Contracting can be a great way to make a career change, and many who make the switch find it to be a great career and lifestyle choice. However, leaving a permanent job is not without its risks, and it may be in your interest to not get too caught up in thinking that the grass is always greener when you are contracting.
Here are six things you may benefit from considering before becoming a contractor, including business insurance such as contractor insurance.
1. Do you have the required mentality?
When you are considering becoming a contractor, you may benefit from carefully considering your motivations for making the move. It’s all about finding the right reasons for making the transition to contracting. Is it to increase your knowledge in a new field, improve your skills, or to achieve a better work-life balance?
2. What are the financial consequences?
Payment for contracting positions can vary wildly depending on the nature of the role and the market demand at the time. Many businesses offer a gratuity-completion bonus that can be included in a contractor’s salary package. Others may offer an increase in base salary to allow for a move into contract roles. Depending on the role, contractors generally are required to be paid more to cover extra outgoings.
3. Consider any set up costs
While set up costs can vary quite a lot relative to the field you work in, there could be significant set-up costs involved in making a move into contracting. One such example of this can be a contract cleaner.
To transition into a contract cleaner role you may be required to spend a significant amount money on cleaning equipment and cleaning products that are essential for performing your cleaning work. Or, if you are a long-haul delivery driver moving from traditional employment into a contractor role, your set up costs may include purchasing an expensive vehicle.
Before spending large sums of money, think about how long it will take you to pay off any loans you might need to take out. Also consider what might happen if the company you’re contracting for loses work. Will that mean that you will lose your contract? Would you be able to easily find other contracting work in that case? Would you be able to continue paying off any debt you owe on your equipment?
4. How will becoming a contractor change your life?
If you are considering becoming a contractor you may benefit from considering the impact on your lifestyle. Often, contractors put the bulk of their focus on the financial aspect of contracting and not enough on the practicality and impact it may have on their family.
Depending on the location of the job, the role, and the length of the contract, you might have to make some lifestyle change. Some contracting positions may require you to be away from home for extended periods. If your contractor role requires you to live away from your home for a period, the financial costs and emotional costs should be taken into consideration. If your family is at home in Christchurch and your contract role requires that you spend your working weeks in Auckland, such family disruption certainly needs to be factored in.
5. Do you want to set up a limited company or an umbrella company?
Contractors generally enjoy all of the benefits of permanent employees – but they typically are required to manage it themselves. Contractors in New Zealand may consider using an umbrella company to assist with sorting out all of these particulars. You pay them to handle tax, pension contributions and holiday entitlements. However, all of this comes with a price and the umbrella company will likely take a portion of your salary in fees.
Another option for aspiring contractors is to form a limited company for contractors. This can be a handy option for maximising your income, but it also means that you will also have to manage your own pension plan, and submit your own tax returns, both of which may require that you hire an accountant to help manage the administration of your finances.
6. Do you have the soft skills to succeed as a contractor?
Whether or not you have a well-rounded set of soft skills under your belt may make or break your move into contracting. Contractors must communicate with business owners, clients, and potentially a wealth of other professionals every day to solve problems, explain projects, and understand their objectives.
As such, having well-developed soft skills can make all the difference for contractors. Contractors can greatly benefit from being be able to deftly communicate with their peers. Some key soft skills that contractors may benefit from having under their belt include:
- time management;
- critical thinking;
- stress management;
- conflict management;
- resourcefulness; and
Whether you are a contract cleaner, a contract IT professional, a contract consultant, or one of many, many other types of consultant in New Zealand, BizCover can help you with a wide range of business insurance that you may be considering, including contractor insurance*.
BizCover helps contractors throughout New Zealand to reduce the risks to their business via contractor insurance. Choose BizCover for your contractor insurance, compare competitive quotes online from leading insurers, get covered in less than 10 minutes, 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).