Contracting

Discussion in 'NZ Computing' started by {-.-}, Mar 17, 2008.

  1. {-.-}

    {-.-} Guest

    After years of permanent employment, I'm about to embark
    on contracting. The money is much better, to compensate for
    lack of stability, sick leave and holiday pays. Are there any gotchas
    before I take on the offer ?

    cheers
    {-.-}, Mar 17, 2008
    #1
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  2. {-.-}

    JohnO Guest

    On Mar 17, 10:10 am, "{-.-}" <> wrote:
    > After years of permanent employment, I'm about to embark
    > on contracting. The money is much better, to compensate for
    > lack of stability, sick leave and holiday pays. Are there any gotchas
    > before I take on the offer ?
    >
    > cheers


    It depends on how much better. It's getting diluted these days as
    there is so much more use of contractors.

    You have to account for and remit GST
    You have to account for and remit ACC
    You have to account for and pay provisional tax.
    You have to manage your general accounting and expenses.
    You don't get paid when on holiday.
    You don't get paid when sick
    You don't get paid when you have no work
    It's harder to get a mortgage until you have some business history.
    You have to find your own clients.

    The advantages are
    More income
    Some expenses that you would have incurred anyway (home office, car,
    computer etc) can be deemed to have business use so you get back some
    tax and gst on them.

    I would personally not want to go back to being an employee ever. But
    I also expect to get around double the income from contracting to
    cover all the risks and hassles.
    JohnO, Mar 17, 2008
    #2
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  3. {-.-}

    Sir To You Guest

    On Mar 17, 11:10 pm, "{-.-}" <> wrote:
    > After years of permanent employment, I'm about to embark
    > on contracting. The money is much better, to compensate for
    > lack of stability, sick leave and holiday pays. Are there any gotchas
    > before I take on the offer ?
    >
    > cheers


    Maybe check the costs of liability insurance too - this seems to be a
    trend where companies require proof of this before signing a contract.
    Sir To You, Mar 17, 2008
    #3
  4. {-.-}

    JohnO Guest

    On Mar 17, 6:41 pm, Sir To You <> wrote:
    > On Mar 17, 11:10 pm, "{-.-}" <> wrote:
    >
    > > After years of permanent employment, I'm about to embark
    > > on contracting. The money is much better, to compensate for
    > > lack of stability, sick leave and holiday pays. Are there any gotchas
    > > before I take on the offer ?

    >
    > > cheers

    >
    > Maybe check the costs of liability insurance too - this seems to be a
    > trend where companies require proof of this before signing a contract.


    Yes, professional indemnity insurance. I was asked for the same once.
    Got the insurance, got the contract then promptly cancelled the
    insurance. What a load of nonsense!
    JohnO, Mar 17, 2008
    #4
  5. {-.-}

    EMB Guest

    {-.-} wrote:
    > After years of permanent employment, I'm about to embark
    > on contracting. The money is much better, to compensate for
    > lack of stability, sick leave and holiday pays. Are there any gotchas
    > before I take on the offer ?
    >

    The others have covered it all pretty well.

    Some form of income protection insurance is a good idea. Professional
    indemnity insurance is essential nowdays as NZ business gets more
    litigious (and the most likely entity to sue you in the event of a
    problem is your client's insurer).

    It may be worth working through one of the contracting companies who
    will not only cover you via their PI insurance but also handle all the
    client billing for you and guarantee payment on a set date each month
    regardless of when/if the client pays. My email addy works - contact me
    if you want the name of the company I used to use.
    EMB, Mar 17, 2008
    #5
  6. {-.-}

    Crash Guest

    On Mon, 17 Mar 2008 05:28:02 -0700 (PDT), JohnO <>
    wrote:

    >On Mar 17, 10:10 am, "{-.-}" <> wrote:
    >> After years of permanent employment, I'm about to embark
    >> on contracting. The money is much better, to compensate for
    >> lack of stability, sick leave and holiday pays. Are there any gotchas
    >> before I take on the offer ?
    >>
    >> cheers

