Thursday, November 22, 2007
Tuesday, November 20, 2007
Are you better off as a Contractor or Perm?
A $70,000 salary equates to approximately $36.50 per hour (based on an average working year of 1,920 hours). Should someone take a $50.00 per hour contract and quit their job?
The simple answer isn’t quite as simple as one might expect. A simple ‘yes’ leads to all sorts of problems, issues and personal soul searching. ‘Yes’ means that you have made a decision to make a fundamental change in how you look at your employment and what you expect to achieve out of your work over the next few years. Whilst the search for more money can often be highly lucrative for many professional people, one must be readily aware of the consequences of such a decision.
Talk to hundreds of professional contractors around the world and they’ll tell you that contracting is fantastic. They will use words like “freedom”, “fulfilling”, “lucrative”, “flexible” and “rewarding”. They’ll tell you that ‘being your own boss’ is as exciting as it is rewarding. They’ll tell you that being in charge of your own destiny is ultimately one of the most refreshing and fulfilling career decision they have ever made. And it certainly can be all of those for many people.
Like everything however, there are serious risks to consider. Such as not being in a lucrative employment field or industry. You don’t necessarily get to ‘pick and choose’ your next assignment and next client. You may not have a choice on rate – the only choice may be whether you wish to take the job or not. You’re also only as good as your last assignment in many people’s eyes – particularly recruitment companies and HR managers. Let’s look at some of the obvious comparisons;
Deductions
Obviously deductions are part and parcel of essentially being self employed. Like any organization, employee deductions are now part of your costs. Try to include them into your rate as much as practical.
Unpaid overtime vs being a Permanent employee
A bit of a myth in the current economic climate I’m afraid to say. Very, very few employers these days pay overtime to their permanent employees, preferring everyone to adopt a ‘whatever it takes to do the job’ approach in their roles. Obvious exceptions include lower-paid industries, operations staff and on-call allowances for support personnel. Often, contractors qualify for the same or similar allowances when doing any on-call work for a client.
Unpaid holidays, sick leave and time without work
Obviously, this is a risk that you choose to undertake when you make a decision to embark on a contracting career. You need to be happy that, under normal circumstances, your rate covers any expected leave plus ensure that you do not generally require a lot of time off work due to illness or inability to work. Talk to your insurance advisor regarding insurance cover for long absences from work as a contractor, although don’t be too surprised when you get quoted a rather large premium.
Paid Training
With the general slide in the global economy of late, very few organizations are spending any additional money on training of their own staff. As a general rule, when money is tight, organizations tend to cut back on spending in a number of areas – training, existing staff, recruitment costs and new employment programs (including graduate intakes).
So, which one is better off?
The decision really is up to you. No one person can convince you either way. It is a decision you need to make based on a number of important criteria.
What do you want out of your job in the next few years? Stability (which is certainly not guaranteed in these times of economic uncertainty), more disposable income from a higher rate, flexibility to work whenever and wherever you wish and the excitement of being in charge of your own destiny. Sounds exciting, doesn’t it? But you may well be the type of person who is good at what they do and likes the stability and consistency of a permanent salary and good growth prospects.
Firstly, you need to make a clear decision on what type of employment environment you prefer to work in and be sure that you strike the right balance between being a ‘free agent’ and the risks associated with it. Although, with all of life’s uncertainties, nothing is guaranteed these days anyway, so keep all of your options open.
Lorne Lee
----------------
Lorne Lee is Director of Business Services for ITG a Contractor Management organization, specializing in facilitation and management of single contractor’s payroll and invoicing, whilst utilizing the ATO employment guidelines to help reduce tax payments and provide increased flexibility from salary packaging. You can contact him on 1300 654 484 or via the ITG website - myitg.com.
The simple answer isn’t quite as simple as one might expect. A simple ‘yes’ leads to all sorts of problems, issues and personal soul searching. ‘Yes’ means that you have made a decision to make a fundamental change in how you look at your employment and what you expect to achieve out of your work over the next few years. Whilst the search for more money can often be highly lucrative for many professional people, one must be readily aware of the consequences of such a decision.
