
Ask HN: How to start working as a contractor? - aliencat
I was offered a job as a contractor by a big company in Canada. The pay is good, around $100,000 CAD ($55&#x2F;h). But so far I have only worked as permenant employees. What are your experiences working as contractor? What are to be expected?
======
techjuice
You need to factor in the following: Taxes PTO Vacation Equipment
Certifications Insurance Costs of hiring people under you Mortgage/Rent
Gas/Transit Costs Emergency funds

Essentially as a contractor you should be making at least 2.5x what an
employee would make. So if an employee is being paid $120,000 as is in a
similar position as you you should be getting paid $300,000/year so you can
make the same salary + a little more for the added costs of being a
contractor.

What are these extra costs you might be wondering they are: Business
registration, licensing, certification, life insurance, private
medical/health/dental insurance, taxes, vacation, technology, bills, travel,
parking, emergency funds, liability, general and umbrella insurance, car
maintenance, car fuel, carl detailing and regular cleaning, house maintenance
(yard, inspections, upgrades, insurance, etc.) or rent, payroll if you get
your own subcontractors, overtime pay (if you end up working 60 hours a week
you need to add in the costs of this. If your employer wants you to work more
than that you can renegotiate your rates to accommodate), etc.

As an employee there is about 50% or more costs that you do not see as an
employee. It is known and expected that contractors will be paid way more than
employees as contractors take on 100% of the risks.

~~~
kenmicklas
> car maintenance, car fuel, carl detailing and regular cleaning, house
> maintenance (yard, inspections, upgrades, insurance, etc.) or rent

These are all expenses that have nothing do with being a contractor vs an
employee. Only some of both category will need them.

~~~
maratd
If you work at home, while those things would need to be done anyway, should
be piped through your _business_ to some extent since your business is taking
advantage of those resources.

2.5x is the golden rule. You will need to double the salary to cover
additional expenses (some of which weren't mentioned, like employer's side of
FICA in the US, time spent on sales because contracts end, legal, etc.) you
will incur. The .5 of that equation is your profit. Because you're running a
business.

~~~
walshemj
3x though if you can land 12 months or greater contracts id say 2.5 is just
about acceptable.

------
cmorgan8506
Also Canadian but I typically contract to US companies and have for the last 8
years or so.

Put away a nice big rainy day fund. I try to aim for 3-6 months of full living
expenses. You'll need this to fill the gaps between contracts.

For me, contracts typically last around two years or slightly less. This is
probably anecdotal, so take it with a grain of salt.

It usually takes me between 2 to 4 months to find a new contract, but I work
strictly remote, so your mileage may vary. Try to keep your finger on the
pulse of what's going on. If you can figure out when your contract will end,
this will help mitigate the amount of time you spend running on rainy day
money.

Pay your income tax installments on time. Every day you go without paying them
costs you interest to CRA. On the topic of CRA, get an accountant to help you
figure out what you can expense. You can expense all kinds of things including
utilities and part of your mortgage.

Get a GST/HST number if you're making more than 30k. You'll have to pay GST if
the work you are doing is not done on a remote server out of country.

That's all I can think of off the cuff. Get in touch if you have any questions

Contacting has been a great experience for me but it takes some time to get
used to the risk and learning to anticipate the future.

Good luck!