    >
    >It depends on how much better. It's getting diluted these days as
    >there is so much more use of contractors.
    >
    >You have to account for and remit GST
    >You have to account for and remit ACC
    >You have to account for and pay provisional tax.
    >You have to manage your general accounting and expenses.
    >You don't get paid when on holiday.
    >You don't get paid when sick
    >You don't get paid when you have no work
    >It's harder to get a mortgage until you have some business history.
    >You have to find your own clients.
    >
    >The advantages are
    >More income
    >Some expenses that you would have incurred anyway (home office, car,
    >computer etc) can be deemed to have business use so you get back some
    >tax and gst on them.
    >
    >I would personally not want to go back to being an employee ever. But
    >I also expect to get around double the income from contracting to
    >cover all the risks and hassles


    You should also look carefully at the contract conditions for
    termination. In my contracts there is always a contract term (say 3
    to 12 months) and provision to terminate the contract by either party
    with notice (usually 1 month or perhaps 4 weeks). In these
    circumstances, because your employer can terminate the contract *at
    any time* the contract term is of no significant value.

    Regardless of whether the contract has a terminate clause or not,
    there is usually a clause allowing instant dismissal for serious
    misconduct and this, along with the contract term, should be all the
    protection a genuine employer should need. I would therefore try to
    negotiate the absence of a termination clause or limit its
    applicability to you only. If you have the choice of a mutual
    termination clause or no termination clause I would suggest you choose
    the latter, or ask about a simple rolling 1-month contract.

    Crash.
    -----------------
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    Access your favorite newsgroups from home or on the road
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    Crash, Mar 17, 2008
    #6
  7. {-.-}

    thingy Guest

    {-.-} wrote:
    > After years of permanent employment, I'm about to embark
    > on contracting. The money is much better, to compensate for
    > lack of stability, sick leave and holiday pays. Are there any gotchas
    > before I take on the offer ?
    >
    > cheers
    >
    >


    Given the downturn in the financial market is causing companies to stop
    doing work are you sure? ie I know 3 contractors quite well, all very
    good and 2 are considering moving to perm as its looking bleak....ie
    both are from Auckland but working in Wellington, and they cant get work
    in Auckland at the moment...so are commuting.

    So if you have a niche and are confident it is going to be secure then
    go for it, it may pay very well....If you are being offered at least 6
    months of well paid work...

    If it is a bit vague and woolly, maybe hold off for 6 months....ie post
    election.

    I have noticed that there are more contractor roles being advertised and
    I actually am getting cold calls, but I wonder if thats because
    knowledgeable contractors are fleeing to perm roles, so the agencies are
    on the hunt for warm bodies, or in fact some "essential" work is being
    done with contractors just to carry past the election.....remember these
    are sales people on commissions, if nobody moves and there are few
    contractors to place, their pay packets suffer...

    regards

    Thing
    thingy, Mar 17, 2008
    #7
  8. {-.-}

    thingy Guest

    Sir To You wrote:
    > On Mar 17, 11:10 pm, "{-.-}" <> wrote:
    >> After years of permanent employment, I'm about to embark
    >> on contracting. The money is much better, to compensate for
    >> lack of stability, sick leave and holiday pays. Are there any gotchas
    >> before I take on the offer ?
    >>
    >> cheers

    >
    > Maybe check the costs of liability insurance too - this seems to be a
    > trend where companies require proof of this before signing a contract.


    A big risk not to have it these days IMHO...some agencies offer
    insurance built into their rates....(not sure on the details) Most
    Govn/public work is going to insist on insurance, but a private company
    may not ask for it, but are more likely to make a claim against you IHMO.

