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Make contracting work for you (Part 1)

28th September 2016

Article written by:

iContract

How much work do you need? 

As a full-time employee of a company, you are not only paid when you’re on holiday or when you’re sick, you’re also paid when you’re in the thick of projects, when it’s very quiet and you are inventing tasks to make yourself appear busy. 

As a contractor, you’ll only be paid for the work that you do. If you’re sitting in a lounger at an island resort with no access to phone or Internet, you are not going to be earning an income.

Therefore, if you want to have holidays (and you really must for your mental and physical wellbeing, regardless of where these take place), you’ll need to factor this period without earnings into your budget.

As well as the general costs of living – housing, food, clothing, transport and entertainment – contractors need to think about providing for their own health and personal insurance, retirement fund, taxes, and even things like phone and Internet bills and stationery. 

Make sure you tally up all your potential expenses then divide this by your potential hourly rate, to see how many hours you will need to work over the course of a month and a year in order to cover your costs. Does this seem feasible? Remember you also need time for breaks during the week, and you need to take a few days off to recuperate throughout the year (yes, holidays).

Next, look at how much work you think you will be able to bring in and put this income figure into accounting software to calculate your tax bill. Will what remains after tax be enough to support your lifestyle as well as your insurance and retirement fund? If the answer is yes, fantastic. It’s time to get to work. 

Start by updating your iContract profile with your availability.

Make hay while the sun shines

If you have specialist skills and a strong network of clients, you are likely to earn significantly more when you switch from full-time to contract work. The temptation is to increase your spending and lifestyle choices accordingly, but you need to keep the temporary nature of your work in the back of your mind.

Make sure you prepare for periods of lower earnings, when the right contract work might be harder to find, by putting away a portion of each of your project payments in a rainy day fund. It’s good practice to ensure your rainy day fund can support your lifestyle for six months.

Negotiate your contracts

Once you have been matched with a role through iContract, and the employer has made you an offer, you can start negotiating through the platform.

As you are living contract to contract, it is your responsibility to ensure you are paid as much as possible, while also being realistic and fair. Most people who are new to contracting underestimate their worth and when asked for a quote, will aim for below the average in order to secure the work. 

If you are up against some tough competition for the gig, and have not yet built up a relationship as the preferred provider for a company, you might consider offering a discounted rate in the form of a trial, but make sure you are very clear that this is not your full rate. This will prevent very a very awkward conversation further down the track when they offer you more work and you are forced to quote a much higher rate. 

At the same time, you don’t want to price yourself out of the market by being inflexible. The market fluctuates constantly, so you should never set a minimum salary in stone unless you are absolutely sure the market can bear it.

Remember that the laws of supply and demand are always at work, and there is usually someone else who is just as capable they can call if you can’t do the work. 

While those in full-time employment may interview for a job once every three years, a contractor may have 15-30 interviews in a year, and you’ll need to be on the ball every time. 

Acing the interview puts you in the driver’s seat – once the client has decided they like you and they want you on board, you’ll find it easier to negotiate your rate and terms.

But while you will want to go into the interview with confidence, you’ll also need to do so with honesty. 

If you get to the interview and realise you haven’t actually done this type of project before, admit it, but let them know why you have what it takes to get the job done anyway. Word will get around if you aren’t fully honest about what you are capable of, and on the flip-side, over-delivering on your promises will have your clients believing you are exceptional. They will spread the word about you, and the work will follow.

Choose your contracts carefully

Be careful what your resume says about you and don’t take just any job.

Think of each project you take on as another line on your CV. Your CV is your most powerful piece of personal branding, and if you are trying to promote yourself as the go-to person in a particular area of expertise, working with a firm or in a role that does not fit with the rest of your CV might be more hassle than it’s worth. 

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