Benefits of IT contracting
Benefits in being a contractor include:
- You’re the boss. You have the freedom to take on assignments or reject them.
- You can earn more money than permanent employees. Even with breaks between work, sickness and unpaid holidays, contractors can often earn much more that their “employed” counterparts.
- You can work full or part time on some projects, often from home saving time in commuting and having to dress up. You can jump out of bed, work in your pyjamas without distractions – and coffee’s on tap.
- You’ll have lots of expenses to claim against tax so your tax bill should be much lower than if you were still an employee. How much tax saved depends on the expertise and confidence of your IT accountant.
- If you do all or some of your work from home, flat or apartment, a % of all costs – rent, mortgage interest, power, water, insurance, maintenance, rubbish disposal, lawnmowing, security locks, alarms, phone line, vehicle expenses and guard dog (not a guard cat however) can be claimed as deductible for tax purposes
- You’re in total control of your own affairs and every situation – a huge plus
- Your contracting assignments can lead to further opportunities as you move around the city for client firms in various industries and trades.
Drawbacks of IT contracting
- You’re your own boss. You have no one else to fall back on if things go wrong. The responsibility for everything is yours alone.
- You can earn less money than from your previous permanent job if you’re not careful. Remember- your boss no longer pays you for 4 weeks annual holidays, sick days, statutory holidays, bereavement time, training and seminars, IT courses, Kiwisaver contributions, pens and stationery, coffee and tea, milk and staff biscuits, business lunches, parking, fringe benefits, staff allowances. Other “perks” include overseas travel, flash hotels, tasty cuisine and entertainment paid by your boss while you’re on the job. And all these “freebies” are still received by your “employed” counterparts and can add up to a lot.
- You can no longer depend on a pay check coming in every week or month like before. Your work flow can be unreliable so unless your skills are highly sought after there could be lean times while waiting for your next assignment. Meantime rent has to be paid and you have to eat. Coffee’s no longer free either.
- You previously had no outside expenses to worry about – the boss took care of all that. What you got in your hand was “tax paid for” and was all yours without further deduction.
- The boss took care of your tax so your tax compliance responsibilities were virtually non-existent. Quite a bit different from your self-employment where IRD can be all over you if you fail to file or pay on time.
- If you did any work from home your boss usually reimbursed you for all legitimates costs that you had to pay over and above your normal home expenditure.
- While being in control of your own affairs is a huge plus it brings with it, its own risks