Read Are you Anonymous at Work – ChrisBrogan.com

You might also enjoy this recent post on how to use personal branding to keep your job safe, any my series on IT contracting if you’re turning to the contract market for work at the moment.

Related posts:

• How to save yourself from getting fired
• How to find work as an IT contractor
• How to calculate your hourly rate as an IT contractor
• Getting set up to become an IT contractor
• So you want to be an IT contractor? Read on…

This article Are you anonymous at work? (ChrisBrogan.com) is © 2009 ExchangeServerPro.com

Get more Exchange Server tips at ExchangeServerPro.com

Table of contents for How to be an IT contractor

1. So you want to be an IT contractor? Read on…
2. Getting set up to become an IT contractor
3. How to calculate your hourly rate as an IT contractor
4. How to find work as an IT contractor

Finding your first contract can be a daunting task.  Unless you are well qualified or have an excellent network of contacts that can tell you about available work you are probably going to have to deal with recruiters.

Recruiters, are they all scumbags?

Contrary to popular belief most recruiters are not scumbags.  This perception is usually formed due to unrealistic expectations or a lack of understanding of how recruiters operate.

First you must understand that the recruiter serves two masters: the employer; and you the contractor.  Recruiters are engaged by companies to find them suitable candidates for vacant positions.  A recruiter does this by either going to his database of contractors and trying to match up one with relevant skills, experience, and upcoming availability, or puts out an ad on one of the job sites such as Seek.

Secondly you must understand that the recruiter works on a purely speculative basis.  There is no pay day for the recruiter until they have successfully placed you in a contract.

Dealing with recruiters

If you are using recruiters here are some points that I recommend you consider for your approach:

1. Get in touch with the recruiter outside of a specific job advertisement.

Most jobs are not advertised, which makes responding to job ads a mugs game because it makes you one person in a sea of applicants.  If you’re exceptional you will stand out, but if you’re exceptional you shouldn’t have to resort to applying to advertised jobs in the first place.  Phone the recruiter and find out how to submit your resume directly to them.  Chances are they’ll match you up with jobs that haven’t hit the job websites yet.

2. Make your resume brief and as perfect as you can.

Recruiters aren’t always very tech savvy, so avoid submitting a long bullet list of technical terms.  Make it clear who you have worked for, how long for, the job title, and describe the duties clearly enough that a non-technical person could understand them.

3. Have references available.

You don’t need to include them on the resume but you need to have them ready to go when the recruiter asks.  If its the first time you’ve dealt with a recruiter they may ask to contact your referrees before you are put forward for any roles.

4. Be willing to build a relationship.

If your recruiter wants to take you to coffee to meet face to face and be more comfortable with you both personally and professionally then do it.  The better your relationship with the recruiter the better your contracting career will go.

5. Be clear in your asking rates and conditions.

Let your recruiter know up front about your business structure, your asking rate, whether that includes super or not, whether you want their payroll/insurance services or not, and any other preferences such as where you prefer to work.  It is a waste of both of your time if they put you forward for a job $10/hr under your asking rate that is on the wrong side of town with no public transport available.

Always make sure the recruiter understands how much notice you need to give at your current job.  Everyone wants a contractor to start ASAP, but most places will understand that you need to give 4 weeks notice to leave your current position.

6. Don’t stress about how much the recruiter is making.

Your only goal is to get the rate that you want for yourself.  If the recruiter is charging the client another $5/hr, $20/hr, or $50/hr on top of that who cares?  Remember that the recruiter works on a speculative basis.  While the margin on your contract may seem high it has to cover a lot of operating expenses for the recruiter, and ensure sufficient cash flow for them such that you are getting paid immediately (remember, you get paid straight away, the recruiter may not get paid by the employer for 30, 60, or even 90 days after you’ve actually worked the hours).

Landing your first contract

Once you’ve got a good recruiter working for you and have been to some interviews you will hopefully get your first contract offer.

Read your contract!

Read your contract!

Read your contract!

