Fixed Term Contract vs Short Term Contract?

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edwinprakash

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#97192 13-Feb-2012 14:55

I am a permy at the moment looking at getting into contracting. I'm getting an offer for a fixed term contact (6/12 months) but I need to provide an indication of salary.

Does anyone know how fixed term contracts differ from permanent roles apart from the fixed duration clause?
Also, anyone know the hourly market rate for a Senior SharePoint developer?

Any help is appreciated... thanks in advance.

gzt

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#581027 13-Feb-2012 19:24

A permanent role is usually salary including holiday pay, medical leave, insurance + whatever other benefits. Tax wise, the employer deducts tax and gives it to IRD on your behalf.

A contract role is usually a per hour payment only (no holiday pay, etc, etc) and you will need to calculate and pay your tax and/or use an accounting service to do that for you.

You need to bear that in mind when considering your hourly contract rate and when comparing an hourly contract rate to your existing salaried position.

edwinprakash

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#581059 13-Feb-2012 20:40

Thanks for the reply. I do understand the permy vs contracting scenario. What I'm really after is the normal hourly rate contractor vs the fixed term contractor roles. What's different in this case?

Is the fixed term contract more like a permy role in terms of $$$ and perks but just a way for the employer to get someone in for a set duration.

Or, is it more like a contractor role where you get a higher hourly rate and no perks for that fixed duration?

minimoke

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#581282 14-Feb-2012 12:57

Your permy role and your fixed term role are essentially the same. The perm role is obviously one that is for ever until it is properly terminated. The fixed term one is for however long you agree it to be for. Both are "employee" so the employer has to pay PAYE tax and ACC and as the "employee you are entitled to annual holidays, sick leave, public holidays and if you get wrongly fired you can take a Personal Grievance. You might want to get paid a bit more to cover the risk of having non-permanent employment. But unles yor are an Auckland wharfie theres pretty much no such thing as perm employment anymore.

If you are a contractor you aren't an employee so have to pay your own taxes and ACC and you get no holidays. So you have to charge a person your hourly rate of pay plus an allowance for ACC plus an allowance for holidays you won't get paid. As a rough guide take your perm hourly rate, add 8% for holidays, 4% for stat holidays, 2 % for sick leave, 2% - 4% for ACC. Then add in an amount to cover your admin costs (invoicing receipting, GST returns if you charge enough). If you get fired or there is any dispute you dont get to take a PG so theres no mediation or reliance on employment law to help you out. You'd have to pursue the problem on commercial groaunds rather than employment grounds.

Unless of course you're in the film industry where you can be a contracotr and tehn tryt to claim to be an employee a bit down teh track - all very messy!

If you want a loan a bank will probably look more favourably at you if you can produce a payslip. Easy to do if you are an employee - hard to do if you are a contractor.

edwinprakash

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#581291 14-Feb-2012 13:12

Exactly what I was after... Thanks a million

minimoke

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#581324 14-Feb-2012 13:49

No problems.
If you end up being a contractor you'll find my invoice in the mail. Thems the costs of doing business!

timmmay

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#581363 14-Feb-2012 14:34

Fixed term contract is just another name for employee. Generally you get paid similar to an employee, it's not really contracting. It seems to be a way for a company to get some of the flexibility of a contractor without having to pay them.

Contracting you generally get paid at least 50% more than a permantent person doing the same job, but you have to pay your own GST and tax, ACC bills, you may need an accountant, etc.

minimoke

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#581395 14-Feb-2012 15:32

timmmay: Fixed term contract is just another name for employee. Generally you get paid similar to an employee, it's not really contracting. It seems to be a way for a company to get some of the flexibility of a contractor without having to pay them.

Contracting you generally get paid at least 50% more than a permantent person doing the same job, but you have to pay your own GST and tax, ACC bills, you may need an accountant, etc.

Semantics I know, but there are actually two types of employees. Theres the "Fixed Term Employee" and then there are other unspecified employees but they include full time / part time/ casual permanents.

None of it is an issue until you have a dispute and you need to work out what your status is. Once you know your status you know your entitlements. For example its arguable a casual who regularly works Mondays is entitled to pay on a public holiday. Where as a perm part timer who works Tuesday to Friday won't get a public holdiay if it falls on a monday. It all depends on the circumstances at the time.

A contractor is a person in business in their own account. Because he/she is on their own account they fix their own charge rates - there is no "50%" (or more) golden rule. Indeed if its found that a bunch of IT guys get together and decide to bill the same fixed hour rate they could be up for price fixing.

Take your local chippie - he'll probably come to some deal which invloces a GST invoice charge and a cash component.

The best golden rule I heard was from a District Court judge who said to a lawyer about his charging
"C'mon we know how you charge. You take what you want to earn in a year and divide it by the number of hours you think you can bill"

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timmmay

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#581397 14-Feb-2012 15:35

There are no standard rates for contractors, but average and peak rates aren't hard to come by. I started on what I was offered contracting by an old boss and over the years i've increased it as I thought it was justified. I really don't talk to anyone else about what I charge, though I have found by chance recently that another contractor approximately as senior as me charges the same rate.

In general a contractor will earn more than a permanent employee. If you earn less you're doing it wrong.