5 things you should consider before you go contracting

Contracting is often seen as highly desirable with many people in permanent jobs salivating over the supposed better life on the other side of the fence like a married couple in their mid 30's watching a group of 20 something's party the night away while they look after the kids. After all what's not to like? Better money, flexibility around hours, not being shackled to one company - the list goes on. But is it for everyone? Absolutely not.

Over the years I've seen many people try and fail to make the move into contracting. Inevitably it has nothing to do with their skills, it's about mindset. Simply put contracting is not for everyone and there is absolutely nothing wrong with that. If you are considering a move into contracting these are some factors you need to think about.

1. If you aren't prepared to accept a 3 month contract don't go contracting. This is the mistake I encounter the most. People in permanent positions want to leave their jobs but only with the security of a long term 12 month contract. The market doesn't work that way, you can't have your cake along ice cream, sprinkles, and a waffle biscuit. There is a reason contracting pays more and it's because it comes with instability and uncertainty. You have to back yourself and be prepared to fight through that period where you might not have work until you pick up your next contract. For some people that is truly scary. Most people like the predictability of knowing what money they are going to be getting each month, at the end of the day we all have financial commitments which only seem to be growing in these volatile economic times. So if you're someone that can't save their money and ride out a period of a month or two where you may not have work, and therefore income, then contracting is absolutely not for you.
2. Forget about the benefits. One of the things that is quickly forgotten amongst the brights lights of the elevated hourly rates is that contracting comes with no benefits. Wave goodbye to the annual leave, kiwisaver, health insurance, car park or basically any other perk that might be coming with that stable permanent role. Once again, the contracting market pays well because there are so many additional costs you will need to carry and if you want to continue to have that three week vacation in Hawaii each year you will need to factor that into your savings plan as you will obviously not be being paid during that period.
3. Career training. One of the things that I think is hardest for contractors is the constant battle to upskill themselves and keep their skills relevant and sharp in a very competitive market. One of the negative aspects of contracting is that companies don't want to invest in training for the contractor because inevitably the contractor is going to leave and the IP goes with it. Therefore contractors have to make time to continually progress themselves which is a further cost they have to carry if they aren't able to get that exposure on the job. I have seen many contractors across my career that are desperate to move into a different technical area but they remain shackled to their strongest discipline because that is what people want to hire them for so it becomes a repeating cycle.
4. Direct or through a recruiter. Ahh the one I can identify with the most. I think it's lost on a lot of contractors that recruiters aren't working for free. Obviously in the permanent transaction this doesn't impact on the candidate as the client pays the fee. However, when it comes to contracting we charge a margin which is then added to your hourly rate and presented to the client. Now in most situations the client gives the recruitment agent a price range they can go up to and the recruiter will then attempt to find the best talent they can relative to that budget. It may seem obvious but if you are not working through a recruiter and you are the right candidate for the job you can probably take the lion's share of the margin that would have gone to the recruiter if not all of it. However, if the opportunity has been brought to you by a recruiter and it is a job you want you may need to be prepared to be flexible on your hourly rate in order to be considered for the role. I don't have an issue with seasoned contractors sticking to their guns and knowing their worth but at the end of the day the same goes for me as an experienced recruitment agent so both parties will need to work cooperatively if the deal is going to be done.
5. Further costs. It's probably the lowest on the list but there are some additional core costs you will need to factor into your decision. If you are anything like me you hate accounting and therefore you are going to have to engage with an accountant to sort out your end of year tax obligations. This shouldn't be a massive cost but it is something that needs to be thought about. Potentially you may also need to look at things like indemnity insurance depending on the nature of the engagement you are getting into and if you are working through a recruiter or direct.

These are just a few of the things you need to consider before making the switch from permanent to contract. Don't get me wrong contracting can be an extremely rewarding experience and a great way for you to dictate the direction of your career and make some great money while you are at it. But it is critical that you way up all the angles to see if it is for you because as the saying goes you can't have the good without the bad and there will be times where you will struggle to pick up that next assignment and being able to not panic in that situation is critical.