    I sometimes get asked to do private work, but the money wouldn't even
    cover the cost of a year's insurance....so no point, especially as the
    ppl who ask are the ones trying to dodge the "fair" cost of such work,
    so to my mind are the least likely to pay up at the end and the most
    likely to try and claim if it isn't "perfect".

    regards

    Thing
    thingy, Mar 17, 2008
    #8
  9. {-.-}

    thingy Guest

    Crash wrote:
    > On Mon, 17 Mar 2008 05:28:02 -0700 (PDT), JohnO <>
    > wrote:
    >
    >> On Mar 17, 10:10 am, "{-.-}" <> wrote:
    >>> After years of permanent employment, I'm about to embark
    >>> on contracting. The money is much better, to compensate for
    >>> lack of stability, sick leave and holiday pays. Are there any gotchas
    >>> before I take on the offer ?
    >>>
    >>> cheers

    >> It depends on how much better. It's getting diluted these days as
    >> there is so much more use of contractors.
    >>
    >> You have to account for and remit GST
    >> You have to account for and remit ACC
    >> You have to account for and pay provisional tax.
    >> You have to manage your general accounting and expenses.
    >> You don't get paid when on holiday.
    >> You don't get paid when sick
    >> You don't get paid when you have no work
    >> It's harder to get a mortgage until you have some business history.
    >> You have to find your own clients.
    >>
    >> The advantages are
    >> More income
    >> Some expenses that you would have incurred anyway (home office, car,
    >> computer etc) can be deemed to have business use so you get back some
    >> tax and gst on them.
    >>
    >> I would personally not want to go back to being an employee ever. But
    >> I also expect to get around double the income from contracting to
    >> cover all the risks and hassles

    >
    > You should also look carefully at the contract conditions for
    > termination. In my contracts there is always a contract term (say 3
    > to 12 months) and provision to terminate the contract by either party
    > with notice (usually 1 month or perhaps 4 weeks). In these
    > circumstances, because your employer can terminate the contract *at
    > any time* the contract term is of no significant value.
    >
    > Regardless of whether the contract has a terminate clause or not,
    > there is usually a clause allowing instant dismissal for serious
    > misconduct and this, along with the contract term, should be all the
    > protection a genuine employer should need. I would therefore try to
    > negotiate the absence of a termination clause or limit its
    > applicability to you only. If you have the choice of a mutual
    > termination clause or no termination clause I would suggest you choose
    > the latter, or ask about a simple rolling 1-month contract.
    >
    > Crash.
    > -----------------
    > www.Newsgroup-Binaries.com - *Completion*Retention*Speed*
    > Access your favorite newsgroups from home or on the road
    > -----------------



    hmmm yes, I signed a rolling one month contract once....then was asked
    to go perm, on 25% less salary, which I declined so got 45 mins to leave
    site and was told I was not getting paid as I had not finished the
    week...Since my agreement was with the agency we agreed I'd get 2 weeks
    pay, one of which I had worked for....not ideal, but I had moved to a
    10%+ better contract the next day!

    ie some ppl take the p*ss, one of the things about being a
    contractor/self employed/in business is spotting these guys...IMHO...and
    avoiding them.

    regards

    Thing
    thingy, Mar 17, 2008
    #9
  10. {-.-}

    Allistar Guest

    {-.-} wrote:

    > After years of permanent employment, I'm about to embark
    > on contracting. The money is much better, to compensate for
    > lack of stability, sick leave and holiday pays. Are there any gotchas
    > before I take on the offer ?
    >
    > cheers


    Make sure you put away your tax money as you earn it an *don't touch it!*
    except when handing it over to the confiscators at the IRD. I have seen
    many new contractors burned by not having enough money to pay their
    provisional and GST bills. The best advice: put it into a high interest
    account and only use it for paying tax, nothing else.
    --
    A.
    Allistar, Mar 17, 2008
    #10
  11. {-.-}

    Allistar Guest

    JohnO wrote:

    > On Mar 17, 10:10 am, "{-.-}" <> wrote:
    >> After years of permanent employment, I'm about to embark
    >> on contracting. The money is much better, to compensate for
    >> lack of stability, sick leave and holiday pays. Are there any gotchas
    >> before I take on the offer ?
    >>
    >> cheers

