Executives go it alone

By GERALDINE McMANUS

Professional contracting is a recognised career option all the way from middle management (including IT and HR managers) to CEO.

At the top level, professional contractors are in a global market - highly qualified and, internationally, highly paid. They can earn more an hour than permanent staff for the advantages they bring in specialist knowledge and skills to employers.

The perception is that there is more risk for contractors, but this is balanced with an upside of more freedom to pick and choose when and where to work. However, insecurity and variable workflow are obvious issues and some contractors, especially those lower down the ranks, say they are drawbacks. For others the limited term of contracts adds to the challenge along with the adrenalin and buzz.

Kevin Chappell, managing director of contracting firm Executive Taskforce, says: "Professional contracting is traditionally found in process-driven roles. It had its origins in IT and accounting but the scope of potential contracting roles is now much broader.

"Contracting can be a 'get them in, get the job done and get them out' approach."

David Long, general management/finance administrator and business analyst, began contracting at senior level three years ago.

He moved into contracting after 10 years as general manager, finance and administration of Orix New Zealand.

"I was keen to enjoy more variety and breadth in my career and so made the decision to contract. In the past three years the contracting experience has been across a whole range of companies and cultures in different industries."

Long says he thrives on the flexibility and variety of work.

"One contract was in a regimented environment while another was a totally different, easy-going culture in IT software. Adapting to the different styles of management from job to job is appealing to me," says Long.

While some contracts can be for just a few days, more frequently they last six to 12 months at senior level. The average contract is around three and a half months.

Long suggests that in his experience contracts often extend beyond the original commitment.

"Senior-level contracting is frequently used for a specific assignment when a higher skill level may need to be brought into general management, especially for restructuring or overseeing change - for example from New Zealand to international ownership.

"Plans are put in place but generally these take longer than anticipated and contracts often extend out to 12 months."

It's important for contractors to seek professional advice about risk management, tax, GST and insurances involved in setting up their own contracting business.

"Achieving the limited liability status of a company, rather than operating as a sole trader or unincorporated entity, is generally desirable," says James Carnie, managing partner of law firm Clendon Feeney.

"The contract between service leasing, the contractor and the organisation receiving the contracting services is pivotal," says Carnie. "The lines can be blurred when a contractor is an independent or an employee, both from a legal perspective and also how the IRD sees a particular case."

While the content of the employment/independent contract remains important, the Employment Relations Act (ERA) confirms that "actions speak louder than words" in determining whether there is an employment or independent contractor relationship."

The ERA does not protect people who fall outside an employment relationship. Therefore, leave and holiday entitlements, minimum wages, parental leave and other employment-law niceties do not extend to independent contractors. Contractors also need to consider medical and indemnity insurances.

"In some industries, it is possible that the contractor could be found to be personally liable (say in negligence) despite the fact that their services were supplied via a services company," says Carnie. "So insurances and related contract terms may need to be carefully aligned to ensure that the contractor is sheltered by insurance protection held in the services company."

The major difference for contractors is that few, if any, contracts include benefits such as superannuation and bonuses. Contracting as a small business does bring some tax benefits, such as home-office and transport deductions.

Professional contractors working for their own business need to consider how they will market their services.

Ness Consulting was set up eight years ago by Russell Ness as a limited liability company. An experienced and independent adviser at senior level, he advises companies across the range of people-related consulting services including training and obtaining professional services.

For Ness, contracting is on-going and well-developed with referrals.

"When setting up I included working with agencies, such as Executive Taskforce, to market me rather than just relying on hits to my website and advertising."

Contracting can be a three- or four-way relationship. The main issue is being clear on the terms of each of those relationships and being aware of who the client is.

"The long-term client relationship is with the agency while day to day there is a client-type relationship with the company contracting the service."

Professional firms take advantage of the flexibility that contractors offer at all levels, from doctors doing locums to project-based teams of engineers and architects.

"Contracting is often a threesome," says Tim Melville of professional architects RTA Studio. "The practice, the contractor and the agency providing the contractor, all have to work together."

Melville says the architectural firm used contractors initially to balance the growth of the firm.

"RTA has two contractors, one being a recent graduate gaining experience on an hourly rate.

"Agencies offer the advantage of 'hiring out' and managing hourly pay. The disadvantage is higher costs. A contractor is usually paid by the hour at a higher rate than permanent staff, then added to this are agency fees and commission - so we look at the option closely."

For recent graduates contracting is an option to gain experience and check out firms and different specialisations.

Clayton Wright, contracted to RTA Studio, says contracting offers an opportunity for graduate professionals needing experience and is a chance to get in the door.

"At RTA I am made to feel part of the team and I also get training. There is a slight premium being paid hourly rather than salary. However, the disadvantage is managing my own tax and financial affairs."

Ups and downs of contracting

* The main openings are in accounting and finance, human resources, marketing, communications, policy planning and covering positions, such as interim general managers.

* Average annual income can range from $80,000 to $150,000.

* Architecture and engineering professionals are in high demand. Few career professionals contract at senior level. There are also opportunities for middle managers with four to five years' experience.

* Contractors usually work with several executive leasing agencies.

* Contracting is unlikely to be full time. Earnings should be managed to cover down-time, taxes and holidays.

* Contractors should check insurance cover, such as indemnity insurance, in their contracts. They should also consider taking out insurance cover for health and sick leave.