Are you considering signing a contract?

The ICT industry in Australia is one of the hottest markets and due to low unemployment levels and aggressive recruitment strategies, many professionals have more employment packaging options than ever before.

If you are considering a contract position and are unaware of the advantages and perceived constraints, this article will attempt to address some common questions and perceptions surrounding contracting in Australia.

The analogy I use to give many professionals regarding differences between permanent or contract employment was (provided you are not a new entrant in the workforce) permanent employment can be an excellent idea for people who are looking to progress their career, develop themselves professionally and who require training and support in achieving this. Contracting can be good for professionals already at a high level in their career who don’t require training or support and are looking to earn as much money as physically possible at their level of expertise. This is no longer the case.

The below points are some perceived advantages that permanent employment has over contracting:
• Employment security
• Training and development
• Continuity of employment
• Leave entitlements
• Ease of payrolling, taxation and employment responsibility
• Ease of obtaining financial credit (home loans, car loans etc.)

I will highlight how these perceived advantages can also be applied
to contracting.

Employment security
At the moment, as a permanent employee under the legislation set up by the Howard government (this may change under the new Rudd government), you can be placed on a three- to six-month probation, within which time you can be “let go” easily and with very little notice. Notice periods may vary depending on your agreement/award, however, generally if your employment is under three years, the notice period your employer is required to give you is comparable with a standard notice period for contract termination i.e. 14-30 days. Always check notice periods of employment before signing a contract of employment.

Training and development
As unemployment is at a record low and aggressive recruitment strategies are being undertaken, Australian employers are commonly choosing to manage the turnover of contract staff through the encouragement of training and development of skills. It’s no secret that one of the great advantages of contracting is the freedom and flexibility it offers, this extends to certification and training. Certified or accredited training is tax deductible and the contractor has the choice of the certification that will best increase their net worth and further their career.

Continuity of employment
Many professionals thinking of making the change to contracting are put off by the idea of lengthy delays between contracts. Depending on the month, market constraints etc. this can happen. My suggestions to help avoid this are to start looking for your next assignment and alert your recruiters four weeks prior to your expected completion date. Unless an offer is exceptional I suggest you look to sign up on six- to 12-month assignments and try not to engage contracts with an expected completion date between early December and late January as these are generally viewed as quieter times in contract recruitment.

Leave entitlements, taxation, employment responsibility and line of credit
I have put these last three points together as the common solution to these issues is the same, a management company. A management company is a company you as a contractor engage to manage your funds, insurance and payrolling so you can focus on doing what it is you know best. A management company can have the ability to pay you as PAYG, salary sacrifice, ABN, Pty Ltd or trust and they generally cover the necessary insurances for you i.e. workers compensation (Work Cover) insurance, professional indemnity and public liability. Your management company can facilitate the allocation of funds for periods of leave or unemployment and normally charge you on a “fee for service” basis meaning if you work for a day you will only be charged a pre-agreed percentage of your income for that day. Management companies have the ability to stay with you throughout your contracting career (site and employment changes), meaning your employer (from a credit perspective) stays the same.

Since my introduction to management companies I have personally engaged them to manage my contracts and despite having excellent knowledge of taxation (having previously managed my own businesses) I have found through a salary packaging structure I take home more money than I would have by doing it myself and the savings more than cover the cost of the service.

Given the current market and salary options available, if your skills are in
high demand and you would like to maximise your income at your current level of experience, I can’t imagine a better employment arrangement than contracting.

Luke Carolan is an industry professional with more than seven years of experience in consultation of best business practice and resource hiring, with in-depth knowledge of tax minimisation services. For more advice on how a management company may be able to assist you, email: info@cxc.com.au