I have worked as both a IT contractor and also as a full time member of staff. I found there are benefits with each form of employment.
To me, some of the benefits of being a contractor are:
- Ability to change projects more readily;
- Shorter term commitments to work; and
- Networking opportunities working across various companies/contracts.
To me, some of the benefits of being a full time member of staff are:
- More stability in times of turbulence;
- Greater continuity of work;
- Greater ability to borrow money from banks;
- Availability of professional development and career opportunities;
- Employee fringe benefits (shares/bonuses/insurances); and
- The feeling of belonging and providing value to an organisation/team.
A lot of people I meet prefer contracting because they think it pays more. I am personally not convinced that contracting is much more lucrative. Let’s compare the same theoretical IT job as both a contractor and a full timer.
Hours of work: 7.5 hours per day
Public Holidays: 11 public holidays per year
Annual Holidays: 4 weeks (20 days) per year
Sick Leave: Assume we take 5.
Professional Development: Attend 1 course and 1 conference per year. 5 days off work and $5000 in attendance costs.
Work Days In Year: 52 weeks * 5 days = 260 days
Days Off From Work (see above): 41 days
Actual Days Worked: 219 days
Actual Hours Worked: 219 days * 7.5 hours = 1642.5 hours
Full Time – $80,000 year base + superannuation (9%)
Total Salary Package = $80,000 + $7,200 super + $5,000 courses = $92,200 p.a
Effective Rate per hour: $92,200 / 1642.5 hours = $56.13 per hour.
Contracting – $60 per hour net including superannuation (and agents fees and insurance already paid)
Gross Amount Received: 1642.5 hours * $60 per hour = $98,550
Effective Base Salary: $98,550 – ($8,136 (Super) & $5,000 courses) = $81,412.84 p.a
You can see that the financial difference between earning a salary of $80,000 per year and earning $60 per hour as a contractor is nominal.
But what if you worked, and billed, much longer hours as contractor? You could earn more, but that’s not really comparing apples with apples is it?
In conclusion, it does pay to think about what a full time salary means and what an hourly rate means. $60 per hour might seem like a lot but when you take into account all the extras that full time employment provides (continuity, superannuation & career development) you may not be getting a bad deal as a full timer after all.
Photo by jsarcadia (creative commons)