Pitfalls of Contract Work and How to Avoid Them

Freelancing is often sold as a dream job. “Be your own boss!”Set your own hours!” Although those elements are certainly part of the package, the reality is that there is a downside to independent contracting. Some of these hazards are avoidable, some are less so. But being prepared offers a freelancer the chance to live their best life. Here’s how to identify and, when possible, avoid the pitfalls of contract work.

When Demand Dries Up

In most situations, an agreement between contractors and employers will outline the expected duration for any given assignment. Occasionally, this information isn’t available, and often circumstances can change. Example: For event-related freelancers such as graphic artists, event coordinators and performers, 2020 proved to be a black hole due to the pandemic. Most of these contractors expected to earn a certain level of income throughout the year, but when on-site events disappeared, so did their work. Circumstances changed.

In a less dramatic example, an accounting contractor who expects 40 hours a week from a client may suddenly learn they’re needed for only 10. How do they adjust to this new reality? While these scenarios are sometimes unavoidable, it helps to secure work well in advance and include scenarios such as these in contracts so they are accounted for when planning bills and finances.

When the Cup Runneth Over

When trying to plan finances around freelance work, some contractors have a tendency to overcommit. Avoid putting yourself in the position of stretching your bandwidth to the breaking point – particularly if it means doing so to keep up with a lifestyle beyond essential expenses.

No judgment – we all like nice things! – but a freelancer risks a lot more than a few luxury items if they come up short on a project. Failing to deliver, or late delivery, can be a reputation-killer. It could cost you future work with that client and may even end up in non-payment, depending on the severity of the situation. Take care to commit to only the amount of work that can be reliably delivered on time and at a high level of quality.

When the Taxman Comes Around

When receiving money as a 1099 contractor or freelancer, it’s important to set aside money for the IRS and to educate yourself on tax laws and procedures. This will help avoid being stuck with a huge tax bill (plus penalties) come April 15. Paying expected taxes quarterly and putting away 25-30 percent of earned income will help prevent an unwelcome surprise at tax time. It’s also advisable to consistently track business expenses and keep documentation. Hiring a CPA can help.

When Payment Is a Problem

Freelancing comes with some risk, depending on the clients a contractor does business with. Sometimes payment arrives late and the worker must make a choice: continue working and wait for payment or cease working. Although it’s tempting to keep working to avoid losing the contract, the client has breached the freelancer agreement. Hauling the client into court shouldn’t be your first instinct, but it’s important to hold them accountable and steer clear of clients who are late or absent on payday. Chances are, it won’t be the last time.

Freelancing can be a dream job, but it’s important to watch out and prepare for the potential pitfalls of contract work. PeopleCaddie can help by making it simple to find work, structure agreements, get paid consistently and on time, and take care of taxes and insurance, allowing independent contractors to sidestep some of their toughest challenges right out of the gate.

PeopleCaddie can help you navigate the pitfalls of contract work. Contact us to find out how.

sgruenPitfalls of Contract Work and How to Avoid Them

The Gig Economy Has Entered a Mini-Boom – Will it Last Post-COVID?

Like many of you, we have been monitoring the US Labor Statistics closely and remain hopeful that our unemployment numbers continue their downward trajectory.  We’ve seen unprecedented market volatility as vaccine news, employment data, corporate earnings, and Fed commentary influence the major indices.  While we hope there isn’t a retest of the lows, most experts agree the numbers will remain well above pre-pandemic levels into next year even with the various stimulus programs and reopenings.  

While it is easy to fall prey to the bearish headlines, it’s important to note some positive developments for both employers and employees.  

For Employers:

Employees shifting to remote working certainly isn’t a new trend, but it was amplified seemingly overnight when quarantines were announced across the globe.  

The increase in contract hiring should continue as employers look to reduce risk in the event of another downturn. Using contractors also allows these employers to be more nimble in hiring, as the talent can often be identified and deployed much quicker than with a traditional full-time hire search.  The speed of deployment often results in a reduction in SG&A spend and provides a predictable cost model based on the hours budgeted for the resource.

The ability to right-size the workforce during both predictable and unpredictable environments allows for cost savings and yields better results. This has been a common practice for professional service firms and consultancies to avoid costly dips in full-time utilization.

Geographic barriers have been virtually eliminated as employers that have been forced into operating remotely – some with no plans on returning to the physical office space – are seeing the same if not higher productivity in their workforce.  

For Employees/Seekers:

Job seekers previously turned off by a daunting commute can broaden their search for a company that may align better with their current/future goals.  In theory, this should result in a more satisfied– and more productive – employee.

While this may have been easy to predict, we are continuously seeing how the technology and healthcare sector have shown their resiliency through this pandemic.  Tech’s propulsion comes as companies look toward further automation and enhanced security for the remote workforce. The so-called “work-from-home” stocks are also heavily made up of tech workers as these companies adapt to the changing consumer.  

While the boom in healthcare is most visibly seen in the hiring of frontline workers and pharma companies racing toward a vaccine, there is also demand for resources to support the myriad  applications needed for telehealth services.

We welcome your thoughts as to how you and your organization have shifted your hiring strategies amid this pandemic.

Throughout history we have witnessed thousands of innovative ideas and products born in crisis. PeopleCaddie will continue to monitor hiring trends during this period of uncertainty with the help of our esteemed partners.

About PeopleCaddie

PeopleCaddie operates a rapidly growing contingent labor marketplace for highly-skilled, independent business professionals who enjoy the excitement and flexibility associated with being a part of the gig economy.

pcadminThe Gig Economy Has Entered a Mini-Boom – Will it Last Post-COVID?