What is the value of a Benefits plan? 5

[rjgoebel]

I am in the boat of not being sure how important a benefits plan is, how much the things are going to cost me if I cannot get one in my work, and if I need to be searching for a job where benefits are present.

I am fresh out of school and am now 'technically' working as an independent contractor. As in, I am getting paid as a consultant or self-employed individual. I am pretty new to all of this and feel as though I have been thrown in with the sharks. In some respects I am weary that my employer is taking advantage of me as a good young EE with not much experience with the monetary side of consulting.

I have estimated my salary (although it is VERY rough at this point) after working here for about a month and a half. It is comparable to the starting salaries of those graduating from Rose-Hulman with me in EE. But, I am not recieving a benefits package because I am not an employee. In addition, my taxes are not being withheld by my employer because I have been labelled as a consultant, independent contractor, and self-employed. This means I have to bear the brunt of health insurance, dental plan, etc, etc. Problem is, I really am enjoying my job here in forensics as an EE but I am worried that something fishy is going on.

Anyone care to opine on the benefits thing?

 

[JAE]

Benefits - insurance and time off, etc. usually amount to about 30% to 40% of your base salary...may range more than that in some cases - but that's what I've seen.

 

[UcfSE]

Benefits depends a great deal on the employer. Some benefits are worth a LOT of money and some are much more basic. You will have to keep track of your taxes too and report those as well. That's time out of your day, and time is money. Insurance can easily cost a $100-$200 a month or more. You may also be missing out on tuition reimbursement, vacation/sick time, paid seminars and so forth. Those can add up very fast if, say, you attend a seminar that costs $1000. Are you under an employment contract with a company where you have to work for so many months before they hire you permanently?

 

[zdas04]

If you really like what you're doing, then you need to set up long-term relationships. I don't know about EE's, but the ASME has a really good package of insurance policies that you can get into, I'd bet that the EE version also has them. As a minimum, I'd look at:
- Business & Professional (including errors & omissions)
- Health
- High deductible major medical

Living without Dental and Eye Sight is pretty easy until you have kids.

You also need to be contributing to an IRA or 401K (which has higher maximum contributions, but more paperwork) since it is unlikely that Social Security will be useful in 40-50 years when you need it.

David Simpson, PE
MuleShoe Engineering

http://www.muleshoe-eng.com

Please see FAQ731-376 for tips on how to make the best use of Eng-Tips Fora.

The harder I work, the luckier I seem

 

[metengr]

In reading your post, it sounds to me like you are underpaid for your work. Typically, most hired guns that we bring in for special projects or outage related activities are based on a negotiated hourly rate.

If you are indeed a recent graduate, and are working as an independent contactor you better go back and re-figure your base salary plus health insurance benefits on an hourly rate basis. If you are using only base salary, and it is comparable to a starting salary for graduate engineers, you are underpaid!

Time-off is typically not figured with hourly rates as a contractor because if this was the case, you would be priced out of the market.

 

[SlideRuleEra]

I concur with all of the above. zdas04 suggestion to look into IEEE insurance programs will serve you well.

About Federal Income Tax - since you are not having any money withheld, you need to start quarterly payments of estimated taxes, and do it NOW. Otherwise you almost certainly will be facing a (monetary) penalty next spring for underwithholding. Here is a link to the relevant publication, look at info starting on page 18

http://www.irs.gov/pub/irs-pdf/p505.pdf

If your state has income tax, the same type situation probably applies, too.

http://www.SlideRuleEra.net

 

[Rich2001]

You are being snookered!

Working as an idependent contractor doing engineer work?

After reading several of your posts, I know you are not a licensed engineer and working as a consultant to Mid-West Forensics. You need to read the Professional Engineer's licensing laws for Indiana. There is a chance that an opposing attorney in a Forensic Case will file a complaint against you.

By hiring you as a consultant Mid-West Forensics has jeopardized your career, themselves and their clients.

Vita sine litteris mors est.

 

[SlideRuleEra]

So many things to remember - there is also (Federal) Self-Employment Tax, this 15.3% (in 2004) of your gross earnings. For practical purposes it is both "halves" of what would be Social Security payments made by a employee and his employer. Estimate payments of this tax can be included in the Quarterly Tax payments (that I discussed above). Here is a link to the publication on this subject

http://www.irs.gov/pub/irs-pdf/p533.pdf

p.s. Suggest that you followup on Rich2001's advice, too.

http://www.SlideRuleEra.net

 

[EddyC]

I have to agree with Rich2001. Its sounds like you are doing engineering without a license. This is a big no-no. If you were an employee this wouldn't be an issue but since you are an independent business entity, you need a PE license.

