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The Real World of Contracting

Contractors

Employment can take on a range of forms – there are permanent, part time, temporary, fixed-term, and contracting positions.

When interviewing candidates and discussing their preferences, I would have to say that the most polarising option is contracting. Those candidates who have fully embraced the world of contracting are very enthusiastic, and find this approach to employment works really well for them. Whereas some who perhaps haven’t had a great experience, or who have heard stories about the challenges, feel strongly that it’s not for them.

In my role, I often chat to candidates who are considering whether or not they should make the jump from a permanent role, and leap into the contracting game. I am here to help anyone looking to take the plunge.

I ran a Q&A session with some of my regular contractors, and compiled this blog to help those considering this option make an informed decision.

The Pros

  • You have more control over your own destiny.
  • There’s generally more variety, and the expanded knowledge and skill set that come with it—you’re going to end up moving around different organisations more than if you were a permanent employee.
  • A higher income is possible, even after adjusting for lack of paid annual leave, public holidays sick leave, tax and ACC obligations and employer contributions to Kiwisaver.
  • You have greater accountability for your work. You’re paid to deliver, not just to show up (if that’s what you enjoy, it’s good to be a contractor, if it’s not — then contracting won’t be right for you).
  • You’re often seen as the expert.
  • It can be an enjoyable challenge to get up to speed, fast.
  • You tend to rotate through more roles, so meet a lot of really interesting people.
  • Financially you are a business, so can claim expenses (though this is not so with a fixed term contracts).
  • Because of the flexibility required, you are forced to think laterally about your skills.
  • You get to ask the questions that the organisation has been wanting to ask, but for perm employees may be seen as career limiting.
  • There’s more flexibility over your annual workload; your commitment tends to be limited to three to six months at a time.
  • It’s possible to get a ‘’foot in the door’ into a preferred company.
  • You gain project experience.

The Cons

  • You have to be ‘top of your game’ to get consistent work. That can mean working in a more junior position, especially while you get established.
  • You may end up taking on types of work you don’t want to do, because it is the first available contract, although with experience you can start to pick and choose a bit more.
  • The risk is yours. If the work dries up, or if you’re sick, you’re then the income stops immediately.
  • You always have to think ahead and make strategic decisions, e.g. trying to avoid roles likely to finish in periods when there is little work.
  • Nobody will be supporting your career except you. You’re not part of the organisation, and you won’t get training or other development.
  • You need to understand and manage your tax and ACC obligations.
  • You do not have the employment law protection of an employee.
  • Discipline is essential around financial budgeting for between roles, time off sick and holidays, GST, Tax (this is the one thing people don’t appreciate when they see your hourly rate)
  • You’ll be the first one off the staffing budget in an economic downturn.
  • You need to be flexible, you need to think laterally about your skills and be open to what’s required.
  • You can be treated as an outsider. Get used to it and have your own social events!
  • Keeping track of hours can suck.
  • Insurance is expensive.
  • Uncertainty about income is the biggie. Your paycheck can look different every month.

Recommendations for those looking at entering the contracting world

  • Talk to people who are already contracting, preferably several people, and ask them whatever you want to know.
  • If you’re not sure, try a fixed-term position as a middle ground option. Although it has much of the risk without the financial reward, it will test your tolerance for uncertainty and will also help show your suitability for your first contract role.
  • Be disciplined and build good financial security, whether through savings or having a working partner.
  • Save any difference between your old and new income, don’t get used to a higher income as it comes without security.
  • Create a bank account for ‘downtime’, and an account for ‘between contracts’ and save for each.
  • Don’t look to invoice for every hour e.g. attending a cool seminar that may be ‘sort of’ related. Be reasonable.
  • On the flip side, make sure you invoice for the work you do. Value your contribution.
  • Be organised. Set yourself objectives to complete timesheets/prepare well in advance of your requirements to submit documents.
  • NZ is small, negative behaviour will get around so keep things positive.
  • Don’t under-price yourself; it screws the market.
  • Choose your style. For example, mine is to be social and also to be part of the team and if people think I’m working full time then I’ve succeeded.
  • You get out what you put in, so be proactive, and build relationships with key individuals. Successful contracting is about relationships and long lead times
  • Give your manager and colleagues a reason to want to work with you. If you’re good enough, there’s a good chance they will create a role for you if your contract work ceases to exist.
  • If you want to succeed, you need to ensure you’ll not pulled into the 9-5 mindset. Create your own standards.
  • Understand your IRD/GST/Student loan/ACC obligations as a contractor, it is all your responsibility. You will experience unwanted surprises. Attend the IRD sessions on GST/General business.
  • Love what you do!

Typical challenges?

  • Finding the next role; it can take a lot of effort.
  • You can often be the dumping ground for boring jobs.  You get paid by the hour—just do it, even if it means late nights.
  • Managing your energy. It’s too easy to go hard and work the hours for the money and get run down or sick.
  • Negotiating the rate.
  • Be aware of your ethics: decide what won’t you do.
  • If your CV doesn’t fit the usual style, you have to adapt.
  • Don’t forget that your hours are virtually nil between mid-December until mid-January.  And if you don’t have a contract by mid-November, you probably won’t be working again until February or March.

Any other things you want to add?

  • While it’s not for everyone, I Iove it!
  • Don’t make the mistake I made in the past and not set aside money for a rainy day.  And be prepared to go full time if the economy shifts.
  • If you decide to go through an agency, do your research. Your Consultant is key, so build a good relationship with them.  They are your ‘insurance’ in this line of work.

I hope you’ve found these insights helpful —and a big thank you to those professional contractors I spoke to, to compile this blog. If you’re a contractor – did we miss anything important? And finally, I’d be more than happy to answer any questions you might have about contracting from a recruiter’s perspective, so feel free to drop me a line.