Contractor vs Employee

Working for yourself instead of an employer can be a liberating experience when you become your own boss through contract work. It can be wonderfully demanding and satisfying to have complete control over how you perform and to bear sole responsibility for the results. To make money and advance your profession, it's undoubtedly a very different yet fulfilling approach.

This guide offers information, advice, and resources to help you maximise your abilities as a contractor, regardless of whether you're just considering it, have recently taken the leap, or are an experienced contractor.

What advantages come with working as a contractor?

Everyone can work as a contractor, and each person has their own motivations for doing so. Here are a few of the more typical advantages that contractors experience:

  • The potential to increase income by establishing a solid reputation as a reliable supplier of a highly sought-after skill and/or services.
  • Get paid extra for working more hours, set your own morning, evening, or night shift rates and charge an on-call or short notice charge.
  • Work when and where it suits you to have more flexibility in determining your own work/life balance. Taking back control of your own life and start living.
  • Gaining experience in various sectors, corporate cultures, and skill applications. Diversify your experiences, skills and increase your employable value.
  • Expanding your horizons through collaboration with a wider variety of individuals and skill sets. Allows you to build a solid network of support, continues personalised education that again increases your employable value. Self-focused growth.
  • Choosing to work for someone instead of feeling obligated to and recognising that you are contributing to their success by giving them the talent they require. This promotes equal value to both and cultivates a healthy professional relationship.

The usage of contractors is increasing rapidly as businesses all over the world realise the advantages of having a more flexible workforce. Most organisations have now seen the benefits of remote working thanks to the Covid-19 epidemic. Employing contractors rather than full-time staff also allows many businesses to have the quick thinking and adaptability needed to thrive in the quickly changing marketplaces of today. Without incurring constant expenses and dangers, they may swiftly obtain the expertise they require for the duration of their needs.

What additional duties come with being a contractor?

As an independent contractor, you must take on certain financial obligations that an employer would usually handle for you. This may comprise:

  • Contributions to KiwiSaver or superannuation (optional).
  • Contributions to ACC levy (NZ) or Medicare levy (Australia).
  • Student loan payback terms
  • Inland Revenue (NZ) or Australian Taxation Office payments of income tax and GST
  • Maintaining Accounting Records
  • Making provisions in your budget for sporadic income

At first, it may seem a little daunting, but there is a lot of support available, and this guide will help you get ready by going over the essential topics. Let's start with some of the false information that well-meaning individuals who might lack your bravery may tell you.

Acquiring knowledge and refining skills as a contractor

Many individuals think that the possibilities to learn from accomplished people and advance your career would disappear if you began contracting. It's just not true.

You will learn from a far wider range of people when you contract. You will probably encounter various working environments, technology, project management techniques, and people management methods. You'll be able to identify and pick up the talents you require to advance. Also, you'll develop into a useful asset who can use your range of experiences to serve clients even more. With every new customer you take on, your network of contacts expands, bringing you closer to people who can see your potential and offer you opportunities to advance your career.

You can learn new skills and hobbies through online courses, in-person training sessions, and industry association meetings during your downtime or in between jobs. All of them can offer additional chances for networking, gaining advice and inspiration, and staying in the forefront of people's minds for employment opportunities.

Minimising unemployed periods as a contractor

The worry of going extended stretches without receiving any money is one thing that prevents a lot of people from contracting. For them, working is a far safer financial option. However, if you're driven and your skills are in demand, your job should be rather stable. All you need to do is be prepared and organised by carrying out tasks such as:

  • Preserving a network of possible customers by remaining in contact without bothering them.
  • Maintaining your skills by making time to read, socialise, listen, and study.
  • Develop yourself by learning new nursing skills that you think will be valuable addition to marketing yourself.
  • Keeping your resume current and prepared.
  • Seeking employment one month in advance of your needs and keeping your availability up to date.
  • Above all believing in yourself and knowing your worth and value that you bring to any work environment.

Regardless of your level of motivation and competence, permanent employment is never assured. In actuality, a lot of people quit their jobs due to frustration with repeated restructuring (e.g., roster changes without notice). Instead, nurses should recognise their capabilities and want more power over their profession and income. The freedom and fulfilment alone from knowing that you are working for yourself and yet making a great positive influence in every environment you get the privilege of working in can cultivate as sense of peace and determination because people work harder for themselves than for others. It is time to chase the life you have always wanted for yourself by taking back control of your choices and choosing better for yourself.

What distinguishes being an employee from being a contractor?

The key distinctions between working as an employee and a contractor are briefly summarised here.

Contractor

Employee

Either have or not have a formal "independent contractor agreement," which is a contract for services. The law accepts verbal contracts.

Must have an employment agreement, which is a contract for services.

Invoices customers for a job at an agreed fixed hourly, daily, or quoted fee, which must be paid at the agreed interval time (weekly, fortnight, monthly).

Is paid a wages or salary, which must be at least the minimum accepted wage in the industry or based on the governed agreements set in each state or country (MECA (NZ), Nurse Award (AU), on a regular basis. (This has limited room for growth).

Is in charge of paying their own income taxes, ACC/Medicare levies, GST returns (if registered), student loan repayments, and, if desired, KiwiSaver or super contributions.
(There are apps to do all of this for you >> https://hnry.co.nz/ )

Payroll deductions for income tax, ACC/Medicare, student loan repayments, and employer and employee KiwiSaver or Super contributions are handled automatically by the employer.

As a contractor, you're not paid for any type of leave, but your higher rates should compensate for the leave benefits you'd miss out on as an employee. Since many employees don't fully use their leave, it's important to include that value in your contractor rates and receive it now, rather than miss out completely in some cases.

Has the right to compensation for paid time off for bereavement, maternity, sick leave, annual leave, and public holidays.

 Can claim expenses and receive tax relief at the end of the financial year.

Most employees must file an annual tax return and can claim deductions for expenses directly related to earning their income. However, they cannot claim personal or domestic expenses, unlike contractors can.

Check out what you can claim on: https://hnry.co.nz/tax-resources/expenses-guide-for-sole-traders

The distinction between employees and independent contractors is typically straightforward and easy to understand.

How much accounting work is required of a contractor?

Very little, Just uploading your receipts to your accounting app under expenses. In today’s market there are plenty of applications and companies that can take care of this for you. Our service recommends “HNRY” - They only charge 1% + GST on income paid into your HNRY account and they take care of all your tax needs, so you never have to think or worry about it. They also, claim their expense back for you automatically as a business expense. I couldn’t have made it easier for you to say YES and take that leap into contracting and be your own boss of your life.