Page 157 - Paulisms: Gold Nuggets for Small Business

With the contracting model, you know your exact cost. Often people do not know the true costs of employing people. For example, if you are paying an employee $32 an hour, you need to add to that rate the costs of a vehicle (perhaps), holiday pay (8%), phone, ACC (Accident Compensation Corporation fees), sick leave (lost time), Health and Safety (now with huge compliance costs), KiwiSaver (the New Zealand government superannuation scheme), insurances, etc. The employee could be costing you easily $50 per hour. If you charge him/her out at $70 per hour, that is not a good return on your investment. It’s hard to charge 40 hours a week, 52 weeks a year, yet you still pay them 40 hours a week, 52 weeks a year. There is always down time, like jobs not being ready or mistakes occurring that costs you if you employ. When using contractors, you don’t have that! You know your exact costs and overheads and they are constant. If work drops off, well, you say goodbye to the contractor.
Another saving is your administration time. Having a contractor who is going to cover all their costs, PAYE and their own administration cuts down on your administration. There are fewer issues than there are with employees, who you have ‘warts and all!’ With employees there is more management required, training, potential employment dispute issues and you need to constantly work on being PC and motivating them. This is not the case with contractors.
When employing a contractor, you are the client. Never forget that. There was a contractor who used to moan about everything... like a squeaky wheel. He got off side with everyone and didn’t act professionally but he did the job OK. We were paying him a fortune, but he didn’t appreciate the work that he didn’t have to hunt for. It was given to him on a plate. It got to a point when I said to him, ‘Fred, obviously you don’t like doing the work. What I suggest is that you go home tonight and tally up