Contracting: Pros n Cons

[faithfilms09]

I've been receiving a lot of contracting offers from recruiters lately and some of them look very appealing in terms of the remuneration offered. Had a recent discussion about this with my coworker and we started establishing some pros and cons of contracting, particularly in Aus and NSW.

Is there anything we're missing in terms of why someone would/would not take up a contracting gig for a period of time?

Note - this was not researched in-depth by us. Just wanted some opinions or thoughts on anything we're missing or might be wrong about.

Pros:

1. Remuneration usually pretty high (have seen offers for my skill level of up to $1000+ a day and I'm fairly new to my industry)

2. Flexibility to move around in different company's or organisations within your field

3. Have heard that it does fast-track your development as you're often made to take on additional tasks and made to manage quite a few things at once as contractors typically work on some project based task

Cons:

1. No job security - project could end at any moment even before your contracted period ends. Could this be hedged by going into Govt organisations where its a lot less choppy?

2. No full time entitlements, eg annual leave, sick leave etc

3. No overtime pay. Project being on time and done is when you're done.

4. Could be abused and handed massive amounts of workload

Anything major we're missing? Maybe someone has experience?

 

[mickcee]

@faithfilms09 Con 1 isn't a con once you realise how disposable a "permanent" position is.

 

[kezia]

@mickcee Exactly lol. I took a co tract role in October. But I knew the lay offs were coming. November 30% of the company gone.

 

[teecake]

@faithfilms09 Pros 3: in my experience, it is the opposite. Companies don't usually invest in contractors and don't care for your progression or improvement. Also, it might be hard for you to take time off for training, as it is missed revenue.

 

[fruge0789]

@teecake It the type of work you get access to can be better development than formal study

 

[ericakuhl89]

@faithfilms09 What about having to pay tax (BAS?) and super? Don't you have to do these tasks your self?

 

[faithfilms09]

@ericakuhl89 Ooohhh okay did not even know these were things that I’d have to consider. Thank you!

 

[kevin1987]

@faithfilms09 And potentially insurance. Public liability and professional indemnity are common.

 

[accelerator]

@faithfilms09 Most recruitment agencies will handle that for you, but they take a cut of your pay. Usually quoted day rates at most agencies are AFTER the agency cut. Ask your recruiter.

I've been working as a contractor for years and never done my own payroll tax/super.

 

[faithfilms09]

@accelerator Yeah that makes sense

 

[debhubtravels]

@faithfilms09 Contracting can affect your ability to get a mortgage. Also if you form your own company you've to do BAS but can claim expenses. Permanent staff get jealous of your pay and you get treated differently (2nd class citizen) and also get assigned more work that no one wants to do. I've been contracting for years.

 

[kathryn1998]

@debhubtravels This is my first year contracting and haven’t found this to be the case - I am still PAYG through a payroll company. Recently did a refi with HSBC on one of my investments - no issue. Withdrew equity with ME Bank, no issue. Pre approval with Bendigo, no issue.

 

[sickntired771]

@debhubtravels IT contractor here. Excellent points by others.

That mortgage bit this is true... but only if you have less than 3 months remaining on the contract. Source - 2 Mortgage Brokers I consulted recently. You are fine if you have a long contract and can manage it before you start counting down the 3 months.

1/ Div 293 extra 15% tax if your income breaches the $250K income threshold. I got hit last year, it hurts.

2/ Significantly higher Medicare Levy Surcharge IF you don't have PHI. I didn't have PHI last year & got stung by it. It hurts bad.

3/ Uncertainty - currently facing it as my contract runs out in June and no one's saying anything about an extension.

4/ You get addicted to daily rates and don't take days off when you should. I worked through sick days, and was reluctant to take holidays to avoid losing money, which kinda weirded out my partner. Eventually I did and it was the best decision ever.

5/ Some employers are, by policy, allowed to extend a contractor only x times, before they either ask you to be permie and/or let you go.

Pros:

1/ I was able to save a significant amount for house deposit.

2/ Seeing my permie friends kicked out, sadly, made me feel ok with my decision to contract.

3/ You are expected to upskill yourself to stay relevant in the market - for a lazy learner like me that's a good kick up the backside to level up and be on my toes.

4/ Uncertainty cuts both ways - you become more cautious with big financial decisions, don't make rash moves, enhance your network, and train yourself to be ready for the next move. Never get too comfy at one place. never believe it will last long. I list this as a pro because it makes you better in every way to anticipate and be ready.

 

[fruge0789]

@debhubtravels Just don’t let the bau staff know

 

[debhubtravels]

@fruge0789 The BAU staff prepare the contractor's contract and rates approval so they know.

 

[tsgaines]

@faithfilms09 Regardless of other things.
Get yourself a very decent buffer. At least what you need to survive for 6 months. You cannot survive "paycheck to paycheck" if you are working for yourself.
If you get sick? Have an accident,? It's all on you.
You may have to pay rent / mortgage etc etc etc for months with NO incoming money.

Make damn sure you can actually afford it.

 

[serllpcb]

@tsgaines Yes this. You essentially need to pay yourself for your leave, sick leave, etc and be able to support yourself between contracts.

 

[accelerator]

@faithfilms09 http://www.contractorpermie.com/

 

[marcocardenas82]

@faithfilms09 Yeah the missing entitlements are a pain. Four weeks off over Christmas can be a very expensive proposition.

However, as you've noted, you get paid bucketloads of cash, and that kind of makes up for it

 

[wonkyu]

@faithfilms09 Put it all into excel.
Current wage, super, annual leave, sick leave etc, then compare it to the contractor wage. Even include things like long service leave, some maternity leave if you are thinking of kids

Have a look at the difference and think, are you skilled enough and good enough that if one project closed after 12 months and you are looking for another one, how long do you have to find another gig before you would have been better off staying full time?

I am considering contracting in around 12 months once I round out my experience and will be doing the same thing.

Also need to think about securing a loan etc as banks don’t like the contracting status on new loans