how to overcome the downsides of contract work

Contract jobs can be great. If they weren’t, I wouldn’t have written an article about why I’ve spent two years as a contractor myself. From true work-life balance to a sense of control over the kind of work I do today and where I want to get to tomorrow, contract jobs have recently allowed me greater control over the direction of my career.

But there are some definite downsides to contracting. And these are things that many of us don’t talk about. We’re not being evasive: it’s normally because we’ve done the math, weighed the pros against the cons and figured out that this, at least for now, is the career path we’re taking. As such, you don’t dwell too much on the negatives.

With that said, for those thinking about going with the contract route, it certainly isn’t a path for everybody. Here’s everything about contract jobs people don’t tell you about.

1. The benefits are not as good

It differs from company to company, but basic employee benefits can cover everything from childcare leave to medical costs. In some cases, they even cover Chinese medicine or trips to the therapist’s office. To a full-timer, this means that a routine dentist checkup is not going to break the bank, since the company has you covered. Most times, this doesn’t apply to contract jobs.

More often than not, the contracts are fairly straightforward: you negotiate the job you have to complete, and how much the company will pay you. Everything else, from cold medicine to a taxi ride, is coming out of your own pocket. That’s not to say that there’s no room for negotiations, but in typical situations, it’s about a flat fee.

I remember visiting the dentist about half a year after I started out as a contractor. It’s not that I didn’t know the average cost of dental visits: it’s just that, after years of being full-time, I had stopped worrying about the price tag, as long as it was within the budget. Imagine my shock when I stepped out of the dentist’s office, only to be handed a hefty bill, which I paid on my own. Did I want a follow-up X-Ray scan? I passed on his suggestion.

Suggested fix

Unexpected costs are great reasons to keep an eye on your pipeline and to maintain rate integrity. Where possible, contractors typically try to overlap several projects. This serves as a way of ‘stocking up’ hours during the busy times, to cover you for either low times of year, or unexpected bills that might throw the budget out.

Should you become a long-terms contractor, consider topping up your health insurance coverage. Contributions to this coverage could even become an additional line item for your regular clients – many of whom won’t mind covering benefits to cover your wear-and-tear, particularly if you become a regular part-timer.

2. You don’t get paid during vacations

Back when we were students, the idea of three to five working weeks of sponsored vacations seemed almost like some sort of hallowed land. Paid holiday leave is definitely a highlight of fulltime employment.

The amount of leave you get as a full-time employee differs from company to company, and whether you have to work during your vacation will also depends on company culture. Some bosses require you to respond to email – others insist that you disconnect completely. Either way though, you can be paid for spending the day in Bali. And that’s a good thing.

Contract jobs are different in that regard. In the contractor’s (or small business owner’s) mind, every vacation day is a day when you’re not working, which means you are also not bringing in any money. As a result, you do start viewing public holidays and vacations differently.

Suggested fix

Since I became a contractor, I have found myself bringing my laptop overseas and working in hotel rooms. In early 2019, throughout my vacation to Jogjakarta in Indonesia, I worked for at least four nights out of the five that I was there. Instead of a short breather, taking vacations as a contractor can at times feel more like interruptions. And to your spouse or partner, your work can feel like a distraction to their holiday.

In many ways, the key often comes down to promises and expectations. Are you actively promising your time to both your clients and family? If you are, you’ll please neither. On the other hand, with planning and communication, you can zone your time just as effectively as a contractor as you did as a full-timer. Just remember: that phone of yours does have a silent mode.

3. You don’t get job or payment security

A contract job feels good for as long as it lasts. However, if you don’t have something lined up immediately after the current contract ends, contracting could very quickly feel like a bad career decision.

Compounding the situation is the possibility of late payments. Unless there’s a stipulated time frame in the signed contract, some employers don’t feel obligated to pay contractors within a reasonable amount of time. The worst employer I have personally had paid me about five months after a week-long engagement. Then again, most of my employers have been good pay masters – but late payments or cancelled jobs can really mess with your job security, especially if you have a mortgage to pay or a family to support. 

Suggested fix

That is why it is always a good idea for contractors to look for contract jobs that lasts for several months at a time: a maternity cover for instance can be your shot of fulltime work for a three-to-four month period. That way, you can maintain a certain level of consistency in terms of salary, and it gives you enough time before the end of your current contract to look for something else.

And forgive the plug, but it might also be a good reason to talk to an agency like this one, which hires contractors on behalf of clients. That way, so long as you do a great job, you’ve got someone potentially helping to look for the next assignment – while you’re taking care of the work part. These agents are also able to negotiate on your behalf: in the best cases, they can have something waiting for you once you’ve almost finished your current gig.

4. You have to constantly put yourself ‘out there’

You hear the word ‘hustle’ among contractors and small business owners a lot. We always have to put ourselves on the job market to make sure that we have a steady stream of jobs coming in. This means constantly revising your CV, updating your social media and making sure that people know you are currently available to take on new contract jobs.

The last point can be tricky: there isn’t a method that works for everybody. Some contractors go as far as setting up separate social media accounts to advertise or broadcast portfolios. Others simply rely on word-of-mouth. Whichever you choose, the purpose is to let people know that you are available — or about to be available — and employable.

Suggested fix

It sounds glib, but the best solution is simply to do a really good job each time. And where you can, learn about what makes your service useful to those who pay you – and learn how to ‘sell’ that benefit to other people.

By leaving clients happy, you will find they recommend you to others. Along the way, try to collect recommendations from those who are happy to help you along. Certainly for many contractors, having a degree of understanding and control over the sales side of your specialty is empowering – and in the best cases, your ability to influence the business conversation can see you both learning and eventually earning more.

5. You deal with support services yourself

Filing your taxes is quite different as a contractor compared to a full-time employee. Getting paid, contributing to your social security savings (in Singapore, called Central Provident Fund) and filing your income tax (in Singapore, it happens around April every year) are fairly simple.

Most salaries and social security savings are automatically transferred or deducted. Filing your income tax requires a few mouse clicks on the Inland Revenue Authority of Singapore website. Since the government knows how much you’re earning, the income tax you owe is on display from the moment you log in.

Either way though, as a contractor you do have to do things yourself. For income tax, you have to declare exactly how much you earn in the year (this is where good habits of record keeping come in) down to the last dollar and cent. The same goes for social security savings as well.

Instead of a monthly contribution that’s deducted from your salary, the government will send you a letter (typically around the middle of the year) to make one lump sum contribution manually. Pay-wise, some employers insist on mailing physical pay cheques to you, which means that you have to drop them at their nearest bank branch.

Suggested fix

As they become more successful, a lot of contractors seek freelance support services – ranging from low-cost accounting software, through to hiring (you guessed it) other contractors.

For many people though, the DIY approach does give them a sense of satisfaction that they fully understand the process, and know the various ins and outs of running a full business.

Ultimately though, one fix is to consider full-time employment again. Contracting is after all, not necessarily a lifetime commitment. It could be that you gain enough experience over enough projects to gain a manager title somewhere interesting – or in a different route, you might fancy building your business such that you hire a small team yourself.

Either way, your time spent as a tourist around the work market should prove empowering and illuminating – a journey well worth the various downsides along the way. 

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