Is it better to be a consultant in a time of layoffs?

If you service big companies, not really. BigCorps will shed their permatemps before they cut employees loose, so you're really just first on the chopping block if you are in a staff augmentation situation.

Middle market, yes and no. We get more 'steady state' type labor from them, whatever it takes to get the business running day to day. However, new projects are way harder to sell. To wit, my firm is currently unable to keep up with MSP work, but the project selling side is starting to get pressured on utilization and it seems like clients are scaling security stuff down to just the barest regulatory requirements.

Also, if you are at a blingier outfit your clients are going to start price shopping. They'll be back when they realize the quality isnt as good or if it turns out you CAN put a price on tribal knowledge... or maybe you'll meet an old contact at a trade show and they'll tell you the new upstart competitor is taking your lunch after all.

tldr we are not just sitting on our hands. the firm as a whole will do well but every consultant has to prove their worth by billing and that is not guaranteed to be easier.

I was an established freelancer when the bubble burst in 2000-2002. I'm too lazy to dig up my old records to get the timing, but recall that there was an initial lull in work offers, then a pretty sizable bump maybe three to six months later from companies that had realized they'd cut too deep but still had work that needed doing, then things leveled off again at pretty much the same level as before the crash (well before the crash was "over"). I had one recurring job that had used to come up twice a year that stopped coming up; other than that I wasn't much personally affected.

Later boom-and-bust cycles I barely noticed, things stayed pretty steady.

It's a very different industry than it was 20 years ago, though, so I'm not sure how much predictive value that anecdata has. This time around I expect companies to be more willing to experiment with the low-cost offshore options than they might have been last year; offshoring wasn't really a well-established option back then.

There are different types of consultants. The bad rap consultants get is based on the stereotype are that they are expensive and deliver a poor-quality job. And this stereotype exists for a reason. Most consultants ARE bad, and deliver poor work.

I am a consultant. And my firm focuses on clients where we have short engagements and focus on specialty work that you can't easily hire for.

The type of work I do doesn't get you cut, because you're in and out and try to deliver a great value to your clients, and you keep them for years in repeat engagements because you do it and can prove it beyond a shadow of a doubt.

As for the former type of consultant, you'll get cut, and you'll get cut so fast your head will spin. And the reason you'll get cut is because your client wishes it could just hire employees, but sometimes they can't and they find consultants instead.

I was consulting in 08-10, the last tough time. Anecdotally, it was ~fine, but you need to be okay dealing with more chaos in your life. Your budget comes out of different pools of money than the FTEs, which means you can be hired during layoffs, but those pools of money don't "recur" the same way, which means you're going to have to have several clients ready to sell/pitch to. You're always 2-3 months from being "laid off", but because of that, you have some control over what might happen.

Consultants usually gets cut first, unless they're deemed absolutely essential - their manager might successfully fight for an exemption then. I'm a contractor and my client recently told me they won't be renewing in the new year and will replace me with a barely competent full-time hire instead - all because of the incoming economic downturn.

Anecdotal, but I started my consulting biz in 2010, when unemployment had peaked at 10% during the Great Recession. It was an incredible time to be a contractor because companies still had work to do, but were gun shy about hiring, so many of them relied on contractors to help out. I had more gig offers than I could accept.

It wasn't until a few years ago, when tech companies started their massive hiring sprees that contracting gigs really started to dry up. So while yes contractors tend to get the axe first in a downturn, at the end of the downturn it can be a lucrative business.

First let’s define what a “consultant” is. A consultant for a company can either be doing “consulting” where they are bringing in a specialize skill set and in the room who have a budget (CxOs) or they can just be doing staff augmentation where you are just another hands on keyboard coder embedded in a team.

Personally, doing staff augmentation type “consulting” is the fifth level of hell. You’re treated like crap, are easily disposable and it really does nothing for your career. You’re also not paid all that much.

On the other hand, “consulting” where you are bringing in specialized knowledge is great. You can charge and arm and leg is great.

Which is better in slow economic times is just the opposite. Companies hire staff augmentation type “consultants” because it doesn’t increase headcount and they are easy to get rid of.

Companies hire true “consultants” when they are going after new initiatives which they do less often during slow economic times.

I’ve done a couple of staff augmentation type projects early in my career. A couple of true independent consulting projects later in my career and I now work as a permanent employee as a cloud consultant at $BigTech.

Consultants often get cut first.

But they are often called in when the cuts were too deep, or to help with the cuts.

The advantage that a consultant has is that they're used to being "laid off" multiple times a year, so they should have a customer base they can use to level out.

It largely depends on if there is a project freeze or a headcount freeze.

Any negative economic blip is used as a recruitement/headcount freeze where employers can cut out the 'deadwood' without market/customer/shareholder/staff negativity. In that environment, consultants and contractors are valuable because the work needs to be done, but they can't hire the staff (hiring freeze + normal churn + "it's the economy" layoffs)

On the other hand, if projects are being canned, products aren't being developed, apps aren't being launched, that sort of thing then contactors and consultants are not in demand. It does take a lot to stop projects at that scale, and they tend to be focussed on a particular sector. I can think of 2008/2009 in finance (obviously), and 9-11 in the insurance industry (travel recovered very quickly).

There are a few variables to this. Are you a contractor or consultant (there is a difference). What you offer (warm body or solution). Location. Target companies size and industry sector. Economy status. Personal relationships with clients.

