It’s not all roses…. How to work with the current climate

We all know that due to economic climates and the downturn that IT has slowed, so what can you do to improve your chances of staying employed or getting your next contract?

Firstly we all need to concede that it is currently an employers market and anyone who disputes that is a fool.

Once we have come to terms with the fact that we need employers more than they need us, we can move on and work on what is important – getting a contract and staying employed!

So here are a few (potentially unpopular) bits of advice:

• Work on your resume.
  It is now more important then ever to have a solid Resume. You need to stand out and sell yourself – at the end of the day you may be competing with well over 100 candidates for the same role.
  The single most important piece of advice I can give you is be focused in your Resume. Make it simple and easy to understand.
  Be clear in exactly what you do – what is you role in the work place. Don’t be a ‘Jack of all trades’.
  Generalists like ‘IT Specialists’, ‘Consultant’ and ‘IT experts’ do not usually do well in a downturn market.
  
• Be flexible on the role.
  Your last role may have been a Development Lead, but if the market is asking you to be a hands on developer again – don’t fight it!
  The most successful contractors are the ones that understand and go with the market. Contracting is not about building a career and promotions – it’s about providing a service for a price.
  
• Be flexible on rate.
  Here we go – this is where I get the abuse.
  Facts remain that in a downturn you must be flexible on rates.
  Firstly, if you take the advice of the above point you cannot expect to command the same rate if you take a role with less responsibility. Be realistic and make sure that the rates you ask for actually reflect the role you are applying for – which may not necessarily reflect your experience. If someone is asking for a Developer with 3-5 years experience they are not likely to pay you more just because you have 15 years experience.
  Secondly – be careful when negotiating periodic increases at renewal. In an employers market you need to be careful when calling your employer’s bluff. Chances are, if you take a stand of “I want $xxxx or I will leave”, your employer will hold the door open for you exit the building.
  There are plenty of people out there who are just as good as you who will gladly take your contract at a lower rate than you’re on!
  
• Head down
  This next one is pretty obvious, but still worth pointing out. Give the employer what they are paying for. Head down, bum up and work harder than you did before. Make them realise what value you are adding.Don’t create waves. Don’t get involved in office or company politics. Just be productive and prove your value.

A downturn if hard to deal with, but good contractors will always ride it out and come out stronger at the other end. Contractors who are focused on the short-term of simply in it for the $$$ will suffer.

Essentially contracting is like the stock market - and in order to be a good contractor you must be prepared to take the good with the bad and adjust your strategies accordingly.

If you cannot take the bad with the good you should get out of the market.


Andrzej Zyms
Targeted Resourcing Solutions - Specialists in IT Recruitment

Direct contracts inflating rates

Over the last 12-18 months there has been a marked increase in so called “Direct Contracts”.

In actual fact these contracts are more based on who you know not what you know. Generally these direct contracts are granted to people with a previous history or relationship with a given company.

In most cases companies are taking on contractors ‘direct’ as it means that they do not have to go to market and it saves a lot of time and should save money – however a huge number of employers out there are not saving the money they should for direct contracts. This in turn is elevating market rates by giving false indications to contractors about their worth.

Let’s look at an example…….

Jo worked for one of the cities bigger IT employers as a permanent employee for 4 years earning around $65,000 per year + Super.

After 4 years he decides to jump into contracting and lands a PAYG contract with an agency earning $440 per day. The agency charges him out at $560 per day.

After 6 months he approaches his old employer and asks if they have any contract roles going. This time Jo is not represented by an agency. After some negotiation Jo’s previous employer decides that he may as well pay Jo what they would have normally paid the agency and Jo lands himself a $120 per day raise and is now on $560 per day. The manager thinks - 'what the hell, it's not my money!'

Huge mistake!!! At this stage what the employer should have done is pay Jo somewhere around $500 per day – thereby splitting the difference and ensuring that all parties win.

By paying Jo the full charge out rate the employer has now set Jo’s future rate expectations too high.

The next contract that Jo is offered, he will be asking for at least $560 per day, more likely $580 or $600.

This is where things go very wrong. Jo is now expecting to be paid the full charge rate rather than what he is really worth in the market.

This in turn pushes rates higher as contractor form inflated egos and delusional perceptions of their value in the market.

Employers that overpay direct contracts are not only shooting themselves in the foot by falsely and prematurely inflating rates and rate expectations, but it could be argued that they are helping to fuel inflation and place the entire economy under pressure.

Something worth thinking about next time Jo calls you and says “Remember me? I know your systems in-side-out. Got any contract jobs going? I’ll gladly come back for the right price….”

Make sure the price is right for all concerned!!!

Contractor Management Companies

Contractor Management Companies……

I’ve mentioned these in the passed, but what is IT Contractor Management all about?

Contractor management companies provide you with a company structure allowing you to maximise your earning potential as an IT Contractor.

Most IT Recruitment Agencies be happy for you to work through a Contractor Management Company as it takes some of the administrative tasks and costs associated with Payroll.

The Structure……

Working through a Contract Management company gives you the same benefits as running your own GST Registered Pty Ltd Company without the hassle and cost to you of having to administer a company.

Depending on the Contractor Company and the exact agreement you will be able to claim business related expenses associated with IT and IT Contracting. Things like:

• Mobile phone
• Laptop
• PDA
• Internet costs
• Training
• Seminars
• Subscriptions

The list goes on. Essentially anything you spend that assist you with earning money as an IT Contractor you should be able to claim pre-tax.