    >
    > It depends on how much better. It's getting diluted these days as
    > there is so much more use of contractors.
    >
    > You have to account for and remit GST
    > You have to account for and remit ACC
    > You have to account for and pay provisional tax.
    > You have to manage your general accounting and expenses.
    > You don't get paid when on holiday.
    > You don't get paid when sick
    > You don't get paid when you have no work
    > It's harder to get a mortgage until you have some business history.
    > You have to find your own clients.
    >
    > The advantages are
    > More income
    > Some expenses that you would have incurred anyway (home office, car,
    > computer etc) can be deemed to have business use so you get back some
    > tax and gst on them.
    >
    > I would personally not want to go back to being an employee ever. But
    > I also expect to get around double the income from contracting to
    > cover all the risks and hassles.


    Other advantages are:

    - you work on your own time. This means you can be flexible wrt. your
    family. Dropping kids off to school, going to school plays/events etc.,
    taking a day off for a birthday. This, IMO, is one of the biggest
    advantages of being a contractor, and it's worth all of the disadvantages
    put together.

    - you can work in the evening and get paid for it! Assuming the work is
    there, you get to control your income by putting in more hours. No more
    working overtime and not getting paid.

    - you can pick up new clients when you like (workload permitting).

    - you can work on a vast variety of projects for very different companies.
    No more "single employer" stagnation.

    - you can work for yourself by developing/inventing products in your own
    field and then selling them.

    I've always been a contractor (never been employed before, except for a
    paper run when I was 12) and I'm not changing anytime soon.
    --
    A.
    Allistar, Mar 17, 2008
    #11
  12. In article <>, Sir To You <> wrote:
    >On Mar 17, 11:10=A0pm, "{-.-}" <> wrote:
    >> After years of permanent employment, I'm about to embark
    >> on contracting. The money is much better, to compensate for
    >> lack of stability, sick leave and holiday pays. Are there any gotchas
    >> before I take on the offer ?

    >
    >Maybe check the costs of liability insurance too - this seems to be a
    >trend where companies require proof of this before signing a contract.


    Contractorsare liable for their own ACC payments too IIRC. :)
    Bruce Sinclair, Mar 18, 2008
    #12
  13. {-.-}

    Sir To You Guest

    On Mar 18, 1:11 pm,
    (Bruce Sinclair) wrote:
    > In article <>, Sir To You <> wrote:
    >
    > >On Mar 17, 11:10=A0pm, "{-.-}" <> wrote:
    > >> After years of permanent employment, I'm about to embark
    > >> on contracting. The money is much better, to compensate for
    > >> lack of stability, sick leave and holiday pays. Are there any gotchas
    > >> before I take on the offer ?

    >
    > >Maybe check the costs of liability insurance too - this seems to be a
    > >trend where companies require proof of this before signing a contract.

    >
    > Contractorsare liable for their own ACC payments too IIRC. :)


    yep, and hard to budget acc, they doubled the cost of that for me last
    year. I asked why, expecting some answer like car accidents up, more
    RSI complaints etc.. But, their response, was , one of the 7 levy
    groups has gone up. What kind of answer is that? There is no
    rationale explanation for increases.
    Sir To You, Mar 18, 2008
    #13
  14. {-.-}

    thingy Guest

    Sir To You wrote:
    > On Mar 18, 1:11 pm,
    > (Bruce Sinclair) wrote:
    >> In article <>, Sir To You <> wrote:
    >>
    >>> On Mar 17, 11:10=A0pm, "{-.-}" <> wrote:
    >>>> After years of permanent employment, I'm about to embark
    >>>> on contracting. The money is much better, to compensate for
    >>>> lack of stability, sick leave and holiday pays. Are there any gotchas
    >>>> before I take on the offer ?
    >>> Maybe check the costs of liability insurance too - this seems to be a
    >>> trend where companies require proof of this before signing a contract.

