Make Contracting work for you

If you've kept an eye on the news lately you'd have seen that there's not enough IT Talent to service all the positions in the market. That's because the IT sector is going from strength to strength, and continues to grow exponentially within large organisations.

Smaller companies have fluctuating IT contractor demands too. For all businesses, an IT contractor's specialist knowledge is seen as a cost effective alternative to permanent employment.

So what is a Contractor?

In simple terms, a Contractor is someone, either as an individual or from a company they represent, who contracts their services to a third party, to help them complete a project. This is usually for a fixed duration, typically 6 to 9 months, but contract lengths can vary greatly. Once a contract is completed, the contractor moves on to the next project.

Contractors are paid well, thanks to their qualifications, experience and specialist knowledge. Many contractors greatly appreciate the variety and flexibility that contracting provides them.

Should I contract?

It's really a personal choice and depends on your individual circumstances. Before deciding on whether to get into contracting or not, you need to look at your options.

Contracting Advantages

1. Nothing beats being your own boss.
2. Exposure to a lot of different systems and organisations will help create ongoing demand for your services.
3. There can be significant tax advantages as a contractor. You may be able to claim a lot of expenses against your business. Talk to your tax specialist.
4. Short-term contracts often attract higher rates of pay, which provides the opportunity to increase your income.
5. Continue learning at your own pace, to stay current but this will be at your cost. We can help.
6. Remaining flexible about work assignments and locations will ensure you'll have an interesting work life, and a steady stream of contracts.
7. Enjoy a great social life by meeting all kinds of interesting people.
8. Who needs company politics either? Not contractors!
9. Extended holidays when you feel like them.
10. As an experienced contractor you can work and play anywhere in the world.

Contracting Disadvantages

1. Contractors need to be open to change.
2. You're responsible for your own training.
3. You have to manage most of your own tax payments, and pay them on time. Recruitment companies now must tax you when they pay you so it's important you supply us with correct tax figures. Use the IR330C to work this out. If you engage a good accountant, this can be less of a disadvantage as you can claim business expenses.
4. A contractor usually has no voice regarding management decisions.
5. Contracts are for short periods, usually 3 months to 1 year. When starting out, this can be a bit daunting until you have a portfolio of companies to contract to.
6. Holiday pay, sick pay and other employment benefits become your responsibility.
7. Unlike employees, you have no rights. If a project goes bad or is underfunded, the contractors are usually the first to go.

So does contracting sound like you?

Talk to Talent Vault if you're undecided. We'll give you honest answers to your questions.

Here are some things you should consider first:

1. Are you well skilled in the roles you're interested in?
2. Do you have enough business experience?
3. Can you deal with potential down times between contracts?
4. How do you manage change?
5. Are you a self-starter?
6. Do you have great communication skills?

Setting up as a Contractor

Firstly, this is a guide. We recommend you speak to a tax expert or accountant to ascertain what's best for you.

Still here? Good. You have decided to set up your own business and you are going to be self employed. You need to decide on an entity to trade under and also a trading name. The more common choices are Sole Trader and Limited Company.

Sole Trader

As a sole trader, you trade on your own. As the sole entity the profits are yours, but you're also personally liable for all business taxes and debts. There is little legal process to handle when starting as a Sole Trader.

Limited Company

A Limited Company is more formal. It's a legal entity that is separate from its owners/shareholders. A Limited Company must be registered with the Companies Office.

You have two ways of registering a Limited Company:

1. Online at http://www.business.govt.nz/companies/. The fees are set for name reservation and company incorporation, payable by Visa or MasterCard or by setting up a direct debit account. To reserve your company name online, click on document registration/name reservation.

2. By filing paper forms and posting them to the National Processing Centre, Private Bag 92061, Auckland Mail Centre.

Online is the cheaper and quicker option.

The company owns the business's assets and liabilities and is responsible for its debts. A shareholder's liability for losses is limited to their share of the ownership in the company. Companies must file annual returns with the Companies Office.

Remember before you decide on the best option for you, speak to a independant specialised advisor.

You might need an additional IRD Number too

If you don't already have one, you'll need to apply for an IRD number. This is an 8 or 9 digit number and each taxpayer has one. If you are a sole trader, your personal IRD number will also become your business IRD number. If you are a Limited Company you will need a separate IRD number for the company. This number will also be used as your GST number (Goods and Services Tax).

Recruitment companies must tax you when they pay you, so it's important you supply us with correct tax calculations. Use the IR330C to work this out.

Here's a couple of links to IRD's website where you can find out more information on setting up and running a business as well as applying for an IRD number:

http://www.ird.govt.nz/yoursituation-bus/
http://www.ird.govt.nz/how-to/irdnumbers/

https://www.ird.govt.nz/contractors/notification/completing-tax-rate-notification.html

When you need to register for GST

(Goods & Services Tax)

As a contractor working in New Zealand, if you expect to earn more than a set dollar amount per annum, you must register for GST. The benefit of GST registration for a business is you can claim back from IRD, the GST paid on goods and services purchased for the business. Read more about GST here: http://www.ird.govt.nz/gst/gst-registering.

Invoices

As a Talent Vault contractor you'll need to invoice us monthly. Here's an invoice template for you.

Why you should consider Insurance options

As a contractor, you're the boss. If something goes wrong you could be help financially liable. Insurance is all about planning for the unknowns in business. Consider what may happen if you fall ill and don't have the means to pay your bills or see out a contract; you're unable to complete a project you were contracted to set up or you make a serious mistake and the client wants recourse ; or any number of things.

Health, Business Continuity insurance and Professional Indemnity (PI) insurance are several types of insurance cover that you should have.

More and more clients are demanding contractors have PI insurance and some will not engage contractors unless they have valid and up-to-date PI Insurance.

To work with Talent Vault as a contractor you must have PI Insurance.

Talent Vault has negotiated a deal with Lumley General to cover our independent contractors for Professional Indemnity Insurance for the life of the Talent Vault contract. It's a geat, cost effective deal, just contact Lisa Diamond for the details.

Banking on your future?

Call +64 9 373 5005 or email us now