Contract vs full-time software engineer jobs
Contract vs full-time, for a software engineer, comes down to this: a contract has to pay noticeably more per hour than a salaried job just to break even. As a contractor you pay for your own benefits, paid time off and the gaps between contracts, and in the US the employer's half of payroll tax too. A common rule of thumb is 1.25 to 1.5 times the salaried hourly rate.
Contracting suits experienced engineers with savings and a network; full-time suits people who want stability, benefits and a promotion track. Contracts are 6% of open tech jobs on PickedJobs today.
By PickedJobs · Updated · Live figures from 62,231 open jobs, as of (method)
What a contract rate has to cover: a worked example
Take a US salaried offer of $150,000 a year. Spread over 2,080 working hours, that's about $72 an hour. To replace it as a contractor:
| Item | Amount | Assumption |
|---|---|---|
| Salary | $150,000 | The offer you're comparing against |
| Benefits you now buy yourself | $25,000 | Health insurance, retirement match and other perks; varies widely |
| Employer half of payroll tax | $11,475 | 7.65% Social Security and Medicare, which a self-employed person pays as well as their own half |
| Total to replace | $186,475 | |
| Billable hours | 1,760 | 44 weeks of 40 hours: 4 weeks off, 4 weeks between contracts |
| Break-even rate | about $106 an hour | 1.47 times the salaried hourly rate |
Your numbers will differ, especially for benefits and time between contracts. The US Bureau of Labor Statistics puts benefits at roughly 30% of total compensation for private-industry workers, so $25,000 is not a generous guess. Put in your own figures with the contractor vs employee calculator, or convert any rate with the salary to hourly calculator.
The kinds of contract you'll see
- Agency or W-2 contract (US). A staffing firm employs you and bills the client. Tax is withheld; benefits are often thin.
- Independent contractor (US 1099). You are self-employed, invoice directly and handle your own tax.
- Outside the US, the same split exists under other names: B2B or freelance contracts in much of Europe, limited-company contracting in the UK (where the IR35 rules decide whether a contract is really employment for tax purposes).
- Contract-to-hire. A fixed trial period, usually three to six months, before a possible full-time offer.
- Employer of record. Not a contract at all: a third party employs you locally for a foreign company. 122 open listings on PickedJobs use this setup.
The label on the contract doesn't decide your status by itself. Many countries look at how the work is actually done, such as who controls your hours, tools and methods. If a “contract” looks exactly like a job, get advice before signing.
Who contracting suits
| Contract tends to win if… | Full-time tends to win if… |
|---|---|
| You have six months or more of savings | You need predictable income or support a family |
| You have deep, in-demand skills and a network that brings work | You want mentorship and a promotion path to senior or staff |
| You value choosing projects and taking breaks between them | You want equity, a retirement match and employer health cover |
| You're happy to handle invoicing, tax and insurance | You'd rather not run a one-person business |
Questions to ask before you sign a contract
- What is the rate, how many hours are guaranteed, and how is overtime paid?
- How long is the contract, how often is it extended, and how much notice ends it?
- When do invoices get paid (30 days is common), and who pays: the client, an agency or an EOR?
- Who owns what you build, and does the agreement restrict other clients?
Finding contract roles
Filter for contract tech jobs on PickedJobs. If you are outside the US and want to work for a US company, contracting is often the setup on offer; our guide to getting a remote US job from another country explains the alternatives. To compare against salaried pay, see software engineer salary by level.