So you’re new to contracting, and not sure where to start? With most organisations looking to make greater use of contractors in the future, and the country starts emerging from COVID hibernation, there’s never been a better time to get into contracting. As we’ve previously discussed, contracting can give you:
Despite how rewarding it can be, contracting can be challenging when entering from a full-time background. More often than not, contractors have to advocate for themselves, negotiate their payrate, develop a pipeline of work and fully come to grips with their tax arrangements. For a new contractor, it’s easy to feel intimidated and unsure of where to start.
Over the past 29 years, we’ve provided guides, training and tips to help contractors navigate the world of contracting. Below, we’ve compiled a list of answers to the most common questions we get asked from workers new to contracting.
Where should I go for work?
The employment market in Australia is starting to bounce back. According to Michael Page, 43% of businesses are expected to increase their headcount in 2021.
Coronavirus is only part of the story shaping the world of work; technological innovations and globalisation are at the forefront of revolutionising business operations. For instance, organisations are now starting to consider the sheer amount of digital information they need to keep track of. 90% of all existing data in the world was created in the last two years, which is predicted to grow exponentially into the future. How do companies respond to this? What roles do they need to capitalise on to remain competitive?
We’ve recently dived into the most in-demand job roles, the majority of which focus on this new age of digital transformation. Contractors should focus on:
- Data analytics – for example, data analysts, data scientists and data engineers.
- Cyber security – for example, engineers, architects and administrators.
- Call centre – for example, agents, managers and resource planning analysts.
- Risk management – for example, operational, financial and commercial.
- Finance – for example, analysts, financial planning and accounts.
- Health – for example, nurses, aged care workers, disabled carers.
One thing is for sure – regardless of the job title, organisations are looking to increase flexibility, compete with smaller start ups, and have the ability to scale rapidly. That means contingent.
The contingent workforce was already building year on year before the pandemic. Now, this trend has accelerated, with 23% of employers focusing on flexible work arrangements in 2021. Organisations are now hoping to build a blended workforce of permanent and temporary workers to meet their business needs.
What do I have to do to be competitive?
The world of contracting by its very nature is competitive. To get the best roles, build up a portfolio of trusted clients and negotiate for the best rate, contractors need to embrace a lifestyle of continuously developing and improving.
Some of the most sought-after skills by employers, as we’ve recently discussed, include:
It’s always valuable when employers have the ability to offer formal or informal training during your engagement; but this isn’t always the case. Contractors should make use of the significant amount of free online educational tools such as edX, Udemy, Khan Academy, Coursera, Udacity, FutureLearn, iversity.
However, developing skills and undertaking training is essentially useless if you can’t properly articulate it to the end client. Make sure your CV is up-to-date and does a good job of highlighting your skills. We’ve provided a guide here.
How will I be working?
There’s a stark difference between the practical ways of conducting work between full time work and contracting. You may be asking yourself:
Am I able to work from home?
In the aftermath of the pandemic, many employers have made the leap to remote working for their employees and contractors. There are now many technological options that give contractors the ability to work from any location around Australia or even the world. It can’t hurt to raise this during negotiations – you may find employers much more accepting of this than in the past.
Do I have to provide my own equipment?
This depends on the nature of job and the client. Many contractors are expected to provide their own laptops or tools, while others may distribute these at the start of the contract and then have them returned at the end. If you are providing your own computer, make sure it can integrate with your client’s systems and restrictions.
Am I able to work for other clients?
As long as it doesn’t interfere with your current job, most contractors are free to undertake as much additional work as they can handle. Make sure your contract doesn’t have any clauses around working with competitors, however.
Is the work I do with a client my intellectual property?
If you’re working for a technology firm, it might be tempting to repurpose your code for the next client you perform work for. In most cases, this is a breach of contract. Some workers might be able to get around these restrictions if they’re using code made outside of their billable hours, but it’s still risky.
How should I structure my tax?
One of the most complex aspects of contracting is deciding how to set up your payment structure. There are a number of different ways you can proceed with this, depending on how ‘hands on’ you’d like to get with your tax and other unique circumstances. Regardless, it’s worth talking to a financial adviser, who will be able to guide you in what structure best works for your circumstances.
Below, we outline common tax structures and what they mean for you.
Pay As You Go (PAYG) tax structures are for individuals entering into a contract as a ‘tax employee’ of a recruitment agency, workforce management provider, company or client with whom you are contracting. Under this option, you are usually covered by the employer’s insurances, payroll tax, superannuation and any other statutory payments.
This option is primarily for workers who want less of the administrative burden associated with contracting.
Sole trader – This is the simplest form of being ‘self-employed’. This structure gives you flexibility and allows you to contract as an individual. As a sole trader, you own and control your own business, and are solely responsible for profits and losses. You require and ABN and have the ability to employ workers.
This option is relatively easy to set up and maintain, and you have complete control over your business.
Pty Ltd or trust – Some contractors opt to set themselves up as a company, which has higher fees and complexity, but potentially more tax effectiveness. Companies need to set up a company, purchase insurances, manage GST and maintain comprehensive financial records. On the other hand, the corporate tax rate at around 30% is significantly lower than the highest marginal tax rate for individuals, at 47%.
Although being set up as a company or trust is a more complex structure, contractors can access the benefits and potential growth opportunities that go with it.
Is it worth engaging a contractor management firm?
CXC takes responsibility for the engagement, payroll and management of your contract work after decision to offer. CXC would initiate your onboarding process, including a robust compliance check. This ensures a streamlined approach to workforce management, as well as clear accountability for all stages of your engagement.
New to contracting? Some of the benefits to contractors engaging CXC
- Receiving the best contracting experience – Contractor experience is at the forefront of our service delivery from the time you are onboarded and for the duration of your engagement with us. We ensure that we find the right balance between technology and process automation and human connection that is crucial to a positive experience.
- Removing administration and hassle – For most tax structures, CXC is responsible for payroll tax, super, paying your salary and insurances. You’ll have access to our online portal, MyCXC, to manage your pay slips and details.
- Gain access to our suite of value adds – Our suite of in-house and alliance contractor benefits partner programs are designed to optimise the contracting experience and support individuals who make contracting a career and life style choice. CXC is in the unique position to be able to provide a range of services to our contractors, clients and employees via our own, 100% owned financial, mortgage and property businesses.
If you would like to find out more about how we can help please contact us.