Contracting as a Holding Strategy

Contracting as a Holding Strategy

No downturn in the economy lasts forever, but Japan's is going to definitely take a year or more. During that time, companies are going to be evermore vigilant about costs and commitments -particularly employment commitments.

I've spoken before about taking time off to do an MBA as a holding strategy until the job market picks up again. But obviously this is for readers without families and for the well-heeled. For the rest of us, another strategy -- even if you currently do have a full-time job -- is contracting. Special note: What I'm about to say next is my opinion, NOT professional advice, so always get professional help before committing yourself to any of the points I cover below.

Up until 5 years ago, almost nobody in Japan worked as a contractor. And therefore, even now there isn't a good definition of what a contractor is. I think it's important to differentiate contractors from temporary staff and part-timers. I would define contractors as people who have a specific set of contracted deliverables to produce, either repeatedly or one-time only, in blocks of 3 to 12 months. Contractors generally work with customers as independent entities, rather than being dispatched as a team, and generally they have more brain-power intensive jobs that require specialized knowledge. Thus, a Help Desk worker would not typically be a contractor, unless they were supporting Tier 3 Cisco router problems!

In a tax and legal sense, it is important for a contractor to establish themselves as an independent and viable entity -separate from either the end customer or any agent that might be representing them. Tax in particular is a thorny area for most contractors, and usually they have 10% of their monthly payments deducted by the end-customer or agent as a pseudo payroll tax. At the end of the year, the contractor is supposed to pay or claim any variance to this amount to the tax office. Here is a tip: a major exception to at-source deductions is if the contractor invoices his/her customers with the words "Consulting Fee" and uses a company name (not necessarily a registered company) which says "XYZ Consulting". In this case, there should be no at-source deductions, and the contractor can settle their tax bills independently. This can be an important value-added point for someone just getting started and needing the cash flow, and also for contractors who have high expenses incurred in delivering their services -office, travel, medical bills, etc.

Right now, many companies are considering reducing staff and bringing on temporary staff and contractors. If you're between jobs, or think you soon will be, you may be surprised how receptive some companies can be to approaches to offers of your particular skill set -so long as they actually need someone, of course. The downside is that you won't have job security; the upside is that you may get a higher monthly check and you can keep busy while looking for the next permanent position.

Job areas where contractors are in demand include: Web development, software project management, general IT project implementation and management, IT and product help desks, restructuring projects (requiring proven bilingual management skills), sales, training, and general back office administration.

Lastly, in an unstable work environment, the great thing about being a contractor is that in two years time you don't have to explain why you've had 5 different jobs. I've interviewed a number of unfortunate individuals who through no fault of their own have been laid off from several companies in a row, and after a while this starts to look pretty bad on a resume. Contracting however, means that moving around is all right.