Sub contractor

Con: It's more bullshite you personally have to deal with in regards to tax. If they have any benefits, you can kiss those goodbye.

Pros: Very little from an employee standpoint.

My personal opinion as a business owner: A lot of times it makes financial sense for the company to do this, but it comes at a cost to morale and growth of the company. With some exceptions, as a contractor, the company looks at you as a number and cog in the machine and not a person with potential for advancement. A company that cares for it's employees will employ them and invest in their future. That's all my opinion. I'm in a couple CEO groups and some of us disagree on this. Seems to vary by industry, too.

Since you're doing this as a part-time retirement thing, you may not give a shite about any of that other than the tax implications. I'd at least negotiate a contract that includes more pay to cover the time and value of the increased tax burden.

FYI, a company can't just decide a worker is a subcontractor. There is a "checklist" to determine whether or not a person would qualify as an employee or a subcontractor

Also, if they are treating you as a subcontractor, you should bill them at full market rate (not your salary).

For example, an engineer may make say $150k/yr or roughly $70ish/hr, but his firm will bill them out at $175/hr.

If they want to treat you like a sub you should get paid like one.