How to Decide Between Contracting and Full Time

Choosing between contracting and full‑time employment is one of the most pivotal career decisions you’ll make. In this guide we break down the financial, lifestyle, and long‑term growth implications so you can decide between contracting and full time with confidence.

Understanding the Two Paths

Contracting – A work arrangement where you are hired for a specific project or a set period, often through an agency or as an independent freelancer. You invoice the client, manage your own taxes, and typically do not receive traditional employee benefits.

Full‑time – A permanent position where you receive a salary, benefits package, and a clear career ladder within a single organization. Your hours are usually set, and the employer handles payroll taxes and benefits administration.

Pros and Cons Checklist

Contracting Pros

• Higher hourly rates – many contractors earn 20‑40 % more per hour than their full‑time peers.
• Flexibility to choose projects, clients, and work locations.
• Faster skill diversification – you work on varied tech stacks or industries.
• Potential tax advantages through business expense deductions.

Contracting Cons

• Income variability – gaps between contracts can strain cash flow.
• No employer‑provided health insurance, retirement plans, or paid leave.
• Administrative overhead – invoicing, contracts, and self‑employment taxes.
• Less job security; contracts can be terminated with short notice.

Full‑Time Pros

• Stable paycheck and predictable budgeting.
• Comprehensive benefits: health, dental, vision, 401(k) match, paid vacation.
• Clear promotion pathways and professional development programs.
• Access to internal training, mentorship, and company resources.

Full‑Time Cons

• Lower hourly compensation compared with contracting.
• Less control over project selection and work schedule.
• Potential for slower skill growth if the role is narrowly defined.
• Office politics and bureaucratic processes can limit agility.

Financial Comparison

According to the 2023 Freelance Economic Report by Upwork, 59 % of freelancers earn more than their salaried counterparts in the same field. However, the same study shows that 42 % of contractors experience at least one month of zero income per year. Use the Resumly Salary Guide to benchmark expected earnings for both paths in your region.

Sample Calculation

*Benefits include health, retirement match, and paid time off. The numbers illustrate that while total compensation can be similar, the cash flow pattern differs dramatically.

Lifestyle & Work‑Life Balance

Do’s

• Do set clear boundaries with clients to protect personal time.
• Do negotiate paid time off or a retainer that covers holidays.
• Do track billable hours and maintain a buffer for taxes (≈ 25‑30 % of income).

Don’ts

• Don’t rely on a single client for > 70 % of your revenue.
• Don’t skip health insurance; consider a marketplace plan or a professional association.
• Don’t ignore retirement savings; open an IRA or Solo 401(k) early.

Decision‑Making Framework (Step‑by‑Step)

1. Assess Your Financial Cushion – Do you have at least three months of living expenses saved? If not, full‑time may be safer.
2. Identify Career Goals – Are you aiming for rapid skill acquisition or long‑term leadership? Contracting accelerates skill breadth; full‑time supports depth and leadership tracks.
3. Evaluate Benefits Needs – Health coverage, retirement, and paid leave are often non‑negotiable for families.
4. Calculate Net Income – Use a spreadsheet or the free Resumly AI Career Clock to model cash flow under both scenarios.
5. Test the Market – Take on a short‑term contract while still employed full‑time (if your employer permits) to gauge demand.
6. Make a Decision Timeline – Set a 3‑month deadline to avoid analysis paralysis.

Real‑World Scenarios

Scenario A: The Software Engineer in a High‑Cost City

Maria lives in San Francisco and earns $130k as a full‑time developer with a 401(k) match and health benefits. She enjoys stability but feels her skill set is stagnating. After a 6‑month contract project paying $95/hr, she realized she could earn $150k net after taxes while learning new cloud technologies. Using the framework, Maria decided to transition to contracting, securing a health plan through a professional association and setting aside 20 % of each payment for retirement.

Scenario B: The Marketing Manager with Family Obligations

James, a marketing manager with two children, values predictable income for mortgage payments and school fees. He explored contracting but found that most short‑term gigs lacked paid leave. After running the financial model, James concluded that full‑time employment with a strong benefits package best aligns with his family priorities, even though the hourly rate is lower.

Tools to Help You Choose

Resumly offers several free tools that can clarify your decision:

• AI Career Clock – Visualize how different salary structures affect your long‑term earnings.
• Job Match – Find roles that fit your preferred employment type.
• Skills Gap Analyzer – Identify which skills you need to thrive as a contractor or full‑time employee.
• ATS Resume Checker – Optimize your resume for either contract or permanent job postings.

Leverage the AI Resume Builder to craft two versions of your resume: one highlighting project‑based achievements for contracting, and another emphasizing long‑term impact for full‑time roles.

Frequently Asked Questions

1. Can I switch between contracting and full‑time frequently? Yes, many professionals adopt a “portfolio career” where they alternate between short contracts and permanent roles. Just ensure you maintain a financial buffer during transitions.

2. How does tax filing differ? Contractors file as self‑employed, paying quarterly estimated taxes and possibly a self‑employment tax of 15.3 %. Full‑time employees have taxes withheld by the employer. The Resumly Career Personality Test can suggest which tax approach suits your risk tolerance.

3. Do contractors get paid for holidays? Typically no, unless you negotiate a retainer or include holiday pay in your contract rate. Full‑time employees usually receive paid holidays as part of benefits.

4. Which path offers better career advancement? Full‑time roles often provide structured promotion ladders, mentorship, and internal training. Contracting can accelerate skill acquisition but may require you to proactively seek leadership opportunities.

5. How important is a professional network for contractors? Extremely important. A strong network fuels a steady pipeline of gigs. Use the Networking Co‑Pilot to automate outreach and stay top‑of‑mind with potential clients.

6. Is health insurance more expensive for contractors? On average, individual plans cost 30‑40 % more than employer‑sponsored plans. Compare options on the Resumly Free Tools page to find cost‑effective coverage.

7. Can I negotiate benefits as a contractor? Yes, you can include a “benefits stipend” in your contract rate or ask for a higher hourly fee to cover your own insurance and retirement contributions.

8. What if I’m unsure after the analysis? Start with a low‑risk, short‑term contract while keeping your current full‑time job (if allowed). This hybrid approach gives real‑world data without sacrificing security.

Mini‑Conclusion

By weighing financial stability, benefits, skill growth, and personal lifestyle, you can decide between contracting and full time in a systematic way. Use the step‑by‑step framework, run the numbers with Resumly’s free tools, and align the choice with your long‑term career vision.

Ready to take the next step? Visit the Resumly homepage to explore AI‑powered tools that streamline both contract and full‑time job searches, and start building the resume that lands you the right opportunity today.