GUIDE TO CONTRACTING

Contracting can be an exciting and rewarding alternative to permanent employment. But it is not always an easy choice - there is a lot to think about and to plan for;

• How will I keep my skills up-to-date?
• How easy will it be to find contracts?
• How will I manage my financial affairs?

1. Contractor Profile
Reviewing many similar experiences, we have noticed several key skills or attributes that make a successful Contractor:

They understand Contracting: Some people believe that contracting is "risky" and can't bear to be without the security of knowing exactly what they will be doing tomorrow. In effect there are no companies that can offer the "job for life" - this is a myth which has become clear with the 2000-2003 Asian economic downturn. The worker of today is likely to change companies more than 10 times and or change career direction at least 3 times. It is increasingly likely in IT that you will be made redundant at least twice. Contracting is more about continued career management and taking control of your own career, rather than risk taking and short term financial gain. Self-motivated: As a contractor you will be responsible for finding and sustaining your own work. If you have a good agent they will be able to aid you in maintaining employment but there are no guarantees. You must always be looking for the next opportunity. Focus on cutting edge skills and maintaining those skills. Remember there will be no more company paid training. Flexibility / Life Style / Change / Challenge: A lot of contractors contract for the lifestyle - being your own boss, working when and where you want. Another major upside with contracting is that you can gain exposure to a lot of new working environments and technologies for a variety of blue-chip companies, building up a portfolio of skills that could take far longer to assemble if you were in a permanent position. Financially responsible: A good contractor knows how to plan for the times when they won't be working, they know how to save for that "rainy day", arguably a good life skill for the "credit generation". As a contractor you forfeit some of the advantages of the permanent workforce, on the job training, medical, insurance cover, travel allowance etc. As a result, you should try to keep money in reserve to safeguard against illness and changes in the marketplace. The key to ensuring you are constantly in demand is to keep your skills up-to-date.

2. Market direction?
There is an increasing trend towards contracting (or Temporary staffing). The more employees who become familiar with this employment matrix the better prepared they will be. Companies require freelance workers to manage peaks in the workload and to provide skills not available in-house. Companies need contractors for a variety of reasons, not solely as a mechanism to reduce headcount. Notably the contracting workforce is the fastest growing segment of the employment market.

3. When do companies need contractors?

Emergency support and for periods of peak activity when resources are stretched. To inject specialist skills to fast track project completion, improve productivity, or replace permanent staff allocated to special project work. Continuity Management: to fill gaps during reorganization, or following a staff departure. Change Management, when companies need help implementing the changes they require in their business - this includes company turnaround, start-ups, operational changes and new management techniques. Problem Solving: companies often need specialist skills provided by troubleshooters with proven track records or for a skill transfer where contractors offer mentoring at managerial and operational levels. Project Management: to provide specialist skills for new implementation, re-engineering or decommissioning projects when resources or technical expertise are not available internally.

4. Issues to consider when contracting:

• Review your skill-set. Decide on your area of specialization, this will help you target suitable contracts. In the I.T. sector, skill requirements and specializations change rapidly. Make sure you are commercially aware of trends and continually seek opportunities to 'up skill'.
• Choose an agent: Register with a recruitment firm, but don't register with too many. Build a very strong relationship with your agent / recruiter, they are effectively your HR Manager, marketing division and contract negotiator. Don't hide information from them they are working for you!
• Setting up a Company: Some people set up their own company, however it is best to check with your accountant to see if this is relevant, depending on your personal and tax status.
• Calculating an hourly rate: the rule of thumb is as follows: Salary divided by 2,000 hours = Hourly rate i.e. HK$600,000 per year divided by 2000 hours = $300.00 per hour. Note, you may need to be flexible as to your hourly rate as it may vary depending on the company and the project required.
• Get references: use your ex-employers as referees, never "burn your bridges". If you are good at what you do, you will be referred or re-employed for other projects or for long-term assignments.
• Know your rights and statutory legal regulations. Check the contracts that you sign carefully and understand all the issues (there will often be confidentiality clauses involved). Most contracts still provide statutory sick and holiday pay.
• Medical insurance: private medical insurance is a must in Hong Kong and, as a contractor; this is something you will generally need to cover yourself.
• Provident Fund: all employers in Hong Kong are required to contribute to the MPF scheme. 5% of your income (to a maximum of HK$1,000) per month will be withheld and placed into an MPF fund. The employer must contribute a matching sum. MPF is currently required to be paid after 60 days of employment at which point the employee pays from day 31 and the employer pays from day 1.
• Employee Compensation Insurance: all employees must be covered by the employer's liability insurance. If the contract is direct with a company or through an agency then this should be covered. If you are self employed you will need to organise this yourself.