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Why Be an Independent Contractor?

I recently read that there is a growing trend of people choosing to work for them-self.  The most likely form of doing this is as an independent contractor … and given the business I am in, I get to meet a lot of these people.

The independent contractor is sometimes viewed with suspicion by regulatory bodies like the tax people (CRA), Worker’s compensation etc.  I have written previously about the value that independent contractors bring to our economy, but I thought it might be worthwhile describing some of the many reasons people choose to be contractors … because I can assure you in most cases it has nothing to do with paying less tax.

There are a number of fields where contractors are more established, the technology world, the engineering world and the construction industry are just three … focusing on those worlds, here are some reasons why people become independent contractors:

1. Control.   I believe that the number one reason people choose to be contractors is freedom of choice.  They are typically accomplished at their job and they want the ability to choose what projects they work on, who they work with and where they work … none of which is available to an employee.

2. Career.  This is very big in technical worlds like IT and engineering.  The traditional career path sees people who are excellent technically get pushed out of their technical jobs and into management positions.  Their role changes from 80% technical challenges, 20% people issues (because they still manage teams, interface with clients and suppliers etc) to become an 80% people management role and a 20% technical role (the 20% coming in the time after 5pm!)  The traditional path doesn’t work for everyone … contracting allows people to earn good money AND stay technical.

3.  A Way to Build a Company. Some of Canada’s largest technology companies (and I have to believe many construction companies) started with a contractor or a group of contractors.  Cognos, Calian, CGI, Systemhouse all come to mind.  If a contractor wants to start their own company, then becoming an independent contractor allows them flexibility to work on that plan, teaches them basic business skills as a one person company and allows them to nurture future partner relationships.

4. Travel.  Having the flexibility to move to where the work is can be a necessity in a tough economy, and some people come to love it.  As a contractor with good skills you can move to where the interesting jobs are … working in warmer or even exotic climates is not out of the question.

5. Company Politics.  Many organizations experience internal politics, in-fighting and positioning amongst employees.  One of the nice things about being a contractor is the ability to just focus on the job and not get caught up in the politics.

6. Necessity.  Even the best people can find themselves out of work in a tough economy.  Employers are less likely to increase their permanent headcount during this time too, so contracting is a great alternative for people with the right skills.

7.  Money.  An independent contractor can make more money than an employee in a similar role, but they have to accept the associated risks too.  They only make more money if they can stay fully billable, they are responsible for their own skills development, marketing and benefits (no pensions plans for the self employed).  Having said all that there is “an upside” to their income that is not always available to an employee.

8. Part Time Work.  For some people who are nearing retirement the ability to pick and choose how much they work, where they work and the types of work they will do is very desirable.  They might not be quite ready for retirement, they might have other things they want to do with their time or they might just need to supplement their income.  There is always a demand for people with good skills and this is a way to work without a commitment to full-time work.

I don’t know what the percentage of the work force is self employed, but it is a definitely a small percentage.  They are a part of Canada’s small business community, offer our economy a flexible labour pool and bring a ton of value to their clients.   They might be the genesis of Canada’s next large companies or just the labour force that will help our economy through the coming labour shortages.

It is the right career choice for some, but the majority of people still prefer traditional employment … and that works out just fine all around.