To Contract Or Not? February 23, 2011

To Contract Or Not? February 23, 2011

To Contract Or Not? The In’s and Out’s What To Consider

Contractor or Consultant? contractor [ˈkɒntræktə kənˈtræk-] n 1. (Miscellaneous Technologies / Building) a person or firm that contracts to supply materials or labour, esp for building 2. (Life Sciences & Allied Applications / Physiology) something that contracts, esp a muscle 3. (Law) Law a person who is a party to a contract 4. (Group Games / Bridge) the declarer in bridge

Contractor or Consultant? consultant [kənˈsʌltənt] n • (Medicine) a. a senior physician, esp a specialist, who is asked to confirm a diagnosis or treatment or to provide an opinion b. a physician or surgeon holding the highest appointment in a particular branch of medicine or surgery in a hospital 2. a specialist who gives expert advice or information 3. a person who asks advice in a consultation consultancy n

Why Contract?...The Nice Pieces There are many advantages and disadvantages to contracting • I like to be “self employed” and be my “own boss” • Income Potential greater than permanent, full time roles • I can drive my own career path- take on different roles as I see fit • I like the change in roles, seeing new environments more frequently

Why Contract?...The Not So Nice • I may be out of work for several months between contracts • I don’t have benefits like a full time employee • I may have to take a role in the GTA instead of staying local • Instability of a contract- could be “terminated” on short notice • Treated differently by onsite staff, because I’m a contractor

Types of Contractors • Temporary • Sole Proprietorship • Partnership • Incorporated There are advantages and disadvantages associated with each structure of business registration. For more information visit the Canada Business Service Centre website: http://www.canadabusiness.ca/eng/125/141/ Aren’t sure which type is best for you? Consult a lawyer and/or an accountant. Each operating structure has different legal and tax implications.

Temporary Temporary Contractors have not registered any business with the government. When these individuals are employed by a placement agency, the agency is required to deduct and remit all the same deductions as would face a typical permanent employee. The Temporary Contractor will also receive statutory holiday pay and vacation pay.

Sole Proprietorship • A Sole Proprietorship is defined as an unincorporated business owner and is operated by one individual. A contractor having a Sole Proprietorship will have to be registered for a BIN & GST/HST Account. • Sole Proprietors are not required to receive any benefits such as statutory holiday and vacation pay. • Sole Proprietors being paid through a placement agency will be responsible for remitting their own taxes but will have the employee EI & CPP deducted from their pay.

Sole Proprietorship Advantages • Easy and inexpensive to form a sole proprietorship (you will only need to register your business name provincially, except in Newfoundland and Labrador); • Relatively low cost to start your business • Lowest amount of regulatory burden • Direct control of decision making • Minimal working capital required to start-up • Tax advantages if your business is not doing well, for example, deducting your losses from your personal income, lower tax bracket when profits are low, and so on • All profits will go to you directly

Sole Proprietorship Disadvantages • Unlimited liability (if you have business debts, personal assets would be used to pay off the debt) • Income would be taxable at your personal rate and, if your business is profitable, this may put you in a higher tax bracket • Lack of continuity for your business, if you need to be absent • Difficulty raising capital on your own

Partnership or Incorporation A corporation &/or partnership represent 2 options for contractors to register a business. With a registered corporation or partnership, contractors are responsible for remitting their own taxes, EI & CPP and are not eligible to receive any benefits including statutory holiday or vacation pay. If you are incorporated or have a partnership you will have to registered for BN & GST/HST Account.

Partnership Advantages A partnership would be a good business structure if you want to carry on a business with a partner and you do not wish to incorporate your business. With a partnership, you would combine your financial resources. As a partner, you would share in the profits of your business according to the terms of your agreement. When establishing a partnership, you should create a partnership agreement with the assistance of a lawyer. • Easy to start-up a partnership • Start-up costs would be shared equally with you and your partner • Equal share in the management, profits and assets • Tax advantage, if income from the partnership is low or loses money

Partnership Disadvantages • Similar to sole proprietorship, as there is no legal difference between you and your business • Unlimited liability (if you have business debts, personal assets would be used to pay off the debt) • Possible development of conflict between you and your partner • You are held financially responsible for business decisions made by your partner