 

[livingston]

Just as a baseline.... single, nonsmoking, female: $300/month for basic health insurance. (medical and dental)

Renegotiate!

 

[Beggar]

Also, recognize what zdas04 alluded to above: You are PERSONALLY liable for mistakes that you make. As a contractor, you're not going to be covered by the company's liability insurance - you need your own. Without your PE, I don't know if you'll be able to obtain it, though.

On the tax front, recognize that you're also liable for the company portion of Soc Sec - that's another 7.65% that you'll be paying in taxes.

I don't know that this liability is on you but the definition of an independent contractor is very strict by the IRS. If you're working hours set by the company and using company resources (desk, computer, etc) then you're not going to be considered a contractor by the IRS.

I think you're being taken advantage of.

--------------------
Bring back the HP-15

http://www.hp15c.org

--------------------

 

[vooter]

rjgoebel,

1. Don't get dscouraged by the apparent tone of the replies; being a registered PE is IMPORTANT. And we care. Also, engineering as a profession is honorable to the nth degree. And a great many engineers have been those who've been on their own for most of their careers. But that's after they established themselves accordingly. Even Nikola Tesla worked for someone first...

2. Your first job is IMPORTANT. Really important. So important that... you should ask this person to hire you as a for-real employee. Even if it's for less pay. The EXPERIENCE is more important right out of school.

3. Benefits are nice. Get them. Want them. You will need them.

4. The associated hassles with self-employment are real. Avoid them for now.

 

[rjgoebel]

I want to clarify what I am doing so as to not get myself and my company in trouble. At this point I am not offering sole consulting or acting as an authority on any cases I am working on. The President of my company has been careful to match me up with other PEs that work for other companies when I am working on cases, and anything else I am doing is mainly just documenting things and research (thus far).

I realize that there are limitations to what I can be doing and what I can offer because I am fresh out of school. I am nowhere close to the point where any of my opinions or conclusions could be used in litigation. I've been thinking about what I need to do to get my PE, because I know that is pretty important for any kind of consulting.

Concerning my benefits (or lack thereof), it definitely is a cause for concern, and I definitely don't FEEL like a self-employed consultant but financially that is what I am being treated as in the company. Maybe I am being snookered, if that's a good way of putting it. The paying double into social security and Medicare is definitely rubbing me the wrong way.



Jim Goebel,
Electrical Engineer
Mid-West Forensics, Inc.

 

[EddyC]

If you are an independent business entity and are engaging in engineering, you need to have a PE. It is not sufficient that your work is being reviewed by PEs that work for your client. An an independent entity, you are NOT legally under the supervision of your client.

 

[IRstuff]

Either that, or you're really not even an independent contractor.

Microsoft got dinged by the IRS for claiming that many of their workers were independent contractors. However, the "walks like a duck, quacks like a duck," rule applies.

If you are managerially treated like an employee, e.g., under the direct supervision of a PE, then you are not an independent contractor and the company is simply trying an end-run around the IRS.

TTFN

 

[EddyC]

To be legally under the supervision of a PE, you must legally be a part of the PEs business organization. If you are filing a tax return that indicates that you are an independent entity, then you cannot claim that you are under a PEs supervision.

 

[zdas04]

Jim,
In a lawsuit prior to my retiring, a lawyer asked me "do you set the hours for the construction company?" A "yes" answer to that seemingly innocent question (that I hadn't been prep'ed for) would apparently have made us liable for the the FICA and medicare on a $30,000/day payroll. It would have also opened a bunch of other doors (like why we didn't provide health care and retirement for the laborers on the crew). Luckily, I got that $64 million question right.

The laws are getting much more strict defining employee/employeer relationships. IRStuff's "Quacks like a duck" is the law of the land. I often have to sign affadavits in my current positions testifying that the client "provides scope-of-work instructions, not performance-of-work instructions".

I don't think that your situation passes the sniff test on this one.

David

 

[rjgoebel]

I just talked to Mr. Boss about all of this. He told me that I am an employee for this company and that the money I am making when working on specific cases is commision, and technically it is not considered consulting.

