We have recently had a run of people looking to sign up to the Vario Hub who are new to contracting. This prompted me to think about the conversations I have with prospective freelancers when they call and ask “What’s this all about then?”
Given what I do at Pinsent Masons it is not surprising that I want to encourage as many people as possible to consider the contracting path. However, I also want people to go into it knowing what they are getting into, because it’s fair to say that there are differences between freelancing and working a permanent role that should be kept in mind.
Firstly, on the encouragement side:
For those new to contracting, here is a broad brushstroke overview of the market.
Within the legal sector, there are a few different options in what can look like a very crowded market. Options are never a bad thing though. At a basic level the market in Australia tends to look like:
• Law-firm captives like ourselves;
• Private equity backed multinationals or ex-PE multinationals;
• Entrepreneurial startup companies; and
• Recruitment agencies that do perm placements and have perhaps seen others crossing into their lane with interim services, so have started a fractional division.
While I have an opinion on the pros and cons of each, me giving it would be somewhat self-serving. If you want to know what works for you, pick up the phone and have conversations. You will soon get a sense of who you think is a cultural fit for you and who can provide access to work that suits.
Now some nuts and bolts:
As a permanent employee, you have an employment contract. You get a base salary, superannuation, accumulate leave, get paid sick days, get paid regardless of public holidays, etc. Interim work can be the same, but there are other options.
You can be on an employment contract, working 5 days a week for x months, accumulating leave, still paid for public holidays, tax taken out by the employer, superannuation deposited as you go. If the nature of the work is more ad-hoc, a casual employment contract may be more appropriate to the situation. The employer takes care of the tax and super, but you aren’t accumulating leave. You aren’t paid on public holidays. Whether casual is the right type of employment or not is largely down to the nature of the work, not the discretion of the employer or employee. If you are entering into an employment agreement for interim work, be clear about the contract you are on.
The next most common engagement method is to set up a company, register it as a law firm and engage with the service providers via a contract for that service. Rather than remuneration via a payroll system you would be invoicing for your time (could be a daily rate, hourly, monthly, retainer, fixed fee – daily is the most common). You would most likely need to register for GST (talk to your accountant), would not be paid for public holidays, would not accumulate leave, would need to take care of tax and superannuation yourself (if you pay yourself a wage out of the company).
A Pty Ltd company is the most common and while some providers will engage sole traders, others will not.
Is there a difference between pay rates on those engagement types?
Those engaging via companies tend to charge higher rates than employed engagements, but then they have to administer a company, organise tax affairs, pay themselves a wage to get superannuation, etc, so it tends to balance out.
In both of the above, your contract is with the provider, not with the client of the provider under whose direction you will ultimately be working. But note, there are a few platform offerings in the market where your contract is direct with the end user (like an AirBnB type situation). However, these platforms are not common in my experience.
And finally some considerations if you are thinking about taking up contract work:
I’m not talking about the “banks are reluctant to lend to contractors” or “the tax savings/cost of being an independent contractor” or “you spend so much time doing admin running your own company”. These things can be true or not as everyone’s situation is unique. It is difficult to cover all situations and nuances. I am not an accountant; I don’t know your personal affairs. Who knows what the banks are thinking at the moment and did I mention I am not an accountant!?
I am talking more about the mental approach to contracting versus full time, your outlook to the work, company and co-workers:
• For your discussion with the service providers, do up an A and a B list. The A list is what you would really love to do, B is what you will consider. For some A will be prominent and B non-existent. Communicate that to the company/agency/service provider.
• Commit to the contract. Do not see it as something to do until something better comes along. The role may be temporary but your contribution may not be and after decades in this industry it never fails to surprise me how small and networked it is. If you do good work, you will be remembered for it, whether it is large scale delivery and churn or macro level bet-the-farm strategy.
• Work out how to become known very quickly within any organisation you are dropped in to. In a full-time job you have time to onboard, can get to know people at end of year parties, things come naturally. Contractors are on an accelerated timeline and there is little value to having a contractor who no one knows to go to. For some people, proactive networking is no fun. No shame in that, but keep in mind your own internal battery and what charges/depletes it.
• Get clarity on early delivery expectation and align your efforts to that. If it is a long enough contract, do the same for medium and longer-term delivery goals.
• If you like the place, get involved and keep an eye out for opportunities. Contracts extend more often than not.
• If you don’t like the place, keep you head down, see point on delivery expectations above, stay out of the politics (easy as a contractor) and know there is a natural end that does not mean upset and anguish for either party. Of course, if it is toxic and impacting your wellbeing, don’t sacrifice your health (though that goes for full time and contract roles).
• Finally, career progression is not always measured in title changes. It can come from broader experience, deeper expertise, greater responsibility and wider connections.