    >> Contractorsare liable for their own ACC payments too IIRC. :)

    >
    > yep, and hard to budget acc, they doubled the cost of that for me last
    > year. I asked why, expecting some answer like car accidents up, more
    > RSI complaints etc.. But, their response, was , one of the 7 levy
    > groups has gone up. What kind of answer is that? There is no
    > rationale explanation for increases.


    It should be based on historic claims....though I would have expected
    that say an IT contractor's rate v a warehouse fork lifter jockie's be
    considerably different, even if they are both temp.

    Is it broken down that far?

    The other possibility is, can you swap groups? ie something similar
    might be more exacting to your particualr line of work...

    regards

    Thing
    thingy, Mar 18, 2008
    #14
  15. {-.-}

    Allistar Guest

    thingy wrote:

    > Sir To You wrote:
    >> On Mar 18, 1:11 pm,
    >> (Bruce Sinclair) wrote:
    >>> In article
    >>> <>, Sir
    >>> To You <> wrote:
    >>>
    >>>> On Mar 17, 11:10=A0pm, "{-.-}" <> wrote:
    >>>>> After years of permanent employment, I'm about to embark
    >>>>> on contracting. The money is much better, to compensate for
    >>>>> lack of stability, sick leave and holiday pays. Are there any gotchas
    >>>>> before I take on the offer ?
    >>>> Maybe check the costs of liability insurance too - this seems to be a
    >>>> trend where companies require proof of this before signing a contract.
    >>> Contractorsare liable for their own ACC payments too IIRC. :)

    >>
    >> yep, and hard to budget acc, they doubled the cost of that for me last
    >> year. I asked why, expecting some answer like car accidents up, more
    >> RSI complaints etc.. But, their response, was , one of the 7 levy
    >> groups has gone up. What kind of answer is that? There is no
    >> rationale explanation for increases.

    >
    > It should be based on historic claims....


    It shouldn't be collected at all - private insurance will do just fine.

    > though I would have expected
    > that say an IT contractor's rate v a warehouse fork lifter jockie's be
    > considerably different, even if they are both temp.


    Yes, the rates are different. From memory the rate for IT workers is
    something like $1.09 in every $100. Although a contractor has to pay the
    employer levy as well as the employee levy (which has always seemed daft to
    me).

    Essentially your tax rate is increased by at least 1%, and that on every
    dollar you earn, not those earned over a certain bracket.

    > Is it broken down that far?
    >
    > The other possibility is, can you swap groups? ie something similar
    > might be more exacting to your particualr line of work...


    The shameful part is that while payouts from ACC are capped, payments to ACC
    are not. What a scam it is.
    --
    A.
    Allistar, Mar 18, 2008
    #15
  16. {-.-}

    Rob Simpson Guest

    On Tue, 18 Mar 2008 15:45:52 +1300, Allistar propped his eyelids open with
    toothpicks and wrote:


    >
    > The shameful part is that while payouts from ACC are capped, payments to
    > ACC are not. What a scam it is.


    And if you don't pay up on time they come down on you like a ton of
    bricks, but put a claim in and you'll be lucky to be paid out 2 months
    after you need it. Private insurance is definitely the way to go,
    especially for contractors.
    --
    Rob - Linux user number 467898 Ubuntu User number 17166
    Linux 2.6.22-14-generic - E2160 1.8Ghz running at 3.0Ghz
    - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
    End User (V): An act the Customer Support Staff wishes to carry out.
    (Known variant is "Disastrously End User" depending upon the magnitude of
    the stupidity.) - Anis Shiekh
    - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
    Rob Simpson, Mar 18, 2008
    #16
  17. {-.-}

    shane Guest

    Rob Simpson did scribble:

    > On Tue, 18 Mar 2008 15:45:52 +1300, Allistar propped his eyelids open with
    > toothpicks and wrote:
    >
    >
    >>
    >> The shameful part is that while payouts from ACC are capped, payments to
    >> ACC are not. What a scam it is.