I can’t stress that enough.  Always read your contract in full.  You’ll be under pressure to sign the contract as soon as possible, but you should never sign a contract that you are not happy with or don’t understand.  Is the hourly rate correct but doesn’t specify inclusive/exclusive of super?  Don’t sign it.  Is the termination clause unclear?  Don’t sign it.  Is the restraint clause unfairly restrictive?  Don’t sign it.

Most recruiters are using contract templates they’ve downloaded from the web and stuck their logo and business name on.  These contracts are often lacking in critical details.  You are still in a negotiation phase so now is the time to amend any contract terms you are unhappy with.  Most recruiters will go along with this as long as you get back to them quickly with all of the amendments you want in one hit.

Get advice from a solicitor a friend with contracting experience if you are still not sure about something.  It may cost a little the first time but once you understand the typical wording of these contracts things become easier.

Contracting can be an exciting and lucrative time in your career provided you enter into it with a clear understanding of all of the elements involved and watch out for the common pitfalls.

Related posts:

• Are you anonymous at work? (ChrisBrogan.com)
• How to calculate your hourly rate as an IT contractor
• Getting set up to become an IT contractor
• So you want to be an IT contractor? Read on…

This article How to find work as an IT contractor is © 2008 ExchangeServerPro.com

Get more Exchange Server tips at ExchangeServerPro.com

Table of contents for How to be an IT contractor

1. So you want to be an IT contractor? Read on…
2. Getting set up to become an IT contractor
3. How to calculate your hourly rate as an IT contractor
4. How to find work as an IT contractor

One of the toughest things new contractors encounter is deciding on an hourly rate.  They don’t want to aim too high and miss out on jobs, and they don’t want to go too low and end up worse off than the permanent job they just left.

The rate formula

My advice is to apply a simple formula to determine your asking rate.  The formula takes into account the following factors:

• 28 days (4 weeks) annual leave (proper holiday leave, not just gaps between contracts)
• 11 days public holidays (check your state’s official public holiday list to verify this number)
• 10 days sick leave (yes, even if you “never get sick”)
• 14 days equivalent training leave and expenses (so you can afford books, maybe a course, and time off to attend)
• 5 days long service leave

There are some other factors to consider as well that I’ll go into in a moment.

Based on a 40 hour working week a full time employee is paid a salary for 2080 hours per year (40h x 52w), some of which falls into the above categories.  So for a contractor who only gets paid for the hours they work, and none of the hours for days like those listed above, they need to charge a higher hourly rate than the permanent employee.  If you subtract 544 hours (68 days x 8 hours per day) from that you get 1536 hours.

This makes 1536 hours a simple basis for calculating an hourly contract rate.  Lets take a look at a few examples using base salaries (ie excluding superannuation):

• $35000pa is about $17/hr for a permanent employee (35000/2080).  To earn $35000 as a contractor you’d need to charge about $23/hr (35000/1536).
• $50000pa is about $24/hr for a permanent employee, and about $32/hr for a contractor.
• $75000pa is about $36/hr for a permanent employee, and about $49/hr for a contractor.
• $100000pa is about $48/hr for a permanent employee, and about $65/hr for a contractor.

The calculations above give you some indication of why contractors can be earning much higher hourly rates yet still be on an equivalent annual salary to a permanent employee making less per hour.  This is why its important as a new contractor not to be dazzled by what appear to be high rates that may actually leave you worse off.

What else to consider

In addition to the factors listed above there are other considerations when calculating your hourly rate, such as:

• recruiter’s commissions
• superannuation
• insurances
• GST
• other costs associated with operating your own company
• unplanned breaks between contracts
• tools and equipment

Each of these will depend on which method of contracting you’re utilising, and the duration of each of your contracts.  If you’re using a recruiter then you can take the simple approach of asking for a base rate and tell them to work out super, commissions, and other fees for services they provide such as insurance on top of that.  In other words you’re telling them “This is how much I want for myself, you work out the rest”.

Don’t forget company overheads

If you’re operating your own company you need to also account for GST, the cost of registering and maintaining the company each year, your own insurance policies, your mobile phone, and tools and other equipment such as a laptop (and don’t forget software!).  Your accountant can work this out for you and then you can calculate it in terms of an equivalent number of days/hours.  So for example you may find that your company costs are the equivalent of 10 days pay, so you would deduct another 40 hours off the 1536 hours when calculating your hourly rate.

