Contractors are people who work on contract, not as traditional employees. A contract may last for a few months, several weeks, or for the given duration of a single piece of work. Contractors may work for one, two, or any number of businesses at once. Although it may sound stressful, knowing your skills are in high demand at multiple companies can provide a sense of security.
Generally speaking, independent contractors:
- Own at least a portion of their business.
- Work for multiple companies in the same financial year.
- Have specialised skills or expertise.
- Work on short or temporary assignments or projects.
- Work for clients for a limited period of time, but not on a regular basis.
- Will supply most of the equipment and materials they require themselves.
- Have clients who ultimately make the final decisions on the project the work on.
What are the benefits of being a contractor?
Several enticing benefits can await you if you choose to become a contractor, as follows.
- You can be your own boss: Contract work offers greater independence and, for many, more job security than traditional employment.
- Enjoy a healthy work/life balance: Contractors can spend less time commuting, attend fewer in person meetings, and work the hours that best suit their needs and their lifestyle.
- More money: Contractors get paid at the market rate for each hour they work. A contractor’s income can be very attractive when their skills are in high demand.
- Try a new area of expertise: Unsure if your skills are in demand? Contractors can test the waters in different industries without having to commit to a full-time position. You can easily cut your losses if it doesn’t work out.
- Part-time work: A great option for those looking for better work-life balance, and one that many contractors prefer.
- Test out a company: You can work for a business as an independent contractor for a set period if you aren’t yet convinced that they are the right fit for you.
- Plan how much you want to earn: Many contractors start out as employees before moving on to contracting. They are familiar with the types of work they will be expected to do and the rates that they expect to be paid. You can find rates and information on sites like Upwork if you aren’t sure how much you can charge.
Five steps for getting started on the right foot as a contractor
Here are five surefire steps that can help aspiring contractors get started as an independent contractor.
#1: Start your business
Preparing and accepting that you are stepping away from being an employee and moving into contractor territory may be a hard decision for some. But you can’t start your transition to contracting without the belief that it is the right move for you. Back yourself, and don’t look back!
#2: Create a business plan
Include business critical information such as the rates you will charge clients, the expenses you may incur, and your projected growth. You may consider engaging an accountant or a business advisor to help you create a realistic business plan.
#3: Reduce your risk with contractor insurance
Public Liability insurance and Professional Indemnity insurance, and Business Insurance are some common types of contractor insurance that newly minted contractors may consider as a way to reduce their risk.
#4: Separate your personal and business banking: This one certainly should go without saying, mainly due to the fact that it makes it much easier to manage your finances.
#5: Set yourself up for long-term success
Don’t be shy when it comes to investing in the systems and processes that can make operating as a self-employed contractor more efficient. Use quality accounting software to track expenses, automate invoicing, and reduce tax work at the end of each financial year. Have a standard contract, non-disclosure agreement (NDA), and services agreement that you supply clients with.
Five handy ways to get contract work
Government-run procurement sites: Mainly for public sector work, these sources can be handy for finding contract work.
Social media sites, especially LinkedIn: Use your connections to learn what businesses are looking for – and bid when they announce invitations to tender
Your contacts: Reach out to your friends and see if they know of anyone who needs assistance at their companies
Other contractors: Your skills might be complementary to those of other contractors, allowing you to form a loose partnership or a collective of contractors who can refer work to each other. For example, a graphic design contractor and a content marketing contractor.
BizCover helps contractors throughout New Zealand to reduce the risks to their business via contractor insurance. Choose BizCover for your contractor insurance, get covered in minutes without drama, and get on with your day. If you’d like chat you can find us at 0800 249 268.
*This information is general only and does not take into account your objectives, financial situation or needs. It should not be relied upon as advice. As with any insurance, cover will be subject to the terms, conditions and exclusions contained in the policy wording. © 2022 BizCover Pty Limited. BizCover Limited is owned by BizCover Pty Ltd (ABN 68 127 707 975).