How Does a Self-Employed Variable Contract Work?

Types

The different types of contracts include temporary, seasonal, casual and variable hours. Temporary contracts may be for specific projects or as replacement for full-time workers. Seasonal contracts include summer jobs, term-teaching assignments and holiday sales positions. In casual contracts, such as freelance work, employers do not have the obligation to provide work and employees do not have to accept the work offered. Other variable contracts include on-call nursing staff, call center workers and shift work. Volunteers and placement agency employees do not count as self-employed contract workers.

The volume of contract work and the number of self-employed workers tend to grow when the economy weakens. During recessions, workers usually have no choice but to rely on contract work to make ends meet. In a May 2009 "Wall Street Journal" article titled "Negotiating the Freelance Economy," Sarah E. Needleman reported on the expanding scope and volume of contract work. In addition to computer programming and graphic design jobs from small employers, large companies were hiring in accounting, sales, law, engineering and other areas. About one in nine U.S. workers were self-employed, according to a June 2011 Bureau of Labor Statistics report. In December 2007, the bureau projected that farmers and ranchers were going to have the highest levels of self-employment in 2016. Retail workers, child care workers, carpenters and real estate agents were some of the other occupations with strong self-employment trends by 2016.

The advantages of contract workers for employers include cost savings and operational flexibility. Contractors usually do not get benefits, sick leave or annual vacations. Employers can adjust their workforces more effectively by hiring contractors only when needed. Self-employed worker also retain flexibility because they can work on multiple projects and do not have to commit to one employer over long periods.

Contract work also has certain disadvantages. Employers may not be able to hold on to talented contractors after the contract period. This could mean additional training costs to bring the replacement contractors up to speed and could cause quality problems. Self-employed workers do not have a guaranteed weekly or biweekly paycheck, which makes long-term financial planning difficult. They also have to pay for health care coverage, invest in computers and set aside enough funds for the dry periods between contracts.