Not all of your “holidays” will be planned

Finally you need to consider the possibility of unplanned breaks between contracts.  This will depend on the job market at the time, your network of contacts that help you land jobs, and the level of demand for your particular skills.  Remember you are allowing for potential problems in the future, so plan for the bad times not the good times.  You might take an approach such as allowing for 2 weeks between each contract.  This would mean:

• 12 month contract, allow 2 weeks
• 6 month contract, allow 4 weeks
• 3 month contract, allow 8 weeks

Applying the 6 month rule as an example you would take 160 hours off the 1536 used for calculating your hourly rate.

Two examples of how to apply the formula

All of that may seem confusing, so here is are two examples:

Bob wants to leave permanent employment and try contracting.  He earns $60000 + super, and he decides to use a recruiter’s contract management services.  The recruiter wants to know Bob’s asking rate, and what length contracts he is interested in.  Bob decides 6 month contracts would be ideal.

1536 hours – 160 hours = 1376 hours.

$60000 / 1376 = $44/hr + super.

Mark wants to leave permanent employment and try contracting and freelancing.  He earns $80000pa + super, and works with his accountant to set up a new company for him.  ASIC fees, accountant fees, insurance and other business costs work out to around $5000 per year.  Mark is also allowing for short contracts and the risk of infrequent freelance work.  He decides to use 1000 hours as the basis for his rate calculations.

$80000 / 1000 = $80 (ex GST).

When deciding on a contracting rate it is important to know your skills, know the job market, and have a proper appreciation for the difference between a permanent hourly rate and a contract hourly rate.

In the next part of this series I’ll discuss how to find work as an IT contractor.

Related posts:

• Are you anonymous at work? (ChrisBrogan.com)
• How to find work as an IT contractor
• Getting set up to become an IT contractor
• So you want to be an IT contractor? Read on…

This article How to calculate your hourly rate as an IT contractor is © 2008 ExchangeServerPro.com

Get more Exchange Server tips at ExchangeServerPro.com

Table of contents for How to be an IT contractor

1. So you want to be an IT contractor? Read on…
2. Getting set up to become an IT contractor
3. How to calculate your hourly rate as an IT contractor
4. How to find work as an IT contractor

First let me say that I am not an accountant, nor am I giving anyone advice here to go in a particular direction setting themselves up for contracting.  In fact, the best advice I can give you is to speak to your own accountant to discuss how best to set yourself up for contracting.  I will also point out at this time that since I am an Australian some of the terms I use here may not make sense to people from other countries.

How to get set up as a contractor

There are a few ways that this is likely to go:

1. Recruiter

Many recruiters offer contract management services that includes all of your payroll, insurance, super, and other HR needs.  In this scenario all you need to do is submit a timesheet to them each week or fortnight and they will pay you.  At the end of the year you’re issued a group certificate for your tax return.  The recruiter takes a few dollars out of your hourly rate to cover these services (and some profit margin of course).

Many contractors operate under this system quite happily as it is simple, easy, and usually means the recruiter continues to work to place you in new contracts as each one ends.

2. Management company

There exists several contract management companies that operate separately to recruiters, such as CXC, that will provide payroll, super, insurance and other HR services to you for a specified rate.  The main difference between these companies and the same services via a recruiter is that the likes of CXC are not working to find you contract positions.  You are responsible for finding your own work either via recruiter or directly yourself.

This is a popular choice for contractors who may wish to freelance to many companies, contract directly with companies, or use a variety of recruiters for finding new contracts, while keeping their own paperwork overhead low.  The recruiters still take their placement commissions in these circumstances, but you avoid paying their contract management fees.

3. Your own company

Starting your own company is the dream of many individuals, and doing so as a contractor often seems like a great way to get some terrific tax breaks and keep more money for yourself.  The reality is often much different.  If you are considering starting your own company then professional advice from an accountant is my number one recommendation.  Setting yourself up incorrectly, or wasting time and money on a company for no actual tax benefit, is the downfall of many contractors.

