Many young people, especially those who are just starting their careers, face a big dilemma related to what form of employment will be most beneficial for them: a custom web app development company, freelancing, or perhaps something else. We often see similar questions on the forums, so we decided to create another post based on the opinions of Digiteum clients.
Respondent profile
217 people took part in the survey, of whom up to 86% were programmers. In addition to them, our survey was also filled out by testers (7%), analysts (2%), architects (2%), project managers (1%), and other IT professionals (2%).
Most respondents (66%) have more than three years of commercial experience.
The largest group among them is employed on a contract basis (47%), slightly smaller on a B2B basis (36%). Significantly fewer respondents work on a contract for work (6%), a commission contract (5%) or a contract (1%). Only 3% are self-employed.
Forms of employment – types and distinctions
In the IT industry, it is common to encounter different variations in the form of employment. On our portal, when an employer fills out the form, he has 3 options to choose from: employment contract, B2B, and other (i.e., contract for work, contract of mandate, etc.). As the results of our survey showed, by far the first two options are the most popular, and it is to them that I would like to devote attention in this post.
Employment contract
- Employment contracts are the most popular and considered the most stable form of employment. It is regulated by the Labor Code, thanks to which it guarantees the employee a number of social entitlements (such as, among others, paid vacation, paid sick leave, parental leave, etc.), minimizes his liability for any damage inadvertently caused, and shifts all responsibility for the business venture to the employer.
- Its most significant aspect is the obligation on the part of the employee and the employer to cover the full payment of social security contributions and personal income tax. The average statistical web app development company that favors an employment contract believes that such a scheme is simply the most profitable – all formalities are clearly defined, the work is relatively stable, and (theoretically) there is no possibility of taking it home.
- Opponents of this form of employment claim that it is inflexible and does not fit today’s realities. This is because the contract includes, among other things, statutory regulation of working time, which does not quite suit representatives of such an industry as IT, for example. The consequence of exceeding working time norms – even with the employee’s consent – can be a fine imposed by the State Labor Inspectorate.
- Another disadvantage may be a relatively lower salary “on hand,” at least with a B2B contract. In the case of an employment contract, the employee has no choice of taxation and is reliant on settlements with progressive taxation depending on the amount of income (i.e.: with a higher salary, he pays more taxes). Moreover, part of the contributions are paid by the employee and part by the employer, so the gross amount shown on the contract is not the full cost of employment borne by the employer (to whom this type of contract pays the least). For this reason, the net salary offered by him with an employment contract is quite a bit lower than for other forms of employment.
B2B (Business to Business)
- B2B, or Business-to-Business, is an increasingly popular form of employment. Its first and essential feature is that, as the name suggests, it is a company-to-company contract (as opposed to an employment contract, where we are dealing with an employer-employee agreement). This means that the contracting company should not decide on the contractor’s working hours or the contractor’s ability to take vacation.
- B2B is a more economical solution primarily for the employer (the contract is included in the cost, VAT is on the side of the employee), but also for the employee (more money in his pocket – the costs are Social Security, income tax, and often accounting). A big advantage for the employee here is also the possibility to save on tax, thanks to the possibility to include company expenses in deductible costs.
- What’s more, with this type of contract, the contractor has complete freedom to set the time frame for the work. The employee decides for himself how much and for whom he works, as well as what contributions he pays.
So what are the disadvantages of this contract? Well, in the case of B2B, if you do not work – you do not earn. There are no paid vacations, sick leave, or parental leave, as in the case of an employment contract.
Another important aspect is the fact that a self-employed person bears full financial responsibility for the actions of his company, that is – if the principal fails to repay the service performed by the contractor, the contractor still has to cover all costs related to his business.
What form of employment do IT Specialists prefer?
The results of the above survey clearly show that, according to our users, the most favorable form of employment is B2B. This option was favored by 56% of respondents. In second place, of course, was the employment contract, which was indicated by 30% of respondents.
The golden mean
Many of you mentioned that the most favorable form of employment is a combination of features of a B2B contract and an employment contract:
We at Digiteum would prefer (perhaps quite forward-looking) to combine the advantages of a B2B job with an employment contract, i.e. less taxes, the possibility of accounting for costs as in B2B, all social privileges, and treating the contractor like a regular employee in the custom web app development area.
It’s hard to disagree with this, and indeed, this type of solution is often used in the IT industry. Establishing terms of cooperation more favorable than the absolute regulations in the Labor Code is not surprising here. Although this type of contract still seems to be less stable and convenient (if only because of the aforementioned “dealing with invoices”), economically – it is hard to find a better solution here.