~~~
lonelyphysiker
Hi Can you tell me something about your remote working experience? What
software stack do you work on? How do you find clients? Do you cold call/email
companies or something else? How do you keep track of hours? Thanks

~~~
cmorgan8506
Python and Javascript mostly. I just use online job boards, communities like
HN and reddit, slack communities, etc. Close to zero networking, though I'm
sure it would help. I wrote an article a little while ago about how I approach
finding remote jobs, if that helps

[https://hackernoon.com/how-i-find-six-figure-remote-
software...](https://hackernoon.com/how-i-find-six-figure-remote-software-
developer-jobs-c01e47b3e64)

The contracts are usually full time equivalent and I usually only have the
one, so tracking time is pretty easy.

------
ztoben
I contracted for about 8 months through a large staffing firm. A few things I
liked:

* Hours were fairly flexible

* Not too much supervision, was mostly given things to work on and expected to finish them in a certain amount of time

* Didn't get pulled in to as many meetings in the office

* The pay was excellent

Some things I didn't like:

* No/little vacation/pto/sick

* If you don't work, you don't get paid (if you're paid hourly)

* No/little job security. I was around for 2 rounds of layoffs and had a young child at home, so this wasn't ideal

At the end of the day it made more sense for me to go back to a normal
employment role due to family and a few other factors with job security. I did
enjoy my time as a contractor though. Enough so that I still pick up hours
through some old employers occasionally.

~~~
aliencat
The flexible hour and no much supervision sounds excellent! Does that mean you
can come to work late or leave work early as long as you work for 8 hours a
day?

~~~
0xffff2
I get to do that as a normal FTE. Hell, I don't even have to work 8 hrs/day;
the only requirement is that I work 80 hours every two weeks. I thought that
was pretty standard in the tech world. Is it not?

~~~
walshemj
For salaried supposedly so - its up to you to manage your time.

------
maxxxxx
I have done contracting for a long time. One thing to consider is that if you
are not careful your career will stagnate. While employees are moving up the
chain you are stuck at your level forever. To get around this you must
establish yourself as an expert in an area so you can charge higher rates.

~~~
mdocherty
I left contracting and took a full time position for this reason.

------
scardine
Did this transition 10 years ago (Brazil). It takes some discipline. I guess
the $100,000 CAD is not that good if you are working full time for them
(specially in the most expensive provinces) because you will not have time for
business development - and having just one big client is putting all eggs in
one basket.

In USA health insurance is probably the most expensive thing for a contractor
but I guess in Canada you have your bases covered.

My advice is to subcontract other people as soon as possible and invest the
extra time to learn about sales, marketing and negotiation, then go after new
business. Currency exchange rates are excellent for subcontracting from Brazil
or Argentina.

Good luck and drop an email if you want to ask anything.

~~~
vitoralmeidasil
Nice to hear your history. I'm very interested in the details of your
transition (pros and cons). Are you from Brazil? Can I send you an email for a
little chat?

Thanks.

~~~
scardine
Sure man, shoot. And if by any means you get nearby São Paulo lets have a
coffee/beer/whatever.

------
j45
$55/hr is not what it seems in Canada, especially since it's likely the first
offer you go. You will take home closer to $30-45/hr or less the first few
years while your first time and ongoing expenses balance out.

Employees who have a hourly before tax pay of $25/hr often cost $40/hr to the
employer with their contributions. Add benefits and other costs to this.

You are not a contractor, you are a small business and will have to carry the
costs of small business.

I would get some local advice. Also to be a contractor in Canada under law you
must meet the burden of being an independent contractor (buying all of your
own equipment, having expenses, have risk of losing work) and have more than
one customer.

Contracting is awesome. I have written about it before - learning about the
difference between being a freelancer, contractor, and consultant will go a
long way to help you assess your value offering and opportunities that come
your way.

I'm Canadian and have been a contractor since I was 19 or so, happy to chat
offline if needed.

------
megous
Depending on how you'll work and charge for time worked, you may want to
factor that in the price too. I'm typically a sole person responsible for
frontend dev, so most of the work time involves writing code or specifications
and very little is communication. Flexible hours and remote work also mean
that I'm not charging for slacking around the cooler, or having a lunch.

I just can't do 8h days 5 times a week of this kind of work consistently. So
if you compare/base your compensation to FTE, factor in that no FTE comes to
work in the morning, writes code for 8h straight and goes home. I add 30% just
for this over the FTE salary, aside from other differences.

------
matte_black
One thing I could never figure out was how to do business development while
simultaneously working full time as a contractor. I just didn't have the
energy or time to continue developing relationships while also focusing on
existing client's problems. Thus when contracts ended it was a rough
transition from one job to another.

Have a plan for that.