Starting your own company is often chosen by contractors who freelance, deal directly with companies, or have their own proper customers.  Since a company involves some paperwork and additional expenses to other contracting models it is not an option to take without fully understanding all of the implications.

Insurance?  Who needs it…

You do!  Permanent employees have very few insurance concerns – their employer is liable for their actions, they have Workcover in case of injuries on the job, and their company superannuation plan often includes income protection and critical illness cover in case of serious problems.

Every contractor should verify that they have all of these types of insurance cover as well.  Depending on how you are setup for contracting you may be covered by insurance through your contract management company, or you may need your own policies in place.

You also need to consider any tools or equipment that you own and use as a contractor.  For example if you use your own laptop and it is stolen then you’ll need to replace it yourself.  Having insurance cover for this equipment can save you thousands when items go missing.

Do not enter into any contract or workplace without understanding how you are covered for things like injuries on the job, lost income due to serious illness, stolen equipment, or liability due to errors and mistakes.

In the next part of this series I’ll discuss how to calculate the hourly rate to charge as a contractor.

Related posts:

• Are you anonymous at work? (ChrisBrogan.com)
• How to find work as an IT contractor
• How to calculate your hourly rate as an IT contractor
• So you want to be an IT contractor? Read on…

This article Getting set up to become an IT contractor is © 2008 ExchangeServerPro.com

Get more Exchange Server tips at ExchangeServerPro.com

Table of contents for How to be an IT contractor

1. So you want to be an IT contractor? Read on…
2. Getting set up to become an IT contractor
3. How to calculate your hourly rate as an IT contractor
4. How to find work as an IT contractor

At some stage during the career of most IT pros the opportunity comes along to spend some time as a contractor.  The lure of high rates, fixed hours, frequent new challenges, and the idea of “working for yourself” are what draws most people towards contracting.  Each of those carries with it some truths and some myths that new contractors need to understand before diving in, otherwise they may find themselves learning a few harsh lessons during their first few contracts.

In this series I will discuss IT contracting from my own experience and from the experiences of colleagues of mine in the hope that it will help others as they enter what can be a very lucrative and enjoyable stage of their career.

Is contracting right for you, and are you right for contracting?

IT contractors usually fall into one of two categories:

1. Low skilled labor, such as basic coding, call centers, hardware rollouts, and other menial routine tasks.
2. Highly skilled specialists in high demand fields such as storage, virtualisation, messaging, security, and databases.

If you fall into one of those categories then it shouldn’t be hard to find contracting opportunities (they just won’t all be good ones).

The pros of contracting

There are some good things about contracting in IT, such as:

• good hourly/daily rates available
• opportunity to encounter new challenges and environments on a regular basis
• working more than 40 hours per week much rarer than in permanent employment
• easy to avoid office politics and just get on with the job
• many good positions where your contract will be extended many times over
• easy to walk away from the less enjoyable positions at the end of a contract

The cons of contracting

Despite all of the pros there are also some downsides to contracting, such as:

• depending on how you set yourself up, can mean a lot of paperwork, tasks and costs associated with running your own business
• no paid leave (annual leave, sick leave, public holidays, etc)
• often responsible for own training and skills upkeep
• often left out of strategic discussions and company social activities
• can carry a higher risk of termination and/or unemployment during economic downturns
• sometimes you need to take an unappealing contract when nothing else is available
• work locations (and things like transport options and travel time) can vary wildly between contracts
• have to deal with the recruitment sector on a frequent basis

If any of those cons bother you then maybe contracting is not for you.  If you’re willing to take some risks, do a bit of paperwork each week, month, quarter, and year, and are a good negotiator when it comes to dealing with recruiters and hourly rate discussions then most of those cons disappear.

In the next part of this series I’ll discuss the different ways that you can set yourself up for contracting.

Related posts:

• Are you anonymous at work? (ChrisBrogan.com)
• How to find work as an IT contractor
• How to calculate your hourly rate as an IT contractor
• Getting set up to become an IT contractor

This article So you want to be an IT contractor? Read on… is © 2008 ExchangeServerPro.com

Get more Exchange Server tips at ExchangeServerPro.com