I started in '09 in the midst of the Great Recession, and did well. Companies were laying off, but still had projects needing done. Between 2010-2020, I also did well. 2020-now, I'm doing OK, but half the work, with regular (non-tech sector) clients have been worried about the economy, holding back on non-essential projects.

The biggest intangible though is how hard you're willing to go out and sell yourself. You have to have more than just knowledge, you have to have belief in what you're selling--which is yourself. If you can sell yourself, you'll do ok.

Consultants cost a lot more over the long term and aren't as productive as full-timers. Part of the rationale behind hiring a consultant is you can cut them whenever you want your books to look better and it's less admin overhead.

If you want stability, get on a project with ample funding from an org whose profits are consistent even through recessions. Whether you're a contractor or not your position is probably safe. I wouldn't want to be in a startup going through a recession.

I work for a Fortune 200 company. Our policy - publicly stated even - is to keep a large contingent of consultants on staff so they can be easily "adjusted" to right-size operations. That's a double-edge sword: consultants are the first to be let go but they're also the first to be hired.

I was a consultant during 9/11 and the ensuring economic meltdown, made worse by major Y2K projects wrapping up. Consultants were let go en masse. It was extremely difficult at the time to get new work because so few people were hiring either employees or consultants and for those that were there were hundreds of candidates trying to get that one job. Contrast that to a couple of years earlier where they were literally throwing around tens of thousands of dollars in sign-on bonuses.

Once you've been around this industry long enough you'll see this cycle repeat every 7 years or so (1987, 1994, 2001, 2008, 2015 - not so much, and now 2022). It's the IT boom-bust cycle.

Slightly OT:

Massive layoffs are happening for some companies, but the market is still extraordinarily great and it's currently incredibly easy to get a better job than you had when you were laid off. As long as the general environment doesn't tip over into higher unemployment, I wouldn't worry about this too much (but still make plans just in case).

When the dotcom crash happened, I was working as a software contractor - I was able to keep finding contracts but: 1) My rate went down to half what it was before the crash, and I was pretty sure the employees who stayed were doing better than me (w/ benefits, et al), 2) The work got a lot less interesting, and 3) I was constantly stressed out about contracts being renewed.

Not super surprising - contracting is a feast or famine business, but after a few years into the early 2000's doldrums I ended taking W2 jobs and never looked back.

I think that in the laying off phase, consultants + contractors are the first to let go. That's because they don't require severance and are easy to just cut for companies.

After the layoffs, I think when companies do need to increase headcount, consultants and contractors will be in huge demand, for the same reason: in a time of market uncertainty, they're just easier to let go and therefore cheaper.

When the economy comes back into full swing, I think we revert back to FTE as the default.

You can check https://www.contractrates.fyi/ to see what kind of rates people are getting these days.

Super short term, I'm bearish - I think hourly workers are going to face significant cuts. Short term, bullish - they'll be the first ones brought back. Long term, FTE will probably win out.

A lot of people here saying consultants are cut first.

I am not an expert, but my understanding is that sometimes accounting makes it so cutting headcount looks great, lower overhead, but stuff still needs to get done so consultants are brought in to actually do it.

Keep in mind that many of these tech companies are in California and the law changed a few years back to make it much harder to categorize someone as a contractor.

I’m not 100% clear on the law, but I think if you work more than 20hrs for a company or derive a large portion of your income from a single client that California might consider you to be an employee even if you have a corporate shell like an LLC.

I know that back when the law passed I was asked to share copies of invoices to other clients so I could continue to do work as a CA contractor and keep my client protected from any employment claims.

It depends on the region and the company - while contractors may be a cheaper option, in some parts of Europe there's legally mandated redundancy payments that employers need to make to full-time employees. There's also a "news factor" for companies letting FTEs go, so sacking contractors, or letting their contracts just run down can be the far cheaper, and less "bad press" option.

I guess, that some companies will want to retain their essential contractors, but might choose to shorten contracts to a rolling month-on-month or something similar.

From experience at a big aerospace company there were consultants that were hired before the last recession and I'm sure they'll still be there after the next.

From what I've seen, whether you get cut is based more upon how discretionary your specific project is rather than whether you are a contractor or an employee.

If a project is equally discretionary contractors will get cut first and without warning but I don't think that makes as much difference.

By discretionary I mean that cutting back won't cause immediate damage to the bottom line or easily visible long term damage to the company.

Being a consultant at a firm with a wide variety of clients does provide some stability, yes, more so if you are a generalist, even more so if you are willing to travel.

(Lots of firms need good engineers willing to work on (not always, but often) less sexy tech that are willing to travel. This is hard to find (see also: every thread about WFH) but pays well. Not bull-market-FAANG well, but well.)

Small companies I work for don't really use consultants. In the one case they were, it was for particular expertise, not available in house, that is central to the growth of the company. So I doubt they would be cut in this case, unless the company got into a lot of trouble (such that they would also be laying off staff).

Small sample size, so pinch and sprinkle.

Many laid-off people turn to consulting. Thus if you are a freshly minted consultant you will be facing competition from those in a similar situation.

The golden rule is to build and maintain a strong network. Easier said than done. Your client contacts could also get laid-off.

From my experience a company is more than happy to pay a lot for an external consultant that they can cut anytime, while they think long and hard about permanent costs like employees.

Not necessarily. Consultants were the first to go at my company.

At least in the Netherlands I have not noticed consultants being laid off en masse.

I think freelancers will be first to go, but also the first to get hired back.