He didn't really give too much on the whole benefits thing, though. He said at best that they might be able to help me out with paying for benefits, but that the company is small enough that benefits is not something that people expect in this field. Our company is only about 7 employees small, and there aren't very many or large forensics companies out there.

EddyC that made a lot of sense how you put it about filing as an independent entity and holding your PE liscence. I do not have my PE yet so I cannot file taxes as an independent entity because I am not legally allowed to practice engineering as a consultant on my own. OK, makes sense. But I am allowed to offer my opinion and use my EE background to reach conclusions on electrical engineering issues in forensics, aren't I? I doubt too many of you have direct experience doing consulting as an EE in the forensics field, but if anyone does I would LOVE to hear how you got started, more specifically about how the pay started and how taxes were filed.

I think that all of this will become a lot more clear once I file taxes for the first time; or at least I'm hoping it will. How many of you signed a contract for employment in engineering? What about a no-compete clause in your agreement to work?

I also told my Mr. Boss about the option of my going to work for a more traditional electrical engineering company for a period of time while I was working to get my PE. That way I could make more money, get an actual benefits package, and also prepare to enter into the field I am in right now with a full head of steam if I want to come back to it (which I likely will). Mr. Boss is the owner of our company and he didn't really like this idea too much, and made it seem as though if I got out and uninvolved in the company, I was out for good. I would bet money that he was bluffing, counting on my wanting to remain here doing what I am doing enough to hear him and not want to go. But I am confident that I could return if I wanted to after working for a GE or similiar company. Would you recommend doing this? I don't want to limit myself to only working in forensics and fire investigation for the rest of my life when after 10 years no one would want to hire me because that's my only relevant work experience and I am too far out of school to be able to re-tool and get molded to fit in at different places..

It seems like PE's have the ability to demand a lot more money when consulting than do non-PE's. In fact I am very uncertain about the ability of non-PE's to offer valuable consulting at all (or the perception of that fact in the field). I actually need to talk to one of my EE friends from Rose-Hulman that was in my class and went directly into consulting after his undergraduate degree, up in Boston somewhere.

The only way I think that our company could get into trouble is if legally I was not qualified to comment/opine on something and I do, and the case gets all the way to court. Realistically, any case of enough importance that litigation would be an issue, my first priority is protecting myself and not overstepping my bounds as a new EE. There is something in court called a Dobler (sp?) challenge, which I need to learn a lot more about. What it amounts to though is that a lawyer calls your credibility into question when you are on the stand. My boss as a general origin and cause expert on fires said that he had a Dobler challenge once in court and it was the scariest thing that ever happened to him. You're done in the field if you don't get past the challenge in the courtroom, because no one will hire you once they know about the ghost in the closet that can always be brought up in litigation. I'm on track to likely be on the stand as an expert in maybe 6 or 7 years, provided I get my PE and all the liscencing needed for the field. I hope... But then again maybe it would be better to get some more traditional industry experience at a place like GE..

 

[zdas04]

You are the only one that can answer the quetion "should I leave?". The few engineers I've known in forensics have been there for their whole career and plan to consult in the field after retirement. None of them can imagine ever doing anything else.

If you feel that way then you would be a fool to leave now that you've cleared up who does the whole withholding thing and you don't hate your salary or working conditions.

This ain't a game. Noone is keeping score. Enjoying your work, being good at it, and being satisfied that you're being compensated fairly is just about as good as it gets.

David

 

[SlideRuleEra]

Jim - I have read your latest response very carefully. For a moment, forget about electrical engineering, forensics, PE, etc. - let's talk about business - which is independent of all those factors.

Mr. Boss says that the money you are making is a "commission". Commissions are treated the same as salary for tax purposes. Mr. Boss's firm is required, at a minimum, to withold Social Security taxes from money paid to you. The money withheld must be deposited on a regular basis (usually weekly or monthly dependent on the firm's total payroll), with the Federal Government (this is done thru a commerical bank). If this is not being done, and you say that it is not, the Mr. Boss's firm is violating the law. This is a very strong clue that things are "not right" at Mr. Boss's firm.

If you wait until you file your taxes to address these issues, in the spring of 2006 I assume, you are going to be in for some very "nasty" surprises. Do you expect to get a Form W-2 from the firm? I doubt it. I hate to say this, but I suggest that you go see a lawyer, now.

http://www.SlideRuleEra.net