There is a widely held belief that when times get tough, contracting is always an option.
However, this is not entirely true. If times are tough for those in permanent employment, they are tougher still for contractors, who have borne the brunt of current lay-offs.
Contracting is not a temporary solution. It is a conscious decision to change one’s career to a completely different employment model, that of an independent entrepreneur. It is a lifestyle choice, not just an alternative work option.
What opportunities are available for contractors?
Recent figures released by the Adcorp Employment Index reveal that the South African employment landscape remains disheartening.
Loane Sharp, Adcorp’s labour economist says, “This is primarily owing to a continual decline in permanent work, with 54,184 jobs lost in May 2014.” By contrast, employment in non-permanent work was sharply up.
Only professional and management occupations have created jobs in recent months. With more redundancies of permanent employees, employers will have their pick of experienced contractors, and to be successful, new contractors will need to offer something special.
What can you offer as a contractor?
Demand for skills is on the decline across the board, but some skills, and some occupations, are experiencing a drop in demand faster than others. The latest results by Computer Weekly’s partner in compiling skills data, Salary Services Limited (SSL), shows that demand for contractors with SQL Server and Oracle skills fell by around 30% between the second and third quarter of 2015. Demand for Java experience by contrast fell just over 11%.
Of course, these figures are historical indicators in a market that is changing by the week.
How to make the most of your CV
Avoid describing yourself as a dynamic self-starter or any other self-promoting cliché that recruiters don’t even read. Your CV must always be relevant to the position you are applying for. If you submit your CV to job boards then be sure to highlight your latest experience and outline your achievements in the workplace or projects that you worked on. This will make you stand out from the crowd.
What about certification?
Survey after survey of employers’ requirements have shown that certification adds value that experience alone does not.
So one of the costs of going the contracting route is keeping your certifications up to date.
Isn’t there a lot of paperwork?
Historically, the preferred option among contractors was to set up a company. However, current tax legislation requires quite a few boxes to be ticked in order to go this route. An easier option is to engage the services of a contractor management company, which, for a fee, will handle all the administration for you and issue invoices on your behalf.
Or you can carry on, picking up odd bits of work and muddling through with your admin, until it occurs to you that you need to do something about tax. You really do not want to get on the wrong side of SARS.
Whatever you decide to do, a good accountant is a lifesaver and will actually save you money. As well as handling tax and bookkeeping, an accountant with expertise in SMMEs, such as Rosstone Consulting, will take care of other aspects of running a contracting business. This will be money well spent, enabling you to concentrate on your work. You will more than recover the cost by avoiding late tax penalties and by taking advantage of all the deductions you are entitled to as a self-employed businessperson.
What is a realistic earning potential?
It is no secret that contract workers get paid more than their permanent counterparts.
However, it is very important to remember that the rate you charge is total cost to company. Many new contractors overlook the fact that they will have to pay their own medical aid, retirement fund and annual and sick leave out of this rate. Many employers balk at the rates contractors quote. They forget that they are paying for results, not attendance. It’s worth reminding them that they are not paying you when you are sick, when you are on holiday, etc. They only pay for your productive time. Therefore you have allowed a certain percentage in your rate to cover these benefits that they themselves take for granted (because we can guarantee that they have never given this any thought!).
So is it for you?
Only you can answer that. Contracting is not for everybody. If you like or need the security of a regular income and prefer to know that your retirement and medical aid contributions are always covered…if the prospect of potential gaps between contracts makes you nervous…then contracting is probably not an option that suits your temperament. If however you like the idea of being your own boss, of having some say over the work you take on, and of potentially being able to earn more than you currently do in fixed employment, then the contracting lifestyle may be your cup of tea.