get paid monthly. Each pay consists of the past two weeks, as well as two weeks in advance.

However, the last company I worked for (as a full-time salary employee) paid me in I.O.U.s for months at a time, and when I did get my pay-cheques, the superannuation was always missing...

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sigsegv42    158
I've been paid in this manner in the past as well. It's fairly common to have your first period's pay withheld and not get your first paycheck until the second pay period comes. So you're always getting paid for last week's work. One rationale I've heard for this setup is so that whenever you leave that job you'll end up with one extra paycheck at the very end.

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mjb5791    122
The other rational I heard for witholding 1-2 weeks pay is for the employers benefit. Where I currently work, our vacation for the year is granted Jan 1. However, the entitlement assumes you are going to work for the full year. If one uses up all of ones vacation and leaves the company, the company will use the pay withheld to recoup the vacation time your took, prorated against days worked for the year.

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Holding the pay is typical. On some jobs even with the government, you pay check is two weeks behind.

When they move you from contractor -> employee here is where you get screwed.
1. Hourly goes to Salary (this means you will work more than 40 per week and get paid 40)

2. Benefit changes. Sometimes they try to justify dropping your pay rate claiming they need to pay for your benefits.

3. Non-compete clauses and such. As an employee, you might get roped into signing stuff that might hender you from doing your own thing.

On the up side, depending on how well your company is doing. You can get a sign-on bonus, and stack options. Since you have been there three years you might be able to get stock with the three years of vesting period already included. That only happens at nice companies.

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frob    44908
Quote:
Original post by Randy of Neuron
Sometimes they try to justify dropping your pay rate claiming they need to pay for your benefits.

Ouch!

I'm going to assume a US-centric view, but most other nations are mostly in line with these.

There are *MANY* reasons for decreased pay for salary from contracting.

  • Contractors must provide their own tools which they pay for and maintain. Employees must use the employer-provided tools. (See IRS guidelines.)
  • Contractors have liability for their results. Employees are generally not liable for their work.
  • Contractors must exist as their own business entity, and are responsible for their own taxes (sometimes called the double-taxation of self employment) and the company hiring them should file a form 1099 to report to the IRS that they paid the contractor. Employees have a portion of their taxes paid directly by the employer, and another part paid through payroll withholdings. That extra cost is typically paid through slightly lower wage.
  • Contractors pass through the costs of advertising their services, making bids on jobs (including bids that do not result in work), and time without work. Employees have the luxury of continuous employment with no significant effort.
  • Contractors must invoice for the work done and hope to get paid, employees hope to get paid on a regular interval
  • Contractors must handle their own business insurance, if anything. Employers must provide workers compensation insurance, disability insurance, unemployment insurance, and assorted federal and state reporting.
  • As you mentioned, contractors must provide their own health insurance coverage, retirement plans, FLEX plans, and life insurance, travel insurance, and assorted other benefits. Most employees have many or all of these as part of a comprehensive package.
  • Although some contractors are paid on an hourly basis, they are often beholden to their initial bids, and under many circumstances may not be paid if their work doesn't meet specific criteria. Employees must be paid for any work done, regardless of the quality.
  • Many contracts limit the number of billable hours, where additional hours required to complete the work cannot be paid. This can be a worse situation than salary employees, since all the employers I have worked with have provided some additional compensation for salaried employees who must work overtime.
  • Many other contracts do not bid on billable hours, they bid on the completion of tasks. If that requires working 80 hours in a week the contractor receives no overtime.

There are many additional reasons, but that should be enough to realize that the difference between employee salary and contractor's invoiced payments are not equivalent.

After re-reading the OP, it sounds like he might have actually been illegally employed for about 3 years, unless he was working through a contracting agency or something similar.

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eedok    982
my last job I was paid a week behind, but paychecks came every week, and I loved it to death(it was like I was never broke). But yea one week behind sounds about right, which is nice if you decide to change careers.

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