Contracting 101

Contracting 101: Everything You Need To Know Before Becoming a Contractor

Have you thought about becoming a contractor before but don’t know much about it? Are you unsure how it works and what it means for you? Maybe you have been stood down from your current place of employment and want to know what options are available? You have come to the right place!

Are you an employER wanting to know about hiring contractors? We have you covered. Click here.

Businesses are slowly beginning to hire again but with a twist. Many businesses are looking at creating flexible workforces – building project-driven teams of contractors. This presents an exciting opportunity for you!

While you may be used to being a full-time, permanent employee, the idea of becoming a ‘contractor’ might be filed away in the ‘too-hard’ basket. But with the workforce heading that way and hiring trends showing us that more and more businesses are going to look for contractors, we want to show you how it can be done.

So with the help of Digital Talent Co.’s Technical Consultant Carly Shearman and Digital Consultant, Kayla Wren, we are going to answer all of your burning questions about becoming a contractor.

Let’s get started!

So, why is this conversation relevant right now?

With the current changes in the environment, this contracting conversation is more relevant than ever! From an employers perspective: businesses and hiring managers are the busiest they have ever been, with remote working conditions. Contracting is a more convenient, faster approach to getting resources onto urgent projects with the potential to employ them full-time in the future if they are a fit to your business. From an employees perspective, contracting is also a way to keep your career moving during this challenging time and obviously, a course of income.

Do you need an ABN?

No you don’t! We can register you in our system as a PAYG contractor. It’s as simple as filling out the necessary paperwork and logging your hours weekly. You will then get paid like a ‘normal’ employee including receiving super either on a weekly, fortnightly or monthly basis.

How do I calculate my rate per hour (e.g.+ super or + GST)? What am I worth as a contractor?

As a very general rule:

Long-term contract: $salary per annum / 1210 hours = $hourly rate
Short-term contract: $salary per annum / 1000 hours = $hourly rate

This is because a ‘full-time’ role is calculated based off a worked hourly rate of 1980 (38 x 52.1 weeks). But 770 hours of those are ‘benefits’ in one way or another; public holidays, annual leave, sick leave, misc. leave, professional development time and others. So when it comes to contracting, you are essentially trying to make ‘1980 hours worth of money’ in a shorter time frame – you are taking the same amount of annual take home and ‘making it’ in a shorter period. Hence the dividing of new numbers.

Some other things to consider is the contractor rate is all inclusive with regards to super. You will also have to pay tax ‘out of your pocket’ at the end of the financial year. Our preferred method is definitely PAYG which is the contractors base rate, whether that be hourly, daily or weekly (including super). The other option is to hire the contractor as a Pty Ltd. but for contractors, that puts a lot of pressure and administrative work on you to ensure you are correctly insured and are protected.

Something to note: we do not accept sole traders at this stage. It is either PAYG or Pty Ltd.

Why would I use a recruitment agency for contracting roles?

In a lot of the contract roles, clients aren’t actually promoting themselves through normal channels so you are getting access to roles you wouldn’t usually have access to.

What are the benefits and pitfalls of becoming a contractor?

The main benefits of becoming a contractor is that it certainly widens the scope of your potential employment opportunities and also opens up your skillset to a range of new tools and projects.

Due to current circumstances, we can’t really identify many pitfalls as today’s work climate has changed significantly. But in the long term, if you are someone that demands structure and consistency in their work life, contracting might not be for you.

Do I BYO my own equipment?

Most seasoned contractors will already own their own equipment; however, given the current circumstances, someone that is traditionally a regular full-time employee will be taking on contracting roles, meaning you may need tools and equipment supplied. It also depends on the engagement itself and the company’s security i.e. someone’s personal computer might not be able to access the system. This will all be discussed before signing any contracts.

Am I insured?

This is something a lot of candidates do not consider but as a contractor, you are not covered from an insurance perspective by the business unlike if you were a permanent employee.

But we want to ensure you are safe and insured at all times which is another reason why going through a recruiter is important.

Insurances included within Oncore’s PAYG set up is:

  • Professional Indemnity insurance (up to $20 million AUD)Public Liability insurance (up to $20 million AUD)
  • Workers Compensation (except in the ACT)
  • Certificates of currency are available on request

On a licensing note: Digital Talent Co. is authorised to provide contracting recruitment under QLD licence number: LHL-02060-T3V0P (for contractor recruitment in other states please inquire as we are expanding our contractor service offering locations).

How do I calculate my hours? Who do I report to?

This will depend on the arrangement however generally you will have a manager/director that you will be reporting too, like you would in any normal full-time role.

At the end of each week you will record your hours in a payroll system and these will be approved by your manager and then you’ll be paid. We work to keep it as streamlined and simple as possible and it will all be covered in the on-boarding.

Something else we recommend is using a project management tool to track your efforts. Some softwares we recommend are Clockify, Toggl and Harvest.

How do I get paid?

This is a great question and something we get all the time. We partner with Oncore which is a payrolling service. They make the process really easy for both the contractor and the business we recruit for.

You simply fill out a timesheet at the end of each week, the company you are working at approves it and then you are paid. That is how easy and streamlined it is.

Who am I technically employed by?

Essentially, you (the contractor) is employed by us, Digital Talent Co., and we provide you to the business as a resource. However, contracting done right will make you feel like an integrated team member of the business you are working for.

Do I get a contract?

Formal contractual engagements are made between the candidate (you), the recruitment agency and our payrolling partner, Oncore, to ensure this is all handled in a fully compliant way.

Can I work for multiple employers at a time?

It really comes down to the engagement. If you are working a 6 month full-time engagement, it isn’t really feasible. Whereas a graphic design candidate on a 10 hr project, she would absolutely have capacity to work on multiple contracts.

We recommend having a good tax person at the end of the financial year to help you lodge the different types of income. Any fees you pay to that tax person will be a deductible expense for the following year and it is definitely worth doing when you have a variety of income streams/sources.

What happens if I want to leave the contract early?

All contractors will enter a flexible contract with the standard notice period being a 7 day notice period. This is very similar to if you were an employee. However, this goes both ways meaning that the business you are working in can give 7 days notice as well.

What if I have been stood down? Can I still have a contract role?

The ATO has answered this question saying:
You can earn additional income without your JobKeeper payments being affected as long as you maintain your employment (including being stood down) with your JobKeeper-eligible employer.

What is the personality of a great contractor?

A great contractor should be confident, a fast learner, highly adaptable and also autonomous. Along with proven experience from their previous contracts, a great contractor should absolutely bring a ‘roll up their sleeves’ and ‘get it done’ attitude to your organisation to succeed.

If you are looking at becoming a contractor or looking for a job whether that be permanent or contract, reach out!

Contact us directly:

Holly Tattersall / holly@digitaltalentco.com.au / 0400 356 656
Carly Shearman / carly@digitaltalentco.com.au / 0488 721 180
Kayla Wren / kayla@digitaltalentco.com.au / 0400 645 270

And don’t forget to connect with Holly, Kayla and Carly on LinkedIn.

Want to learn more? Click here to watch the recorded webinar.

Recruitment Strategies

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