Talk to hundreds of professional contractors around the world and they’ll tell you that contracting is fantastic. They will use words like “freedom”, “fulfilling”, “lucrative”, “flexible” and “rewarding”. They’ll tell you that ‘being your own boss’ is as exciting as it is rewarding. They’ll tell you that being in charge of your own destiny is ultimately one of the most refreshing and fulfilling career decision they have ever made. And it certainly can be all of those for many people.
Like everything however, there are serious risks to consider. Such as not being in a lucrative employment field or industry. You don’t necessarily get to ‘pick and choose’ your next assignment and next client. You may not have a choice on rate – the only choice may be whether you wish to take the job or not. You’re also only as good as your last assignment in many people’s eyes – particularly recruitment companies and HR managers. Let’s look at some of the obvious comparisons;
Deductions
Obviously deductions are part and parcel of essentially being self employed. Like any organization, employee deductions are now part of your costs. Try to include them into your rate as much as practical.
Unpaid overtime vs being a Permanent employee
A bit of a myth in the current economic climate I’m afraid to say. Very, very few employers these days pay overtime to their permanent employees, preferring everyone to adopt a ‘whatever it takes to do the job’ approach in their roles. Obvious exceptions include lower-paid industries, operations staff and on-call allowances for support personnel. Often, contractors qualify for the same or similar allowances when doing any on-call work for a client.
Unpaid holidays, sick leave and time without work
Obviously, this is a risk that you choose to undertake when you make a decision to embark on a contracting career. You need to be happy that, under normal circumstances, your rate covers any expected leave plus ensure that you do not generally require a lot of time off work due to illness or inability to work. Talk to your insurance advisor regarding insurance cover for long absences from work as a contractor, although don’t be too surprised when you get quoted a rather large premium.
Paid Training
With the general slide in the global economy of late, very few organizations are spending any additional money on training of their own staff. As a general rule, when money is tight, organizations tend to cut back on spending in a number of areas – training, existing staff, recruitment costs and new employment programs (including graduate intakes).
So, which one is better off?
The decision really is up to you. No one person can convince you either way. It is a decision you need to make based on a number of important criteria.
What do you want out of your job in the next few years? Stability (which is certainly not guaranteed in these times of economic uncertainty), more disposable income from a higher rate, flexibility to work whenever and wherever you wish and the excitement of being in charge of your own destiny. Sounds exciting, doesn’t it? But you may well be the type of person who is good at what they do and likes the stability and consistency of a permanent salary and good growth prospects.
Firstly, you need to make a clear decision on what type of employment environment you prefer to work in and be sure that you strike the right balance between being a ‘free agent’ and the risks associated with it. Although, with all of life’s uncertainties, nothing is guaranteed these days anyway, so keep all of your options open.
Lorne Lee
----------------
Lorne Lee is Director of Business Services for ITG a Contractor Management organization, specializing in facilitation and management of single contractor’s payroll and invoicing, whilst utilizing the ATO employment guidelines to help reduce tax payments and provide increased flexibility from salary packaging. You can contact him on 1300 654 484 or via the ITG website - myitg.com.
Monday, November 12, 2007
Rate discussions…….. "I want what he’s on!"
This is a rather contentious issue, but one that needs to be explored.
In most cases (unless you are a fully independent contractor) you are employed by an agency to work as an IT Consultant for their client – usually at the client site.
In order to secure the contract agencies have to find the balance between offering the client good value for money and offering the contractor a fair rate.
When ‘value for money’ is a major factor (as with most State and Federal Government Contracts) this balancing act is crucial.
Let’s face it, even when talking about lower end contract rates we are still talking about very high numbers!
And it is these obviously high figures lure IT Professionals into contracting. This means that 9 times out of 10 a prospective contractor will agree on a rate that they are more than happy with.
Once the agent has confirmed a rate with the contractor, they workout fees and charges and present a charge rate to the client. The agent should keep this charge rate as low as possible to ensure that the client is getting the best possible price.