~~~
walshemj
That's why you have agents

~~~
matte_black
Please tell me where I can find an agent who will find and maintain a steady
stream of clients for me, and what the catch is.

Not "leads", actual qualified clients ready to pay for my service if I should
accept the terms.

~~~
walshemj
Almost all tech recruitment agencies have a contract side - do you not know
how the recruitment industry works?

------
sampl
I just made the transition to contractor/consultant/freelancer. Some thoughts
more on the consultant side:

\- Logistics: set up a domain with a one-pager landing page[1], get some
simple business cards, and get a work email. I ended up spending $50 for an
LLC and getting a business bank account and card. I use Freshbooks for
tracking time, expenses, and sending invoices.

\- Legal: Get a lawyer (and a tax person) who understands what you're doing.
It's worth the <$1000 you'll spend just for peace of mind. I found mine
through a local startup incubator. Your lawyer can draw up a Master Services
Agreement you sign with clients once that goes over IP etc. Then for each
project, you simply sign a one-pager Statement of Work that has your rate,
scope of work, duration, etc (which can be updated and expanded as you go by
re-signing).

\- Getting clients: this is literally a sales/marketing funnel. Share your
business with your network [2], start getting incoming leads from folks,
screen clients [3], closing contracts. This is actually one of the reasons I
decided to consult, I want more hands on sales experience. Advice from a
friend: spend min 1h each day emailing or whatever else necessary to land new
clients.

\- Doing work: take on a customer-facing mindset (like you would in a support
role)--make them feel comfortable, make them look good, and make them
successful. Obviously makes sure your work is incredibly good--your best sales
channel should be referrals.

Maybe this goes without saying, but all of the above is MUCH easier if you
have genuine experience and expertise. I wouldn't recommend this for someone
in their first 5y of being an engineer/designer etc--build specific experience
in an area and make the jump later (for ex, I lead a design team at a YC
startup and taught design at UM, not sure I would have done this 5y ago).

[1] [http://directedworks.com](http://directedworks.com)

[2]
[https://www.linkedin.com/feed/update/urn:li:activity:6401496...](https://www.linkedin.com/feed/update/urn:li:activity:6401496572122718208)

[3]
[https://muledesign.com/designbook/screener.html](https://muledesign.com/designbook/screener.html)
(from [https://abookapart.com/products/design-is-a-
job](https://abookapart.com/products/design-is-a-job))

~~~
aliencat
Hi sampl, thanks for taking the time to comment! I have less than 5 years of
experience, but apparently the company is in need of contractors so they
offered me the job without hesitation. I am wondering if there is anything I
should consider before taking the job.

------
bargl
Are you hourly? Do you get vacation? Do you get medical, 401k?

I have done both, and I typically factor it all in for pay. If you're hourly
that means that you get paid for what you work, which is great if you've ever
worked a salaried job and put in 50 hours a week.

But it also means that you won't get vacation (most likely) so you either have
to make up for that or factor in the amount of days you don't want to work
into your schedule. So if you want to take 3 weeks off a year, factor that
into your pay and reduce it accordingly.

If you get paid overtime, then factor that in as well. This all sounds like a
lot but my rule of thumb is as a contractor I should be making at least 20%
more than as a FTE. This isn't the case based on my last job of 50+ hr weeks.

That isn't even to start into how you approach the team and your code. As a
Individual Contributing contractor (non-contract to hire), you probably won't
be doing maintenance, setting schedule, or a lot of other project planning
like activities. You'll be laying tracks down how they want. That isn't to say
you can't make suggestions, and make the code more maintainable but that's not
your primary focus once you're on site, it's to fit in to the team and support
them. To make them better where they'll accept advice and to follow coding
standards where they won't. While this is also true of FTE in a lot of cases,
you aren't going to be maintaining this beast so if you bring it up (typically
a few times) and they shoot you down then you did your best.

Don't go rogue, if you see a better way to do something and you want to show
them, it's OK to work up a POC but I typically don't charge for that if they
don't take it.

This is ALL my opinion, I've seen so many different types of contractors, some
don't care, some go rogue and do whatever. The whole point is that at the end
of the day you have a set time on the project and you have to keep that in
mind.

EDIT: I use pomodoros to justify to myself the hours I'm billing. This is a
personal technique I really like, but it helps me identify when I'm going over
and under what I should be doing in a day and to have a justification to
myself (meetings or other such things).

