A guide for those thinking of entering the world of contracting

If you are an experienced IT professional currently in a permanent position you may have wondered if contracting is for you. In this article, we’re going to explore the benefits of becoming an IT contractor and discuss the important aspects you’ll need to consider.

What is IT Contracting?

To shed light on this topic, Let’s start by getting a clear understanding of what IT contracting is.

IT contracting involves working as an independent professional on a contract basis rather than being a full-time employee of a single company. Contractors are hired to work on specific projects or assignments for a predetermined period, which could be a few weeks to several months or even years.

As a contractor you are self-employed and responsible for your own career path, and manging your future assignments, finances, and legal obligations.

To clear up any ambiguity, Fixed Term Contractors are not contractors in the true sense. They are considered employees with the same rights as permanent staff such as sick pay, holiday pay and kiwi saver but are not eligible for the benefits we will discuss here.

So today we’ll be covering those key benefits: the higher earning potential, flexibility and the diversity of experience and the work life balance.

Then the #1 concern that comes up, the continuity of work, the job security.

And finally, we’ll cover, the keys to success as a contractor. What are the 5 things you need to know to ensure a fruitful contracting career.

So here we go, what are the major advantages, and the pitfalls to look out for?

The Benefits of Contracting

Higher Earning Potential

There are several benefits to consider: Number 1 is the higher earning potential: Contractors often earn a higher hourly rate compared to salaried employees, and they can take advantage of tax deductions and write-offs.

When it comes to motivations, high on the agenda is the earning potential for contracting. It makes sense, it’s certainly a more lucrative career option and it capitalises on years of hard-earned expertise and qualifications.

Clients are willing to commit to contractors as they have worked out their Return on Investment and factored contractor rates into budget costs.

Financial gains are really maximised when you are in 12-month contracts for years at a time and, whilst this isn’t the norm, it’s also not unusual. In contracting however, nothing is guaranteed, and you must plan to mitigate any periods between contracts.

In a previous contractor Q&A podcast and blog I covered what to do between contracts. It was called “IT Contracting in an Economic Downturn”. It’s worth a read.

But back to earning potential. Normally you will be earning an hourly or sometimes a daily rate. For a 40 hour per week, 12 months contract you could expect to earn 1 ½ and 1 ¾ of a permanent salary.

For my calculations I work on a 47-week year. Everyone needs a holiday, and you’ll probably have a closed office at Christmas as well as the stat days throughout the year.

If you’re looking into contracting, make sure you put the time into determining the right charge out rate, based upon things like market demand, your experience, skills, covering costs like ACC and tax, plus the margin you want to make. It might also be worth connecting with LinkedIn contracting groups to get insights into how they calculate hourly rates. Or, speaking to a someone like me of course. I’m always happy to discuss and the latest contractor survey will be out soon with up-to-date market rates.

Flexibility, diversity and work-life balance.

IT contractors have the flexibility to choose their projects and clients, allowing them to work on projects that align with their skills and interests.

Large IT initiatives are going to effect change. They are transformative. Usually, they are going to be for a timespan, culminating in a “Go Live” which make them perfect for being project based.

In many cases, Kiwi organisations do not have the resources in house, or they require specialist skills. Consultancies are an option but may not be cost effective, or indeed have the resources and expertise themselves, and this makes a contractor the logical choice for many roles.

Typically contract resource brought in will include Program Managers, Project Managers, Business Analysts, Change Managers, Architects, Developers and Testers.

Your relationship with the client is very different from being an employee for them. You won’t be going on company training, the emphasis isn’t on team building (although you’d better be a great team member!) Office politics play less of a part, basically there’s fewer outside distractions and you are looking to make every minute count towards the project goals.

Of course, remote working is now very acceptable. You should expect to be on site as a contractor, especially in the earliest phases. But once the project is in full swing, remote working may make sense. Still. The emphasis tends to be on output and efficiency.

Except in rare cases, most clients prefer the contractor to be based close to the site, ie Auckland based for an Auckland role and full time Work from Home (WFH) would be rarer still, unless you are very established and critical – in which case you’ll know all this already ????


Contractors work with various clients and projects, gaining a diverse skill set and industry exposure.

It’s the nature of contracting that you’ll be moving from project to project and acquiring new experiences and skills along the way. First and foremost, you will be brought in for your strengths, but the tech stacks, their application and the industry you’re in may vary.

As a rule of thumb you will get quicker and deeper exposure to a wider range of technologies, newer products, and of course a more diverse group of peers to learn from whilst contracting.

Being comfortable with change is perhaps a prerequisite. Then again, working with an everchanging landscape may provide you with the confidence and ability to adapt to change and prosper quickly. Regardless, contracting keeps you at the top of your game as there is no time for complacency and the expectation is often that you hit the ground running.

In reality, it’s actually quite hard to switch industries as a contractor, but if you can it’s a very valuable asset. Key sectors tend to be government, especially for Wellington of course, health, telco, finance and FMCG. Personally I’d like to see more cross pollination, and I know most BAs and PM’s I speak to are very confident their skills are transferable but there is a tendency to get pigeonholed by industry – the flip side again, is that you may become an industry subject matter expert and subsequently more valuable.