The initial scenario is set and all 3 parties are happy.
Then things start to go wrong as rate discussions start
“how much are you on?” “I bet you’re on a lot” “do you know what your agent gets?”
A true career contract would walk away at this point saying only that they are happy with their rate.
But for the inexperienced it’s the start of a slippery slope as contractors who do not really understand what they are talking about try to compare rates and implied value to the client.
The bottom line is that what the client pays for you does not reflect your implied value to the organisation and it never should!
So we end up in a situation where Fred finds out the Jane earns $10 per hour more than he does and all hell breaks loose!
All of a sudden, Fred what a 20% pay increase and is upset because the client is paying so much more for Jane.
So what? Does it really matter? If you are happy with your rate, who cares if Jane is earning more than you? Take the emotion out of it – it’s just business!
Inevitably we end up in a situation where the agent is trying to manage an emotionally motivated contractor who is demanding an unrealistic increase.
All this does is damage the relationship between all 3 parties.
Firstly the relationship with your agent will come under pressure as you make unrealistic demand and try to hold the agent and employer to ransom.
Secondly, the relationship between the agent and the company is put under pressure as they have to try to justify why the organisation should not have to pay so much more for you.
Lastly and what few contractors consider, your reputation is tainted. Like it or not the client will look at you differently.
If you want a 20% pay rise, move contracts – simple! In this sense contracting is the same as permanent jobs. If you are in a perm role you will get a cost of living increase on an annual basis, sometimes you may get a little more one year.
What makes you think that as a contractor you deserve anything different? You are already earning more so why should you also get higher increases?
There are some simple points to take out of this:
Do not discuss rates Do not compare rates
Last of all - If you are going to call your agents or employers bluff, be prepared to join the dole queue – especially in today’s market. There is no need for agents and employers to be held to ransom. There are plenty of good people out there who will happily work for a fair contract rate.
Think about it…….
In most cases (unless you are a fully independent contractor) you are employed by an agency to work as an IT Consultant for their client – usually at the client site.
In order to secure the contract agencies have to find the balance between offering the client good value for money and offering the contractor a fair rate.
When ‘value for money’ is a major factor (as with most State and Federal Government Contracts) this balancing act is crucial.
Let’s face it, even when talking about lower end contract rates we are still talking about very high numbers!
And it is these obviously high figures lure IT Professionals into contracting. This means that 9 times out of 10 a prospective contractor will agree on a rate that they are more than happy with.
Once the agent has confirmed a rate with the contractor, they workout fees and charges and present a charge rate to the client. The agent should keep this charge rate as low as possible to ensure that the client is getting the best possible price.
The initial scenario is set and all 3 parties are happy.
Then things start to go wrong as rate discussions start
A true career contract would walk away at this point saying only that they are happy with their rate.
But for the inexperienced it’s the start of a slippery slope as contractors who do not really understand what they are talking about try to compare rates and implied value to the client.
The bottom line is that what the client pays for you does not reflect your implied value to the organisation and it never should!
So we end up in a situation where Fred finds out the Jane earns $10 per hour more than he does and all hell breaks loose!
All of a sudden, Fred what a 20% pay increase and is upset because the client is paying so much more for Jane.
So what? Does it really matter? If you are happy with your rate, who cares if Jane is earning more than you? Take the emotion out of it – it’s just business!
Inevitably we end up in a situation where the agent is trying to manage an emotionally motivated contractor who is demanding an unrealistic increase.
All this does is damage the relationship between all 3 parties.
Firstly the relationship with your agent will come under pressure as you make unrealistic demand and try to hold the agent and employer to ransom.
Secondly, the relationship between the agent and the company is put under pressure as they have to try to justify why the organisation should not have to pay so much more for you.
Lastly and what few contractors consider, your reputation is tainted. Like it or not the client will look at you differently.
If you want a 20% pay rise, move contracts – simple! In this sense contracting is the same as permanent jobs. If you are in a perm role you will get a cost of living increase on an annual basis, sometimes you may get a little more one year.