~~~
seanmcdirmid
Just to point out, if the salary is listed in CAD, then medical and 401k are
not going to be relevant. I’m not sure how payroll taxes and retirement
savings work in Canada, but it’s bound to be very different compared to the
USA.

~~~
zerr
Can be interpreted as corresponding healthcare insurance and pension fund
taxes/expenses.

~~~
seanmcdirmid
I thought Canada had universal healthcare?

~~~
coaxial
To some extent, ambulance is usually not covered by the oui plan (but an order
of magnitude cheaper than in the US), prescription medicines aren't 100% (but
also much much cheaper than in the US anyway), neither is dental or vision.
But your hospital stay is free, and so are doctor and specialists visits. If
you have a health plan through work, or costs 300-500 per month in my
experience and is a benefit so you only pay the taxes on it and then it covers
dental, vision, sometimes alternative medicine, psychologist, etc.

------
chrisparton1991
I sort of slipped into contract work this year. After ~5 years of full time
work I'd had enough, and I quit my job in January to do more things that I
wanted to do (spend time outdoors, work on side projects etc.)

A few months ago I was contacted by a previous employer, asking if I'd be
interested in a short-term contract gig (similar pay to what you're
describing, but in Australia).

I'm coming to the end of this contract and I have another one lined up once
I'm done, working 4 days a week from home and making my own hours.

I have to say that I love the freedom and extra money contracting has given
me. Of course, there are a lot of extra costs to consider (no paid leave or
superannuation, need public liability and professional indemnity insurance),
but even considering all of that I'm better off financially that I was at any
previous full-time job.

I wouldn't recommend contracting if you're only just living within your means
(e.g. paying off a hefty mortgage and supporting a family) where being let go
would leave you in an untenable financial position. Contractors generally have
far fewer rights than a full-time employee, and my current agreement states
that my contract can be terminated with a day's notice (YMMV).

I hope you have the same experience I've had, all the best!

~~~
weka
To be fair, you can be let go without notice in the US as well. I was recently
let go without notice and I was a salaried employee at the company.

------
q-base
Raise your rates and concentrate on delivering value.

First contract won't give you the best rate and you will most likely not be in
a position to negotiate a great deal. But that does not mean you should not
try! Negotiate, negotiate, negotiate.

Delivering value is different than just doing your "job". Help the business
and carry more than your weight. This can also mean questioning(in a polite
and constructive way) what you are doing. If you can see that the problem
could be solved in a better way, then speak up.

Once you have shown your value, then you are in a better position to negotiate
- so use it. The more you know a business the more you are worth to them. The
more experience you have as a contractor the more you are worth to new
clients.

BUT as someone else also very wisely pointed out. It is a game of diminishing
returns. By being a contractor you also somewhat step out of "normal" career
advances. You can raise your prices up until a point, where without a doubt
you can live a very, very comfortable life. But 10 years down the road you are
not necessarily advanced to a higher position. Which can be fine, but you need
to think about it of course.

------
gregsadetsky
Have you already negotiated with them? (@techjuice brings up a great list of
points which could be negotiated). Is the contract signed? Is 100k their first
offer?

You could contact 10x Management (they offer "Agent on Demand"[1] which was
discussed on HN[2]) for help / guidance. I've been represented by them for 5
years and they do tremendous work (they're professional agents /
negotiators..!)

