The Joy of Contracting: Many Employers, No Safety Net

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working at home - consultingIn today's stuttering economic recovery, the job market remains at center stage -- from President Obama's urgent meeting with his Jobs Council to spur private sector hiring to a slew of cover stories on career reinvention. But while the traditional hiring remains tepid, there is a sector whose strength isn't necessarily fully counted by the Bureau of Labor Statistics, that does seem to be experiencing real growth: Independent consulting. At this point, going it alone may not just be a good move, it could be your only move.

Once you make the switch, you may find yourself smiling: There are indications this growing segment of the workforce may also be the happiest. According to the Gallup Healthways Well Being study showed the highest happiness rates among self-employed people and business owners. The self-employment trend is booming with boomers. A Charles Schwab survey finds as many as 9.5 million Americans are considering coming out of retirement and going back to work in some capacity, and AARP reports 79% of baby boomers say they don't plan to stop working at age 65.

When it comes together, self-employment, home-based freelancing or "e-lancing" give people control over both their incomes and their lives. Still, while that can be a recipe for happiness, it's not a cakewalk.

Many professionals making the switch from employee to independent struggle with replacing the safety net their employers once provided, particularly as regards health insurance and retirement plans. They also often don't know how to address issues like taxes, business liability insurance and contract management.

Handling the Bookkeeping

One company, MBO Partners, has built a business helping independent workers put the pieces together, and it's seeing record growth -- more than 40% year over year. By working through MBO, contract employees also get a single W2 even if they are working for multiple companies, which means they are paying taxes and being tallied in the latest job numbers. That's significant from a compliance perspective. MBO's fees are transaction-based in the neighborhood of 3% to 6% vs fees of more than 20% to 30% for staffing companies that find you work.

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The company thinks of itself as playing the role of "business manager," providing a resource for talented consultants who don't want to be bothered -- or don't know how to deal -- with things like bookkeeping. And, by pooling thousands of consultants, they're also able to secure bulk discounts on things like insurance.

We spoke with Gene Zaino, the company's president and CEO, who admits working independently it's not always the first choice of individuals or the entities employing them, "It's not optional for a lot of people. Companies are being forced to be more agile, buying work in little pieces and making smaller commitments." He thinks the shift is fundamental, calling it "the new normal." But, he notes, "once people try working as an independent consultant, 80% don't want to go back to their old way of working."

Case in point: Retired Lt. Gen. Jan Huly became an independent consultant after a 37-year career in the Marine Corps. "I wasn't sure what I wanted to do post-retirement," he says, "but I knew I wanted to enjoy myself, have more freedom, and yet still make a positive contribution with my skills." Huly has found "unsurpassed freedom" in his new career, part of a growing population of retirees leaving the traditional workforce and beginning second careers in which they control when, where and how they work. As independent consultants, these new retirees can even combine work and travel, taking assignments in other cities or countries. It's a nice second act -- if you can pull it off.

Independence Days

MBO will soon begin a "State of Independence in America" study characterizing the independent workforce. Here are some initial trends they have found in self-employment:

Women are going solo: The growth rate of women's enrollment as independent consultants on MBO Partners is approaching double the men's rate, rising 250% from 2008 to 2010. Zaino says the company is approaching a 50/50 gender balance.

Growth spans the generation gap: Enrollment rates show growth across all generations in the past year with Millennials in the top spot (more than 110 percent growth), followed by Gen X (64 percent growth) and Baby Boomers (26 percent growth).

The nation's capital leads the nation: While the traditional labor market in Washington, D.C., is stagnant, with unemployment rates on the rise, independent work is skyrocketing. The D.C. metro area is MBO's largest and fastest growing region, thanks to employees making the shift to independent consulting. Government work tends to be project-specific and federal retirees often consult.

Big in the Big Apple: New York City is another hot spot for independent work. Enrollment growth rates in the metro are topped 270% from 2008 to 2010.
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