When entering the consulting world from a permanent position many questions arise. However, the most immediate question and the first step in educating yourself in consulting is learning “How will I be paid?”
This question can be heavily weighted with stress when considering a career as a contract consultant for Health IT. There are four main methods of payment that occur between Healthcare Organizations and consultants. Below is a very brief introduction into the different options:
Salary Consultants – Salaried consultants work with a firm that keeps them on payroll. Working as a salary consultant means that you will have a regular pay check, possible bonuses and paid bench time when you find yourself in-between contracts. Typically you will have benefits offered as well. Most people find bench time very appealing. However, it’s very important you make sure you have an understanding of what will be available should the firm you join be unable to find a project in a timely manner.
W2 Hourly Consultants – In this case you’re submitting a timesheet and receiving a regular paycheck. The consulting firm you are working through handles the taxes and liability. Benefits may be offered under this type of arrangement as well. Along with the regular pay you’ll most likely be on a similar schedule for travel reimbursements. It’s considered to be the easiest and simplest of options when contracting. You will most likely not be provided with any income while you are in between engagements. Because of this, you will typically earn a higher hourly rate while you are on engagements than if you were being paid a salary.
Corp-to-Corp – Under this arrangement you bear the cost of maintaining a corporation. The consultant will be responsible for taxes and providing themselves with necessary benefits. Since you are operating as your own business, you will be responsible for funding yourself in between engagements.
1099 Consultants – This is a classification that is used if you do not have your own corporation in place and are operating as independent contractor. Many Healthcare IT projects do not allow an individual to truly perform their tasks and bill clients in a way that is in line with IRS guidelines for independent contractors, therefore this method is not used very often. Most consulting firms will not compensate consultants under this arrangement. Because the circumstances of most projects will not meet the IRS requirements for this type of an arrangement, it is really important that you look at all the details if this type of an arrangement is offered.