Whether you're contracting or not, the job market has been tough. Instability in the market such as Covid, recessions, mass layoffs or good old Brexit leads to headcount restrictions and redundancies—but projects still need to get delivered! Some heartless businesses will divide these responsibilities between their remaining overstretched teams—the rest will use contracting and freelancers.
We’ve had 2 years of declining job vacancies and constant redundancies (the latest being in the media industry) leading many people out of work and exploring temporary solutions.
Here are some pros and cons about contracting and freelancing (and a few useful tips).
Contracting and freelancing have some small differences:
- Freelancers are usually self-employed, managing their own set of clients doing X number of hours every week or month. These come from your own network or recruiters such as Aquent.
- Contractors have a fixed-term assignment usually with one client which can be project-work or BAU. These are more likely to come from recruiters.
I’ll refer to it as contracting in this guide.
What are the advantages of contracting?
- Freedom to manage your own workload is a big one. If all goes well, you'll have a great work-life balance as you can take time off in-between contracts or control the number of hours you work.
- Broaden your skills and network by working in different environments with new people, and keeping up with the ever-changing landscape.
- This diversity will also improve your agility. Good contractors can hit the ground running in any business!
- You'll find more opportunities in a downturned market due to headcount restrictions e.g. 70% of my job requirements in 2024 have been temporary.
- Politics. Contracting can be the best of both worlds; deliver amazing projects without getting bogged down in office politics.
- Try before you buy. I've seen plenty of short-term contracts become permanent roles as it gives both parties time to see if it's a good fit. Just don't burn any bridges if it's not working out!
- Higher earning potential. Experienced perm candidates can earn more contracting. For instance, according to our latest Salary Guide a Data Scientist can earn up to $150k + Super and Tech Leads can earn $180k. One of my contractors charges $950/day + Super. Despite no holiday and sick pay, it still leaves them $50k better off than a permanent worker.
What are the disadvantages of contracting?
- When you're not working, you're not earning! With no sick pay or holiday pay certain times of the year, like Christmas, become forced leave for contractors and difficult to land a new gig. It's why compromising on your rate for a long-term contract can be worthwhile.
- Career Progression. Businesses want contractors who've done it before and can give them quick results so it's difficult to step up.
- Supply and demand. Rates will indefinitely fluctuate with market conditions so it isn't always a better financial decision.
- Contracting has less security than a perm employee. “No budget” can be enough reason to terminate contractors and notice periods are getting shorter (although, the security of perm roles seems questionable right now as well).
- Contractors can be treated like 2nd class citizens. Contractors can experience a lack of involvement in strategy meetings, end-of-year reviews or even small perks like going to Christmas parties.
- A hiring manager may see you as a flight risk if it's your first time. Would you leave for a good perm role once the market stabilises?
- It's still a competitive space for certain skill sets. For example, I had 363 applicants for a recent Technical BA contract advert and 285 applicants for a Comms & Content Specialist.
- It can be stressful constantly searching for new roles if you're not in long-term contracts.
- Potential restrictions in the long term. I was a contract recruiter in England and ‘IR35' was the bane of my life. Australia seems to catch on to things like this eventually (Neobanks, GDPR, etc.) so this could restrict a lot of your freedoms.
How should you prepare for contracting?
- Gather results from all your projects.
This can be % or $ outcomes or links to websites, products, sample copy, etc. Build a portfolio, website or even a doc with links to your work that you can send to clients.
- Networking—not all temp roles are advertised.
They come from referrals or recruiters running through their list of known contractors. So, maintain relationships with current and former colleagues and build them through attending events and regular activity on LinkedIn. Pro tip: Get to know a few recruiters who specialise in your area—check out our team here. - Update your CV.
Good contractors' CVs should be punchy. Focus more on outcomes and deliverables of projects and fewer career aspirations. I often find contractors pitch themselves as either a specialist in one area or as a jack of all trades. - Know your numbers.
Use day rate calculators to figure out what to charge. This one's handy as you can budget for unpaid leave. When contracting you'll need a 15-20% uplift on your salary to come out on par. I've spoken with career contractors who budget for working 40 weeks a year which is why 12-month contracts are the dream.
- Prepare to get your own gear.
Equipment isn't always provided to contractors so you may need to have your own laptop and the relevant software.
How do contractors get paid?
- PAYG—Pay as You Go is the simplest way to start as you don't need to worry about your tax, super and insurance. PAYG will come from a 3rd party as you'd go onto their payroll.
- Sole Trader—A lot of freelancers have their own ABN set up as a Sole Trader as it's the easier and cheaper ABN option. However, you can't use your Sole Trader ABN with recruiters for tax purposes. You can do both PAYG and Sole Trader contracts you'll just need separate tax returns EOFY.
- PTY LTD—Setting up a private company is the most expensive and complicated option, but it gives you control of your own taxes and insurance and you'll pay business rates. It's ideal if you decide to become a career contractor.
In summary…
If you’re thinking about contracting long-term, then I’d make sure you’ve built enough experience to be a specialist in your field. That, or have the network that’ll allow you to build a client base.
Taking a contract or some freelance work could be the perfect stopgap for you until the market recovers, and early signs are positive for the new financial year!
I sit on Aquent’s Marketing & Analytics team and would love to have a chat if you have any more questions. Connect with me here.
About the author
Cat Dad with 9 years of recruitment experience in Australia & England. I'm working with some great candidates and clients across Australia in the Marketing & Analytics space so I'm always happy to chat, whether you're keeping an eye on the market or looking to grow your team. You'll find me holding up traffic as an annoying cyclist or hacking my way around a golf course outside of work (usually plastered in SPF-50).
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