What makes you think that as a contractor you deserve anything different? You are already earning more so why should you also get higher increases?
There are some simple points to take out of this:
Last of all - If you are going to call your agents or employers bluff, be prepared to join the dole queue – especially in today’s market. There is no need for agents and employers to be held to ransom. There are plenty of good people out there who will happily work for a fair contract rate.
Think about it…….
Thursday, November 8, 2007
A good place to start......
Generally, contractors are actually employees and most contractors are PAYG employees of the Recruitment Agency that placed them with a client or an employee of a Contractor Management Company.
[I will explain Contractor Management Company in a future post.]
So, what are you according to the ATO? Are you an employee or a contractor? Have a look at the following link to find out......
ATO Contracting Essentials
[I will explain Contractor Management Company in a future post.]
So, what are you according to the ATO? Are you an employee or a contractor? Have a look at the following link to find out......
ATO Contracting Essentials
Monday, November 5, 2007
Preface
A lot of young IT Professionals are attracted to contracting without really knowing what is involved and what it really means to be an IT Contractor.
Quite simply money drives us all and the thought of money lures IT Professionals away from the perceived security of Permanent employment to Contracting.
It is true, as a contractor you can earn a lot of money, but as with anything in life there is a trade off and it’s not just the obvious things like lack of employee benefits, holiday pay, sick pay training and superannuation that you need to consider.
As a contractor you are expected to be an expert, a trouble shooter, a hired gun. You are there to do a job, do it well and do it quickly and you will be highly rewarded.
Longer hours and higher expectation is not generally something that ‘new’ contractors take into account and they need to.
You must expect to work harder than your permanent colleagues – at the end of the day you may be getting paid twice as much as them!!
So you don’t get any employee benefits and you’re expected to work longer and harder…..so why contracts?
“Why do you want to contract?” is something that I ask all candidates. The general response is “I want more money” – when I hear that I cringe.
Contracting is not about money – well it shouldn’t be!
A good contractor isn’t motivated by money alone.
Prestigious projects Personal reputation Achievement Job satisfaction Job variety
These are the things that motivate a true contractor. The money is a recompense for their effort – not a major factor in their decision to be an IT Contractor.
So is contracting for you? Over the coming weeks and months we will explore the world of IT contracting and you can decide for yourself if this is the life for you.
Quite simply money drives us all and the thought of money lures IT Professionals away from the perceived security of Permanent employment to Contracting.
It is true, as a contractor you can earn a lot of money, but as with anything in life there is a trade off and it’s not just the obvious things like lack of employee benefits, holiday pay, sick pay training and superannuation that you need to consider.
As a contractor you are expected to be an expert, a trouble shooter, a hired gun. You are there to do a job, do it well and do it quickly and you will be highly rewarded.
Longer hours and higher expectation is not generally something that ‘new’ contractors take into account and they need to.
You must expect to work harder than your permanent colleagues – at the end of the day you may be getting paid twice as much as them!!
So you don’t get any employee benefits and you’re expected to work longer and harder…..so why contracts?
“Why do you want to contract?” is something that I ask all candidates. The general response is “I want more money” – when I hear that I cringe.
Contracting is not about money – well it shouldn’t be!
A good contractor isn’t motivated by money alone.
These are the things that motivate a true contractor. The money is a recompense for their effort – not a major factor in their decision to be an IT Contractor.
So is contracting for you? Over the coming weeks and months we will explore the world of IT contracting and you can decide for yourself if this is the life for you.
Welcome to contracting essentials
Over the coming months this blog will provide you with a huge amount of information about contracting.
We will cover things like:
The difference between contracting and permanent work Contracting etiquet Agencies Rates Negotiation techniques and much more.
This blog is not the be all and end all of contracting, but it will help you to become a better IT Contractor.
We will cover things like:
This blog is not the be all and end all of contracting, but it will help you to become a better IT Contractor.
Subscribe to:
Posts (Atom)