Who do I claim from…….

The simple answer is “Your company”. It works exactly the same way as if you had your own company with money sitting in a company account.

Your money is paid to the Contractor Management Company by the Recruitment Agency. The money sits in a pot allocated to you – just as if it was sitting in your company account.

For all intents and purposes this money is yours to distribute as you see fit. You can decide how much you want paid as taxable salary, you can make additional contributions to your Super Fund, and you can claim tax free money from the pot to reimburse your business expenses.

Why not set up my own company…….

• Time
• Cost
• Hassle

Setting up and administering a GST Registered Pty Ltd Company can be costly and is a potential minefield to IT Contractors.

In the past IT Contractors set up Pty Ltd companies in order to get out of paying tax. The ATO wised up to this and introduced ‘Personal Services Tax Legislation’. This basically means that contactors are seen as employees rather than companies – this whole are is extremely complicated, but suffice to say that the way that most contractors work nowadays – Personal Services Tax going to be an issue.

By using a Contractor Management Company you eliminate all the risk and gain all the benefit.

As Contractor Management Companies have a large number of clients and income streams Personal Services Tax is never going to be an issue.

So how does it work…….

Any employer can chose to allow their employees to claim business expenses, salary package and salary sacrifice. Most perm employees do not get the option as these types of benefits can be costly to administer, but Contractor Management Companies are set up to do exactly that.

They are structured in such a way and have all the systems in place that expense claims, salary packaging and salary sacrifice is all easy and cost effective.

Who are they……..

There are a number of Contractor Management Companies around. Here are just a few:

• ITG http://www.myitg.com/
• Freeland Global http://www.freelance-global.com/au/contractor.html
• Entity http://www.entitysolutions.com.au/
• CXC http://www.cxc.com.au/
• PayMe http://payme.com.au/

How much will it cost me…..

All companies have different free structures, so shop around and make sure that you only get what you need.

Some companies increase their fees as the type of service you require gets more complex. Many will charge extra for Salary Packaging, Lease agreements etc.

So if all you want to do is be able to claim your business expenses make sure you are not paying for all the bells and whistles unnecessarily.

Generally you’ll be looking at somewhere between 3 and 5% of you gross income as a fee.

This seems like a lot but the benefits far outweigh the costs if used properly.

So how do I make it work for me…….

Think outside the square! There are obvious things you can claim – generally these are larger purchases or ongoing costs like those mentioned above – Mobile phone, Laptop etc……

But…. …..what about……

• What about the newspaper you buy on a Saturday to see what is happening in the job market
• The pen you bough in the newsagents as you were rushing into a meeting
• The taxi you took when you went to your Agency function
• The packet of batteries you bought for you wireless mouse

It all adds up. Take a newspaper. You may think that $2.00 is not a lot of money and it’s not worth bothering about, but to spend that $2.00 you need to earn over $3.00 pre tax. By keeping that $2.00 receipt and claim it you save $1.00!!! It does not seem like a lot, but if you buy a newspaper most mornings that could be a tax saving of $350+ over the year.

I’m no accountant, so cannot advise you on what you can and cannot claim, but all of the Contractor Management Companies have specialist accountant working for them and they know exactly what you can and can’t claim. They will never pay a claim that is not within ATO guidelines, so you are always sure that you are acting well within Tax Law and Legislation.

Conclusion…….

If you want to make the most of your IT Contractor rates and reduce your tax payments without the hassle and potential problems of running your own Pty Ltd company – get a Contractor Management Company working for you.

If you’re happy just getting paid – stick with your Agency on a PAYG basis and miss out!!

Timesheets - your best mate!!!!

For permanent staff moving into contracting timesheets may seem like real pain in the neck - well they may be, but.....without them you don't get paid!

There are different forms of timesheets:

• paper hard copy printed timesheets
• soft copies in Word or Excel
• on-line timesheets
• e-mail timesheets

whichever timesheet system your agency uses - that is your key to the cash!

So what is it about timesheets? Why are they so important?

Without an authorised timesheet your agency has no idea what hour you work and there does not know:

• how much to pay you
• what to invoice the client

All agencies run very tight cashflow models which mean that if timesheets are late - so is everything else - invoicing, salary, everything!

So if you want to be paid on time - always remember to get your timesheets in early - fully completed, authorised and signed.

Who is my employer?

This can be a very confusing subject for a lot of contractors placed by an agency, but generaly the way to think of it is that you are employed by the agency and placed on client site as a consultant. The agency charges the client consulting fees and pays the contractor a salary, based on an hourly or daily rate.

A lot of the time the questions comes up when contractors are considering getting home loans of finance. In these cases your employer is the entity that pays you - generally this will either be the agency that placed you or a contractor management company.

If you need a letter of employment or confirmation of earnings your first port of call should be the agency. They should be able to provide you with all the information that you need or will be able to coordinate the collation of information for you.

Although the agency is ultimately your employer, your day to day work and tasks are managed by the client and you report to the client's on-site managers.

However should performance disputes arise, the agency may get involved. Because you are consulting on behalf of the agency they are well within their rights to talk to you about conduct or performance.

TRS Test Forum: Rare skills in Brisbane

TRS Test Forum: Rare skills in Brisbane

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.

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…….

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

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.