Email me if you want more info (email in profile). I'm Canadian and have been
doing nothing but contract work for US customers for the past 5 years.

[1] [http://www.10xagentondemand.com/](http://www.10xagentondemand.com/)

[2]
[https://news.ycombinator.com/item?id=16494677](https://news.ycombinator.com/item?id=16494677)

------
tptacek
Generally speaking, you want to be targeting ~2x your FTE salary as a
contractor rate, and your floor should probably be somewhere north of 1.5x. So
if you were making $50k/yr before, this is a good offer; if you were making
$80k/yr, it's not a good offer.

------
imhoguy
Not sure what is the job and market like in Canada but I think the contractor
gig should pay at minimum twice of your permanent position. That should
compensate all benefits you would get from permanent role and risk of
switching when they decide to not extend you for another 3/6/12 months.

------
RobertRoberts
I've worked as a contractor in the US only. Other than tax paperwork, which is
minimal (but can have a lot of ramifications come tax day), and a few
managerial differences (ie work scheduling) there was no difference.
Congratulations and have fun!

~~~
walshemj
I hope you got paid 2.5 to 3x for the extra risk other wise why bother.

~~~
RobertRoberts
It all depends on what you feel comfortable asking for. At first, no, I didn't
do great, the more experience I got, the more comfortable I got asking for
more because I was getting more done, and thus not as many hours to get
projects done.

------
flamtap
I don't know where you are in Canada, but I would not consider $100k a good
rate for a contract position. I would double it to consider it a "good" salary
for a contracted position.

------
dmrg
I have been working a Software Developer / Independent Contractor in Toronto
for the last five years doing mobile-related projects. I had gigs with a bank,
a telecom company, a VC-funded startup and a couple of development studios.
Here are a few insights.

* You earn more than full-timers, the performance expectations from you are also higher. If working with other devs in your area, you are expected to be stronger and more efficient than full-timers to justify your salary and status of a contractor. If working on the project alone, you are obviously expected to be the technical authority and go-to person regarding any issues related to the technology stack you are working with.

* Once you are on a project, you have less freedom of choice than the full timers what kind of work to do. Usually, you will get what the full timers don't want to or don't have the expertise to do. For example, at a bank, the full timers usually implement new features, while the contractors clean up the bugs. Also, banks and big telecoms have separate dedicated budgets for contractors.

* So far, I have been lazy looking for gigs, finding them mostly through recruiters. My biggest gig and the one I mostly enjoy has been lasting intermittently for almost three years. I got that far with the client by delivering over and over again results above and beyond the client's expectations.

* The mindset of a contractor is different than the mindset of an employee. You will no longer care about meetings, "promotions", titles, asking/getting vacation days, Monday Syndrome/TGIF, performance reviews etc. In fact, your "performance review" will be whether or not your contract gets extended. You will care about getting your own (best) hardware equipment and software/dev tools licenses, assuming responsibility over professional development and delivering the best results you can. Also, as a new adopted mindset, you need not care what kind of work you get given by your client, your goal is to deliver excellent results for any kinds of projects.

* Starting rate on a gig is usually determined by the market with ~10% negotiation room. For example, the recruiter will call you and have a second or third question "so what is your hourly rate?". If you name a figure 10% higher than what they have in mind, they will usually say that is above their range. From what I know, the reason for that is companies have fixed budget for contractors and when starting the search, during the conference call with recruiters, they set their rate expectations.

* So far, contracting proved to be so much more fun and intellectually and financially rewarding than full-time employment. Once you start, there is no going back :))

Best of luck.

------
boardguy
For me the pay increase made it a great switch. But I would say I could not do
it if I had kids. The job stability would be needed.

~~~
imhoguy
But what if it is remote contract? Definitely anyone with some financial
cushion and family should consider.

------
stealthmodeclan
One of my friend created British Virgin Company (contracts from Canadian
companies) and moved to Thailand.

But he pays no taxes.

Now he is on a student visa there.

And if you do not have a family it might work for you.