Work-Life Balance

Many contractors have better control over their work schedules, which can lead to improved work-life balance.

Contractors may have a certain degree of flexibility around hours to fit their lifestyle but generally, normal work hours will still apply.

Where I see great management of the flexibility is planning the downtime between contracts. There’s obviously no stigma to job hopping when you are a contractor so using the gaps to travel back home, go on a European or South American tour or do up a house or major DIY project.

The # 1 Concern

Job security is a concern for many professionals. How does job security in IT contracting compare to traditional employment?

Job security in IT contracting might seem less stable, but the demand for skilled IT professionals is consistently high. As long as you have in-demand skills and a good reputation, you’re likely to find new opportunities quickly.

There are always seasonal variations, the summer months, January and February are notoriously slow if you are not already in a contract.

Major events, local and national economics can cause contract opportunities to fluctuate.

How lucrative a contract is may depend on downtime throughout the year.  2021 and 2022 were very good years for contracting as we rebounded from Covid, but 2023 did see downturn as companies buckled down. During quieter times, the perceived security of a permanent role is seen as more attractive by many.

2024 remains to be seen, although there are good signs of recovery in the economy and business confidence has seen a sharp pick up. The nature of contracting is that it moves very quickly, and requirements go from very quiet to high demand in the blink of an eye, so it’s best to always be prepared.

Be Prepared

So, there are challenges to overcome with an inconsistent income, lack of benefits, and the need to manage your own finances and taxes. To overcome these challenges, it’s crucial to:

  1. Budget Wisely: Plan for periods without work by saving during busy times.
  2. Consider Insurance: Invest in health, disability, and liability insurance.
  3. Consult a Financial Advisor: I strongly recommend working with a good accountant. You will get professional financial advice for tax planning and retirement savings.

Unfortunately contracting can also been seen as a more risky option for a bank’s perspective when it comes to mortgages and other loans. This is where your accountant will really assist, providing banks with the assurance that your finances are professionally managed. Specialist mortgage brokers experienced with contractors are also readily available to mitigate issues when dealing with the banks.

The 5 keys to success as a Contractor

How can IT contractors build and maintain a strong professional reputation?

1.      Deliver Exceptional Work:

Consistently deliver high-quality work on time and within budget.There is nothing better than a great recommendation. I rely on references from previous projects and to become one of Logical’s preferred contractors – an MVP – a Most Valuable professional, you’ll need to demonstrate a great track record on New Zealand based assignments.

2.      Networking:

Build a strong professional network to connect with potential clients and other contractors. Keep in contact with your colleagues, LinkedIn is the most valuable business networking tool so make sure your profile is up to date.

3.      Your CV

An area often overlooked CV. After 20 years in an industry the CV can begin to get unwieldy and possibly irrelevant.

A CV shouldn’t be restricted to just 2 pages, but if it’s longer than 5, it’s probably getting too long. There is a a wealth of free templates, Canva and other creative tools at our disposal and a plain CV with no graphics can be improved with some visual appeal.

The CV is your document. it’s your opportunity to make the best first impression. Hiring managers are quick to form first impressions, they are likely make decisions based on that first impression.

If a hiring manager looks at your 15 page CV for 20 seconds, decides it’s difficult to find the information they need, it’s not hard to imagine that they will move to a candidate with an easier to read, more easily digestible resume.

It’s a good investment to have your CV professionally produced.

4.      Continuous Learning

Stay updated with the latest industry trends and technologies to remain competitive.

We work in the ever-evolving tech world. Attending workshops, webinars, and online courses to learn new technologies and tools is rarely wasted energy.

Becoming certified in your chosen area of expertise can only enhance your employability and makes you stand out as a subject matter expert.

5.      Communication Skills

Effective communication with clients and team members is essential for success.

On every job description I’ve seen, contract or permanent, it says, must have great communication skills. There’s no better way of demonstrating great communication than at the interview stage. Interview training would possibly be one of the best investments you’d ever make.

And to wrap up,

The future looks promising for IT contracting. With the continual demand for technology solutions, companies will always rely on contractors for specialized skills.

If you are interested in pursuing IT contracting, these are the first steps to take:

  1. Skill Development: Hone your technical skills and consider certifications to stand out.
  2. Networking: Build a strong professional network through events, online communities, and platforms like LinkedIn.
  3. Legal Considerations: Set up your business structure and consult with a lawyer or accountant for legal and financial advice.
  4. Finding Opportunities: Explore job boards, recruitment agencies, and freelance platforms to find your first contract.

IT contracting can be a rewarding career path, but it’s not without challenges. The key is to stay adaptable, continuously learn, and build a strong professional network. Remember, the more you invest in your skills and reputation, the more successful you can be as an IT contractor.

If you have any questions please feel free to reach out.

Related article: http://logicalconsulting.co.nz/it-contracting-in-an-economic-downturn/

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