Contracting/ Freelancing comes with many key benefits such as flexible working hours, higher rates of pay, getting to choose when and where to work, when to take holidays and more… However, deciding to become a contractor or freelancer is not an easy decision to make, as it comes with different work rights compared to the so-called security of a permanent position.
Is Contracting the right choice for you? To assist you in working that out we have put some relevant information together so you can find out the pros and cons – and learn the key steps you will need to take before you can start your first contract role.
Do your research
Firstly, make sure you do thorough research about your market and make sure there is a demand for your particular skillset! For this, you can also have a look at some of the job sites we have mentioned below and type in your skillset and look for contract work. This will give you an idea of the positions available along with the rates and see if this is what you expected.
Talk to your local recruitment agencies and get their views, plus, an idea of the rates.
One thing with regards to rates is that you must obviously have the opportunity to earn more money than you are now; or perhaps earn the same amount in less time… Here’s a starting point for you – do a quick calculation by dividing your yearly salary by / 220 days and the by / 8 hours. If the daily rates out there are not more than this; then you may want to have second thoughts…!
Find a contract
The easiest way to find a contract is by searching online.
Look at online job boards to see what types of clients and contracts are available; it is a great place to start – you can either use the dedicated filters or for example try using the word ‘contractor’ as a keyword on the online job boards.
It’s also worth checking job listings on a company’s career page, subscribing to relevant newsletters, and keeping up-to-date with relevant forums, newsletters and social media sites.
LinkedIn, in particular, is one of the most effective tools in order to build your network as you can directly connect with the head or recruiters of any company and look for ways to be in touch with them to put your CV forward. However, it’s worth keeping both online and offline ways of networking while looking for new contracts.
Set up your own company
Before you actually have your first contract in hand, you will have to decide how you want to operate. The two of the most popular models are, either setting up your own private limited company or working through a contractor management payroll company. Of course, there are pros and cons for both…
Setting up your own private limited company means that you become the director and shareholder of the company. It allows you to have complete control, be it financial or administrative, over the company. However, completing paperwork and documents, coping with duties and responsibilities which are not your speciality will keep you busy and give less time to focus on your core service offerings.
Alternatively, if you choose to work through a contractor management payroll company, then they will take all your extra responsibilities like sorting and chasing the invoices, debt collection, lodging BAS, managing cashflows etc, from your shoulders giving you more time to focus on your core service offerings and spending the spare time with your friends and family. Working with such a company means you are eligible for PAYG and superannuation contributions which is not necessarily a bad thing.
The good part here is that maybe you are able to still claim all your expenses you would have done under your own company, plus all the required insurances and your end of year tax return are covered by the contractor management payroll company.
Deciding which direction is right for you is one of the key considerations of contracting – so make sure you carefully consider the pros and cons of each before making your decision.
Get to grips with the Personal Services Income (PSI) rule:
As a contractor, you will have to look at all the income received from separate contracts or projects you have performed, in order to determine if you have received any Personal Services Income (PSI). For this, you need to work out if PSI rules apply to that income and if you are considered as an employee or a contractor?
Get yourself insured:
As a contractor, you will be offering your services for which they completely rely on you. Ultimately, if something goes wrong, the client could decide to make a claim against you. Even the most skilled contractor can sometimes make a mistake, and if it happens, the client could allege that there has been a breach of contract. This may cost you a fortune and cause you a lot of stress!
Insurance like Professional Indemnity is what you need against such claims in order to cover the legal costs or compensation. Today, insurance is a mandatory requirement for many contracts as it serves as an assurance for your clients.
Please note: As mentioned above if you work under a contractor management payroll company, you do not have to worry about this as you are automatically insured.
If you would like to know more or need assistance in discussing your chances of working with a contractor management payroll company like Pendragon, please do not hesitate to contact us or reach us at [email protected]
For your reference, we have provided you with some of the most reliable job sites in Australia and other relevant links that might be useful.
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What you need to know about employee benefits: