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During the corporate downsizing wave of a decade ago, legions of former employees and their employers discovered that both could benefit if the ex-employee went right back to work for the same company as an independent contractor. Despite a subsequent crackdown by the Internal Revenue Service on abuses of the practice -- some employers used the arrangement to avoid paying overtime while maintaining close control over the contractors -- the current contraction of the work force is proving the value of such arrangements once again.
By disappearing from corporate overhead yet still lending their services, former employees -- whether they've been voluntarily or involuntarily severed -- give companies fiscal flexibility and the benefit of their experience. "A lot of companies want to appear to Wall Street in this environment to be lean and flexible" and contracting helps, says Andrew Schultz, President of Pro Unlimited, a Boca Raton, Fla.-based human-resources consulting firm. Pro Unlimited conducts seminars on the merits of contracting for large companies.
For professionals, the scenario can be attractive. For instance, your company is forced to reduce staffing so it lays you off but then gets a new client that requires three or four months of work. "So you come back as a consultant," says David Lewis, President and Founder of OperationsInc.com, a Stamford, Conn.-based human-resources consulting firm. "You still have a job per se; you're on COBRA (health coverage for terminated employees) so you can get health-care benefits; and you're still free to look for other work. And you never know -- if the employer keeps getting more clients, you could come back as a full-time employee."
But working as a contractor can have its pitfalls. Marcus Foody, a San Francisco-based Web-site developer, often has felt exploited when working for former employers, particularly when they asked him to help land new clients without paying for his time. "I also missed the enthusiasm and the sense of hard work and commitment that go with a full-time job," says Mr. Foody, who re-entered full-time work recently as Webmaster for the International Association of Business Communicators, a San Francisco-based organization for PR professionals.
Here are some factors to consider if you receive the opportunity to rejoin your former employer as a contractor:
There may be a chance to redefine your work: Even if you sign on as a contractor for your former boss, the switch may give you the chance to reset your job description. "Go to the employer and say, 'Now I'd like to do more of what I'm good at and enjoy, and less of the other things,' " says Jim Cathcart, President of Cathcart Institute Inc., Lake Sherwood, Calif. Mr. Cathcart, a career-motivation consultant and speaker, advises would-be contractors to "start looking for ways to restructure your own job description and your own role. This is likely to be your only shot at doing something like this, so you might as well try it."
It can be a good transition: Even if you don't relish being independent, a short period of doing familiar work in a situation you understand can provide a taste of what full-time contracting would be like.
"Doing the same job as before and being able to put your lunch bag in the same refrigerator can be a source of comfort," says Ray Marcy, President of Guru.com, a San Francisco-based portal for free-lancers. "The peril for the independent contractor is that they've entered a new world. They don't have the safety net of an employer; they don't have health-care coverage or as much employment security. You're trading that for a premium pay rate. That can be comfortable or uncomfortable depending on your temperament. But if you're willing to explore the world of independent contracting, there's no better way to start out."
Don't assume you're welcome: Even if you leave a company on the best possible terms and you think contracting makes good sense, your former boss may resolutely oppose the idea.
"Contractors think they can come in and get a lot of the money and many of the benefits that an employee might get without any of the responsibility," says Dane Madsen, President and chief executive officer of YellowPages.com, a Las Vegas-based concern. "It's like living with a partner as opposed to being married; you've got one foot out the door. I don't like that . . . I like commitment." His experience with hiring contractors has been less than satisfactory.
You can't really go home again: Being a contractor may feel for a while the same as being a full-time employee. But sooner or later -- for managerial or legal reasons -- the former boss will focus on your changed status, and it may sting.
"It may be an event they're running, like a corporate meeting, and suddenly the class system becomes very clear," says Mr. Lewis. "You as a consultant can come to the company picnic but not to the quarterly employee meeting, because 'That's not where we bring consultants.'"
Adds Mr. Schultz: "If the relationship is properly set up, the [contractor] shouldn't be in the employee directory, shouldn't have his or her name on a door and shouldn't be playing on the company softball team anymore. That's a difficult challenge for some workers."
Erect your own barriers: On the other hand, you may want to put up boundaries of your own so that former bosses and colleagues, now your clients, don't try to treat you like the employee you were and, perhaps, take advantage of you. Be sure to have conversations upfront not only about your specific job assignment but also about how to avoid previous expectations.
Pat Fallis was the Webmaster for Walt Disney Co.'s Cable Networks Group until the company slashed staff by about 10% last summer. He, other ex-Disney employees and people from different firms started their own promotions company, Burbank, Calif.-based Practical Synergy. Among its services, the company regularly places its principals back with Disney and other ex-employers on a contract basis. One challenge is thwarting clients' expectations that the ex-employee now will fall into his or her previous job description and previous work relationships.
"Others in the company have seen them coming back in and want to make use of them as a resource in their old capacity," Mr. Fallis says. "That puts the contractor at a big disadvantage." The solution may be as simple as making sure that your client notifies the staff of your change in status and its implications. But on one of the contracting assignments he fulfilled himself, Mr. Fallis actually worked by himself in a closed office so that most of his former departmental colleagues wouldn't know he was back on site.
Avoid exploitation of your time: As a contractor, you're working on your own clock, not the ex-employer's -- and you need to make sure the client respects the difference. While contracting for one ex-employer, Mr. Foody was asked to drive as much as an hour and a half to join former colleagues in making pitches to potential new clients. Sometimes, the requests would come on short notice, requiring him to reorder other projects. "So I told them in order for me to be on their clock, they needed to pay me for my time regardless of the outcome of the client pitch," Mr. Foody recalls. They did.
Supervisors may be ambivalent: If you were laid off and then brought on as a contractor, be aware that the staffing cuts may have put your immediate supervisor in a bind in terms of meeting deadlines.
Guru.com's Mr. Marcy says supervisors may be facing accelerated deadlines without the necessary staff. While the assignment may mean immediate work for you, the boss knows you don't fit into the long-range plans.
Pensioners beware: Some retirees may have trouble collecting pensions if they sign on as contractors for their ex-employer because it may not seem as though they actually have "retired" from the company, says Mr. Schultz. He suggests "coming back through a properly set up third party" such as a payroll service that will bring you on as a W-2 worker and become your employer of record and then lease you to your former employer. "The last thing I'd want to find out if I've retired is that I have a pension problem," he says.
-- Mr. Buss is a journalist and editorial consultant based in Rochester Hills, Mich.
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