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By 'contractor' I do not mean 'independent contractor.' That is a different thing entirely and comes with a bundle of tax implications. An independent contractor is generally a specialist hired for a particular purpose, say, an electrician who installs power panels. You may recall some years ago when Microsoft hired a bunch of people, treated them exactly the same as employees for years and years, and was spanked by the IRS for that. That case drove a lot of clarifying rules around what counts as an independent contractor. While there are a few contractors who have their own companies and function as independent contractors according to the IRS guidelines, mostly what I mean by 'contractor' is essentially temporary staff hired from a firm that specializes in this. A firm that needs a few experienced engineers for some project, for example, would do well to go to a staffing agency, what we call a "job shop" in the trade, and outline the sort of person they are looking for. In aviation, this is a time honored practice. What's the difference? I have worked for several job shops. Each of those took better care of me as a contractor than the companies I worked for as a direct, except for training. Contractors are expected to already be trained, which is more or less fair. The direct employees get to go to all the cool classes, and as a Boeing employee, I spent literally thousands of hours in classes both on the clock and "after hours." Boeing had an excellent training program back in my day, and the only limit on how much you learned was the amount of time you wanted to invest in yourself. We all know what a direct employee is. That's when you get hired by the company you are working for, get paid by them, and have some small theoretical chance of moving up in the hierarchy if you do everything right. Allegedly. I have worked a great many places, seen a lot of stuff, and it is the rare company indeed that lives up to the American Myth of the Workplace, even episodically. Different kinds of contractors Here in aviation, there are many different kinds of contractors, of course (except management contractors; there do not appear to be any of those, probably for legal reasons). There are contract engineers, contract mechanics, contract inspectors, contract planners, and contract drafters, to name the ones I am most familiar with. There are even contract pilots. You can find us holding together staid old programs after all the best and brightest of the directs have been reassigned to other, more sensitive projects. You can find us on these same new projects working hand-in-hand with the directs, holding the fort, stabilizing the new processes, and bringing decades (literally) of experience to bear on the same old problems which only appear to be new. What do contractors actually do? A contractor does whatever the direct employee would do. We even have the same manager. Really, the only way to distinguish us from a direct is to see where the paycheck comes from. This is why we are considered temporary staffing, or on-demand staffing, and not independent contractors. So, if the group is a structural design group, we design structure. If it's an aircraft maintenance A&P group, we wrench on airplanes. In short, we do whatever the group does. Why hire a contractor Aviation has been characterized as the "hire a bunch, fire a bunch" industry since the Great War. The US OEMs are not really interested in stable workforces. They can't be given the cyclical nature of the industry. Actually, that's not quite fair. Aviation industry executives would love to be able to train up and maintain a stable workforce. No, really, that's true. There are a number of reasons why. The basic paradigm of HR is the stable workforce. Employees are hired, paid, trained, promoted, and their managers get to know them as people, sometimes, resulting in a better understanding of their abilities and attitudes potentially resulting in assignments that benefit both the company and the worker. Contractors are just hired when needed and let go when the need evaporates. Nothing personal, strictly business. Impact of the business cycle Another reason is that a stable workforce would be a sign of a steady flow of orders, a stable business, itself a sign of the coming apocalypse, I'm sure. Since World War I, aviation has been a cyclical industry. When the investment bankers haven't trashed the entire global financial system and people have jobs and money to spend, they often fly. When the the world markets haven't been burned down by the C-students we didn't hire, and businesses are making deals around the world, they tend to fly. When people fly a lot, airlines and charter operators make money. When operators have money, they like to buy new equipment. Those orders come in very close together because a healthy economy, a growing economy lifts most boats at the same time. This bunch of orders drives a hiring cycle, bringing in new people as well as bringing back some of those who were laid off at the bottom of the previous cycle, assuming they are willing to come back. Conversely, when the financial system is trashed, through incompetence or malice, all those boats sink together, drying up orders pretty much simultaneously, leading to a firing cycle which goes by a number of different euphemisms these days like "leaning