H-1B Work Visa–Contract Types–Pros and Cons

 

There are two frequently used Contract Types that you can have with your H-1B Sponsor, they are:

Employment Contract	Consultant Contract
(Fixed) Per Month	(Variable) Per Hour
Include Paid Annual Leaves	No Paid Annual Leaves – Number of Hours worked will be paid
Low Risk – Will be paid fully or some fixed % of the salary even if not deployed on a Project or Client	High Risk – If No Project or Client then No Salary
Comparatively low rates	Comparatively higher rates

In order to understand the compensation difference and risk involved, let us consider two simple cases:

NOTE – I will discuss compensation/salary rates, rate differences, break-up, sponsor-share, taxation, etc. in detail in another post.

Case 1 – Variable # of days in a month – For example consider the month of January (31 days) and February (28 days)
Employment Contract	Consultant Contract
Example – US$ 3,500 per month	Example – US$ 30 per hour
Irrespective of how many days a month might have, you will get a fix salary at the end of each month. Easier for monthly budgeting and expense allocation.	You will be impacted by the variance in # of days in a month. So, if you get paid for 23 days in January (8 days of weekend holidays), you will be paid for only 20 days in February.
January Salary = US$ 3,500 February Salary = US$ 3,500	January Salary 23 (days) x 8 (hours per day) x 30 ($ per hour) = US$ 5,520 February Salary 20 (days) x 8 (hours per day) x 30 ($ per hour) = US$ 4,800 Do note that there’s no loss or gain, because net salary for the year will always be the same, no matter if you get less salary in one month and more in another. Because total number of hours for a year will more or less be the same.

Case 2 – Leaves (Sick/Casual/etc.) – For example if you have taken 2 leaves in the month of March and your compensation is the same as mentioned in Case 1 above then:
Employment Contract	Consultant Contract
(Without leaves) March Salary = US$ 3,500 (With leaves) March Salary = US$ 3,500 (provided you have not consumed all your annual leaves)	(Without leaves) March Salary 23 (days) x 8 (hours per day) x 30 ($ per hour) = US$ 5,520 (With leaves) March Salary [ 23 (days) – 2 (leaves) ] x 8 (hours per day) x 30 ($ per hour) = 5,040 You loose US$ 240 per day if you take a leave (based on compensation mentioned in case 1 above)

Case 3 – Gazette Holidays – For example consider the month of November. There is a Veterans Day holiday on 11th. A Thanksgiving Day holiday on fourth Thursday. A Black Friday holiday following the Thanksgiving Day. In total, there are 3 holidays during the month of November.
Employment Contract	Consultant Contract
(Without holidays) March Salary = US$ 3,500 (With holidays) March Salary = US$ 3,500	(Without holidays) November Salary 22 (days) x 8 (hours per day) x 30 ($ per hour) = US$ 5,280 (With holidays) November Salary [ 22 (days) – 2 (holidays) ] x 8 (hours per day) x 30 ($ per hour) = 4,800 You loose US$ 240 per holiday (bases on the compensation mentioned in case 1 above)

Case 4 – Bench Period – Time period when you are not deployed on any project or client.
Employment Contract	Consultant Contract
Based on your contract with your employer you will either getting: 1. Full salary OR 2. Partial/Base salary - a % (usually more than 50%) of your full salary	No salary during bench period