Re: Transition from employee to consultant--any gotchas?

Subject: Re: Transition from employee to consultant--any gotchas?
From: Al Geist <al -dot- geist -at- geistassociates -dot- com>
To: "TECHWR-L" <techwr-l -at- lists -dot- raycomm -dot- com>
Date: Tue, 24 Aug 2004 07:01:56 -0600


Regardless of how open the company is about paying you a retainer for your services, or selling you equipment for a buck, I would take your severance pay in lump sum. You said yourself that the company is on it's last legs. If you don't get the money up front, there is a good chance you will never see all of it. I say this from both personal experience and from the experience of close friends and relatives. I was offered a severance package once similar to yours. I got two biweekly checks and that was it. The company declared Chapter 11. Since I was a contractor, instead of paying me, I became a creditor...and one of the smaller ones at that which means there was nothing left for me after the big creditors were paid off. Sure I could have sued, but I was a single parent with two kids and a mortgage....do I sue, or do I feed the kids?????? And even if I did sue, I wouldn't have gotten much than personal satisfaction over winning. Economically, it was wiser to accept the fact that I made a mistake and move on. If you get the severance package in a lump sum, you won't have that worry.

As for it impacting your unemployment, if you are paid on retainer, that will probably be enough to negate any unemployment anyway, and there is the fact that as a consultant you will be self-employed. The self-employed do not get unemployment.

Paying the severance in biweekly installments will also raise questions with the IRS because it appears to be just a different way to pay wages.

SO, my suggestion is: get the severance in a lump sum, then enter into a consulting contract that pays a regular retainer. Keep the two separate.

Al

Dick Margulis wrote:


1. They're giving me severance of a few weeks' pay, to be paid in biweekly instalments. My understanding is that this probably will prevent my collecting unemployment benefits until I've received the last installment. Not a problem. However, I don't think this prevents me from entering into a contract with the company effective today.


--

Al Geist, Geist Associates
From Concept to Completion
Technical Writing, Online Help Applications, Marketing Collateral, Web Design, Award Winning Video, Professional Photography
Office: 505-294-8855

Cell: 505-400-4128
E-mail: al -dot- geist -at- geistassociates -dot- com <mailto:al -dot- geist -at- geistassociates -dot- com>
URL: www.geistassociates.com

"When the situation is absolutely hopeless, you have nothing to worry about."
Compliments of The Monkey Wrench Gang




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Transition from employee to consultant--any gotchas?: From: Dick Margulis

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