Contracting is the future of the workforce. Gig Economy, Contingent Workforce, there are several phrases that have been used to define this new workforce mindset
As a contractor, ensuring that you are compliant is essential – you do not want to get caught up down the track because you made a mistake. This could be ensuring that you are aware of your tax obligations or making sure you have the relevant work insurances.
Depending on how your contract stipulates that you will be paid, will affect who has to ensure compliance. If you are payrolled on a regular salary by the company, then they will be the ones responsible for the compliance of all government taxes. However, if you are invoicing the company for your contracted services, then you are liable for ensuring you pay the necessary taxes and abide by the Personal Service Income Rules – https://www.ato.gov.au/Business/Personal-services-income/. So you have to ask yourself, are you a contractor, or will you be seen as an employee?
As the old saying goes, cash is king. It is crucial that contractors have a steady cash flow and that they do not get caught out by unpaid invoices and finding themselves struggling to find the money during a dry spell of work.
Cash flow is the net change; it’s your cash position from one period to the next. If you have taken in more cash than you send out, then you have a positive cash flow. You have a negative cash flow if you have more cash outflow then inflow.
Contractors need to find a contract, and then they are reliant on their invoices being paid on time.
If contractors are unable to get the cash, then bills will go unpaid and pile up. It is possible to borrow money, but that makes the entire process more costly, so having the money and strong cash flow is essential.
If your contract requires you to invoice and take care of your own compliance, this can cost you in time, as well as physical cash. There are services available to make contracting less stressful and to give your time back, such as payroll or contractor management companies. If you calculate your hourly rate and find that the amount is greater than the cost to make use of these outsourced services, it might be worth considering.
If you are contracting, it is essential that you are confident. You have to confidently present yourself to earn your next contract, to network and build connections and you have to have the confidence to chase down that outstanding invoice to make sure you have that cash flow.
The contingent workforce or the gig economy, is pushing toward this flexible contractor driven model. With both employers and employees embracing this new approach, it is destined to become the new normal of the working environment.
If you have further questions on this subject or would like a simpler, more cost-effective, efficient way to run as a contractor, please do not hesitate to talk to us…