Things to Consider When Doing Contract Work

[Md. Anikuzzaman]

The recession of the 2000s altered the corporate landscape. Every worker is now more replaceable than ever, causing Bloomberg Businessweek to call this period "the era of the disposable worker." Savvy unemployed professionals have turned to contract work to pay the bills, and many are doing as well or better than they were in their corporate jobs. Working on a contract basis can be lucrative, but it does come with some challenges.

Financial Considerations
Contract workers often charge two to three times what their permanently employed counterparts make, and with good reason. Instead of receiving a paycheck with your federal and state taxes neatly calculated and taken out, you will receive checks based on the price you negotiated with the client. You are responsible for paying your own tax bill, which many contract workers estimate and pay quarterly. If you plan to be a full-time contract worker, you also will need to put money away to pay for health insurance premiums, a retirement fund and an emergency fund that you can use when you have down time between clients.

Price it Right
Setting the price for a contract job often is one of the most difficult things you will have to do, but getting it right can make or break your business. Price the job too high and you may not land the client. Price it too low and you may find yourself working for minimum wage. As an independent contractor, you are responsible for all federal and state taxes, as well as hefty self-employment taxes and insurance premiums. Monster.com recommends taking the average annual salary of someone performing the job on a full-time basis and dividing that number by 1,000 to determine the minimum hourly rate you should charge. If you are being asked to design a website and a full-time graphics designer makes an average of $50,000 per year, you should charge a minimum of $50 per hour to ensure you can cover your costs and turn a profit.

Read the Fine Print
Consulting contracts may make your head spin, but it is critical that you read them carefully and understand what they contain. The contract should detail the relationship between you and the company, how much you will be paid, how and when you will be paid, what happens if either party breaches the contract, who owns the work to be completed, confidentiality clauses and how to handle changes to the scope of the project. A document called a "statement of work" should accompany the contract, where you can lay out the scope of the project in detail. This should include the ultimate deliverable, time frame, any milestones and their due dates, budget and any other detail, no matter how small, that will impact how you do the work.

It's Not for Everyone
If you are the kind of person who thrives on teamwork and morning chat sessions around the water cooler, you might want to rethink your foray into the world of contracting. Some people thrive on the change of pace and the new challenges that accompany each new job, but not everyone. Although they have the luxury of a somewhat flexible schedule, independent contractors are always networking and on the lookout for that next job, and anyone considering this type of work needs to be able to keep up that type of pace and cope well with consistent changes.

Source: http://work.chron.com/things-consider-doing-contract-work-10492.html