Hello there. This is the first installment in a hopefully ongoing series, in which I will be documenting my journey as a self employed software consultant in Denmark.
In this article I will try to explain my thoughts on why going the independent consultant / contractor route makes sense to me, as opposed to working at a consulting firm. To put things into context, I have a masters in Software Engineering from Aalborg University and 2.5 years of experience at a medium sized danish consulting company, which specializes in cloud-based IT systems. I am 30 years young.
I see full time employment as a kind of package deal. This package includes the following:
- Paid vacation
- Paid sickness (to a pretty high limit)
- Paid first sickday of child
- Psychological safety: You know where the next paycheck will come from, and you know what it will be. You have support behind you in case things go wrong with a client.
- Social events
- (Hopefully) good colleagues which stick around
- Networking opportunities: You get to work with a lot of people, which you will know moving forward in your career.
- Projects being found for you. You do not have to sell yourself.
- Administrative stuff: You don’t have to care about company stuff like taxes, accounting, insurance etc.
So what are the drawbacks in exchange for all this goodness?
- Money: This is the main item for me. I am kind of a FIRE (financial independence, retire early) type, so making money early(ish) in life is very important to me, as the early money has more time to grow via compound interest in the markets. As a consultant at my previous job, I was being paid a fraction of what I made for the company. To be fair, included in the “price” are all of the abovementioned benefits, but at least for me, it is not a good trade. I am rarely ill, have no children, am very confident in my technical abilities and don’t mind the added administrative burden. I am, of course, assuming that I can manage to be employed most of the time. This is in no way a certainty, and if this experiment fails it will be here. I do think that times are very good right now for credentialed, semi-experienced software engineers, so I am not too worried, but we will see.
- Single source of failure: Since you gain all of these benefits through your employment as a package, you lose it all at the same time as well, when you leave. This hurts if a lot of your free time activities and social connections are through work, which it might be because it is easy to just go along with whatever is being arranged at work. I would recommend diversifying your social / event sources, even if you don’t take the nuclear option and go independent like I did.
- Motivation: I had a hard time being motivated to do a good job in the end, as there was little upside to it, I felt. I felt I could have been a vastly inferior engineer without being fired, and being a better engineer did not, from my short experience, result in meaningfully more money.
- “Jobløn”: I am not sure what it is called in english, but the normal job contract in the danish consulting world is basically that you aim to work X hours in a week (eg: 37), but can be asked to work more without additional compensation if the project requires it. This is justified because of “higher” base pay. This creates a slight incentive for the company to create a situation where the employee works more than X hours, because the company expenses by the hour, so every hour the employee works more than X hours goes straight to the bottom line. My personal experience is that no leader I’ve had has tried to game it (I think), but in my last job I was pretty fanatical about not working more than 37 hours, and it still happened sometimes. In actuality, it is hard saying no when a deadline is looming and the team needs you. It always left a sour taste in my mouth. Now I get paid for every minute that I work, so doing overtime doesn’t feel like I am being taken advantage of.
- Reduced control of pension and investments: Depending on where you work, your company has often negotiated pensions for their employees with a pension fund, and you have little say in how it is invested or how much the fund takes for their work. As an independent, you have full control of your pension and investments in your company (which pay lower taxes than private investments).
That is all I can think of right now. I am really enjoying learning what it takes to run a company and what you can do with it. Overall, it is more “modular” than salaried work. You can go completely bare bones and basically not pay for anything, or you can spend some money to try to get the perks of salaried work that you want (I pay for an office that I go to every day so I can get some socializing in and good cantina food)
Another thing: by necessity, you are negotiating your rates with clients more often as a consultant. This should ensure that you are continually being paid about the market rates, if you are not short selling yourself, and get more experience overall being “near the money”.
With all being said, even with all my complaints, I wouldn’t recommend jumping into independent consulting without the experience from a job. The experience and network I gained on the job are invaluable, and I was learning all the way to the end (I quit basically when the learning slowed down, which I took as a sign that I was more or less ready).
Hope it was an interesting read. Next, I’ll get a little more practical and talk about how my companies are structured.