Incorporation Advantages Another business structure is to incorporate your business. This can be done at the federal or provincial level. When you incorporate your business, it is considered to be a legal entity that is separate from the owners and shareholders. As a shareholder of a corporation, you will not be personally liable for the debts, obligations or acts of the corporation. • Limited liability • Ownership is transferable • Continuous existence • Separate legal entity • Easier to raise capital • Possible tax advantage as taxes may be lower for an incorporated business

Incorporation Disadvantages • A corporation is closely regulated • More expensive to incorporate than a partnership or sole proprietorship • Extensive corporate records required and documentation filed annually with the government • Possible conflict between shareholders and directors • Possible problem with residency of directors, if they are in another province or not Canadian

Code of Ethics • To understand that your client always comes first • To believe you are part of a team. You may have opposing priorities, but you have to achieve the same end result they desire • To be an integral part of creating the best solution for customers • To present a positive attitude even if things are not going as smoothly as you would like • To consider everything a challenge that YOU can help solve, not a problem that is inhibiting your success • To present solutions to the problems you find

Code of Ethics • As an “outsider”, present a professional image at all times • Dress yourself appropriately for your location of work • BE SENSITIVE! Appreciate that others might be under more stress than you are at that moment • Learn to compromise and be flexible. Fine line between “best practices” you recommend and you being overbearing • BE PATIENT! The larger the company, the slower that things get resolved

Billable Hours- You Are NOT an Employee! • As a contractor, you are paid an hourly rate for each hour of work that you complete, rounded off to the quarter hour. • A normal work day is 7.5 billable hours. Break times and lunch times are not billable, only actual hours worked are billable. If you have a personal appointment, or are ill and go home, those hours are not billable. • Statutory holidays are not paid for unless you work hours during that day. • Your pay rate is constant no matter how many hours you work in a day.

Billable Hours- You Are NOT an Employee! • Work may arrive at different times. You should only log the number of hours that you actually work, as opposed to a full 8 hour day. • “Banking" of hours (moving them forward into the next timeframe) is generally frowned upon. If there is nothing to be done, then you are free to log out and leave. • Every contractor will have to take the occasional day off, or for our longer term contactors, vacation time. You don’t get paid vacation time- your hourly rate is your rate and should be all inclusive. Set expectations with clients in advance • Time spent on personal telephone calls or personal work of any nature during core hours is discouraged and not billable.

Selling Yourself- The Resume • Have a generic version of the resume as your default starting point. • Use the standard chronological format and include month/year start AND finish dates for all roles. • Include functional titles NOT “consultant” • Add Technical Environment at end of each work assignment • Add Use of Time at end of each work assignment • Customize each resume you send out to add content that is relevant to the role you are applying for and decontenting the less relevant information.

Selling Yourself- The Resume

Selling Yourself- The Networking You are a business, marketing is an aspect of that business • User groups, such as the IIBA • Linked In- an absolute must • Twitter, Facebook, etc (follow or lead strategy??) • Local associations • Job Boards- public or private postings

Consultant “Recapture” The “Disclaimer” Please note that information provided is general in nature, and is not intended to be a legal review or legal opinion. The information can assist the consultants in understanding business structures however consultants are responsible for determining their specific individual responsibilities and, if necessary, they should seek legal advice.

Consultant “Recapture” FAQ’s • Q1: I used to be an employee of ABC, would I be able to come back as a contractor in the future? A1: Many companies have business rules around this issue. Generally if you have been away for 6 months and have no outstanding severance being paid out, yes. • Q2: Hourly, daily, fixed price- what is best for costing my services to a client? A2: The client will generally dictate their model to you- but ask what their preference is. Best practice also suggests an “all inclusive rate” however make sure you articulate that in any communicationlient? • Q3: What should I use as a rate for my services? A3: Work with a couple of staffing agencies to get an idea of market rates for similar profile candidates. If they won’t tell you- they’re not worth working arise in the future

Consultant “Recapture” Questions?

To Contract Or Not? February 23, 2011