down," "right-sizing," and "excess reduction," one of my personal favorites. Good, if painful, management practice This is smart management on the part of the OEMs. In a high labor product like aircraft, if there are fewer orders, the production rates have to drop and that means the workforce has to be cut back. It's a variable cost reduction strategy. Again, nothing personal; it's just business. Yes, I know it's your life, your mortgage, your kid's college fund, etc, but from the executive's perspective, it's just business. If you read Drucker, you'll find that this is right and proper. Management's first responsibility is the survival of the firm. No one has a crystal ball (otherwise there really would be no excuse for the current economic debacle), so management is obligated to play it safe and conservative (financially speaking), which results in layoffs when orders collapse and customers defer deliveries. Rapid ramp up Even at the bottom of the cycle, there are still people working, doing constructive things. Not all deliveries halt, of course. Some products go to governments, some to firms in foreign countries, and some to domestic firms that still have money (usually those in counter-cyclical industries). When the economy recovers, which isn't going to be for at least five more years here in the US, and the new orders roll in, they will come in bunches. This will requires a fast ramp up in personnel, preferably people who already know how to do the job to minimize the costs associated with hiring, training, and increased productivity. This is where contractors become very attractive. A hiring manager can expect a contractor to be productive very early on, often the day they arrive on site. Essentially, show them the locations of the bathroom and the coffee pot and point them at the problems. Believe it or not, we enjoy the challenge. What is different from being a direct employee I've worked both contract and direct. There really is a difference. Contractors know we are there only because we are highly productive. We tend to produce a lot. In my experience, direct employees tend to suffer from more job-related depression and so aren't as productive. On the other hand, they don't have to be. When the orders evaporate, it's the contractors who will be first out the door, not the directs. They get to be second. Not for everyone Not everyone is comfortable being a contractor. I know when I first heard of the concept I was horrified! Those poor people had zero job security! Well, I as a direct didn't have much more; I just didn't know it. There are questions of benefits (get them from your job shop and buy the ones you want and actually value), moves (not the best life for people with small children or ailing parents), and employment history for mortgages (I don't have one and you couldn't give me one until the bankers are in jail where they belong). Without question, there are a number of downsides to the life of a contractor. We move around a lot, we have no guarantees in terms of employment, and we are responsible for our own training, our own moving costs. On the other hand, we make a lot of money. This is another reason executives would prefer to hire directs. They are less expensive. On the plus side, we have a lot more control of our lives than do directs. We work, in part, because we enjoy it and we are good at it. We also work because we aren't financially independent, but some of us get there, a lot more than directs. We become a lot more responsible for ourselves because we have to be. Again, this is not a life for everyone, but I enjoy it. Achieving balance Having the option of working as a direct employee or as a contractor gives us working people a range of options that are nice to have. I have worked in a number of places where we get hired in initially as contractors and then are invited to stay as directs. When fresh out of college, with little in the way of experience to offer other employers, I took the opportunity to absorb as much training and education as I could, as well as experience on different programs and in different organizations. That worked for me. People with children or elder care issues who are geographically anchored for a time should seriously consider a direct employee position. For the companies, having a source of contractors available is helpful. They can keep their key people through the down part of the cycle, and still rapidly ramp up with contractors as the new orders come in. This offers executives a flexibility in the work force that they would not otherwise have, and given the exigencies of the current economy, we all need some flexibility. Terry Drinkard is currently consulting on an aviation start-up. His interests and desire are being involved in cool developments around airplanes and in the aviation industry. Usually working as a contract heavy structures engineer, he has held positions with Boeing and Gulfstream Aerospace and has years of experience in the MRO world. Terry’s areas of specialty are aircraft design, development, manufacturing, maintenance, and modification; lean manufacturing; Six-sigma; worker-directed teams; project management; organization development and start-ups. Terry welcomes your comments, questions or feedback. You may contact him via terry.drinkard@blueskynews.aero Other recent articles by Terry Drinkard:
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