    >
    > And if you don't pay up on time they come down on you like a ton of
    > bricks, but put a claim in and you'll be lucky to be paid out 2 months
    > after you need it. Private insurance is definitely the way to go,
    > especially for contractors.


    Oh god, dont feed his political troll bullshit here.

    --
    Hardware n: Parts of the computer you can kick
    shane, Mar 18, 2008
    #17
  18. {-.-}

    EMB Guest

    Allistar wrote:
    > The shameful part is that while payouts from ACC are capped, payments to ACC
    > are not.


    Utter bollocks. I forget the figures but ACC contributions abate
    completely at a certain level of earnings (identical to the maximum
    weekly compensation they will provide).

    From memory ACC levies for IT consulting work out at roughly 1.7% of
    earnings up to $85000, with no increase above this amount.
    EMB, Mar 18, 2008
    #18
  19. {-.-}

    Fantail Guest

    On Mar 17, 11:10 pm, "{-.-}" <> wrote:
    > ... I'm about to embark on contracting...
    > Are there any gotchas...


    No-one has mentioned the general lack of rights one has as a
    contractor, and the necessity of being on good behaviour. If the
    client tells you to do something you don't want to do, you've got a
    problem, because the NZ market-place is too small for a contractor to
    get a bad reputation. I've seen it happen, more than once. I made a
    gentle suggestion once that spamming the entire company (over 500
    staff) with ra-ra sales puffery was not good, enraging some executive,
    and I just had to grovel and sweat and grovel some more. (The fact
    that I was right, and said executive caused lots of trouble, at least
    by crashing mail servers, because no-one would tell him to mend his
    ways, was irrelevant.) Employees have rights, contractors only have
    what's explicitly worded in the contract, and even then, it's lose-
    lose trying to enforce anything if the client digs in. If the client
    says to use poor practice (goto, globals, poor tools, poor security,
    reliance on lousy software vendors, fill in your pet hate here), or
    provides a lousy workplace (instant coffee, neck ties, vermin, > 25°
    C, bigotry, to name a few unpleasant memories) your only recourse is
    to ask politely then not renew the contract.

    An agent, though they take a big whack, can really earn their money in
    problematic situations, though the agent's loyalty is divided.

    When I worked for a consulting firm I was costed with a multiplier of
    2.4 times my salary, which I understood was typical for a minion. The
    firm did not consider itself making money on a deal unless I was
    billed at more than that. So a factor of about 2 should be used
    comparing contracting gross income with a salary.

    From my perspective the main advantage is the freedom to work
    irregularly, for example... 6 months on, 3 off, 9 on, 2 years being a
    homebody, 6 months ...
    Fantail, Mar 18, 2008
    #19
  20. In article <>, Sir To You <> wrote:
    >On Mar 18, 1:11=A0pm,
    >(Bruce Sinclair) wrote:
    >> In article <=

    >om>, Sir To You <> wrote:
    >>
    >> >On Mar 17, 11:10=3DA0pm, "{-.-}" <> wrote:
    >> >> After years of permanent employment, I'm about to embark
    >> >> on contracting. The money is much better, to compensate for
    >> >> lack of stability, sick leave and holiday pays. Are there any gotchas
    >> >> before I take on the offer ?

    >>
    >> >Maybe check the costs of liability insurance too - this seems to be a
    >> >trend where companies require proof of this before signing a contract.

    >>
    >> Contractorsare liable for their own ACC payments too IIRC. :)

    >
    >yep, and hard to budget acc, they doubled the cost of that for me last
    >year. I asked why, expecting some answer like car accidents up, more
    >RSI complaints etc.. But, their response, was , one of the 7 levy
    >groups has gone up. What kind of answer is that? There is no
    >rationale explanation for increases.


    There is a book you can get with the rates for various jobs. Shows clearly
    what to avoid for employment I reckon. :)
    Bruce Sinclair, Mar 18, 2008
    #20
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