Contract versus Full Time Employment

[lou76]

Hi

I had a coffee 'interview' chat today. The job is a contract position and it seems that the majority of the employees are contractors on long contracts which roll over at the end of the contract.

I haven't contracted before so I don't know the advantages or disadvantages. I'm assuming that this also means no benefits, holiday pay etc?

Will I have to invoice them monthly?

If anyone can offer any advice on how it works- I am a bit of a novice when it comes to this!

Thanks

Lou

[miep]

It all depends on the type of contract.
In general if you're on an hourly rate then you have to register for GST if you think you'll earn more than 60 or 70k (not sure what the number is) and invoice the company, usually monthly. You're unlikely to have benefits like health insurance or holiday pay so your hourly rate is usually higher to make up for that.
As a rule of thumb, your hourly rate is the same as the job would pay if it was permanent, so if the job should earn 60k a year your hourly rate would be $60. It doesn't always quite work out like that, the hourly rate is usually slightly lower, but it gives you an idea.

If you're on a fixed term contract you may or may not have benefits and you usually get paid like every other employee, so no registering for GST or invoicing. You will get holiday pay and I think Kiwisaver as well and you can get lucky and get other benefits too.
It may not be the case in your industry but in IT it's usually the worst kind of contract to have as you get paid about the same or even less than a permanent employee without all the benefits and you won't know if your contract will be extended.

HTH

[mylesdw]

I agree with much of the above. I spent many a year as an IT contractor and as a rule of thumb the hourly rate was at least twice that of an employee. Not so in NZ where (as mentioned above) you'll be lucky to get much more than a staff member and with no benefits.

Only plus I can think of is that you can manage your affairs so as to pay less tax than an employee. It does however give you a foot in the door and if you become of value to them it can well end up in a full time job.