General > General Technical Chat

How to be a contractor

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Kasper:
I'm considering becoming a contractor and have a few questions.

What hourly rate should I offer?  or where do I look to find info on contractor rates?  I've looked at randstad salary guide and glassdoor but those seem to target employees not contractors.  Is there a general multiplier to convert from employee rate to contractor rate?  ex: contactor rate = employee rate x 2?

What do I need for legal, liability, etc? 

I'm guessing insurance is good to have, but what kind do I get and where do I get it?

I plan to search online for a contractor agreement, does anyone know a good source for one?

I'm also considering selling some little things I'm making on my spare time.  Perhaps that should be a separate thread but maybe worth mentioning here since we're talking about insurance.

Location: BC, Canada
Education: diploma in Electronics Engineering Technology and B.A.Sc. degree in Electronics Engineering (straight A's and won some contests).
Work experience: 14 years
Tools: Circuit studio (aka altium lite), KiCAD, freeCAD, a good soldering iron and a low cost; oscilloscope, power supply and toaster oven.

Skill level:
Hardware: junior for complex systems, senior for simple things
Soldering: senior
FW: junior / rusty intermediate
Mechanical: junior

Most of my experience is from making simple wireless sensors on my spare time and as the only HW designer in small companies.  I think I'm quite proficient at that and I think my years of experience classify me as a senior but I'm not sure about that title.  I haven't worked on many complex systems or had much opportunities to learn from seniors outside of this forum, google, datasheets and app notes so I think intermediate is probably a more accurate title.

tom66:
IMO, I would avoid being a contractor in the current economic climate, unless you've just been made redundant from a perm position.  Most people think the West is likely to fall into a recession, even the US is not immune. That's a bad time to be a contractor, as companies look to cut those first (as they're expensive) and they avoid new projects, which are of course the lifeblood of contracting. 

If you are sure you want to do this, I'd make sure you have a minimum of 12 months expenses banked, ideally 18 months, because generally once you go contracting, you want to stay that way and therefore need to survive a long period without work comfortably.  It's harder to get hired as an employee again if you've been contracting, *especially* if you're looking for a job in a downturn, because a savvy employer thinks you'll just leave as soon as things pick up again.

Legal:  depends on the area you work in, but at minimum professional indemnity insurance covering your field, but if you work on any products that are exposed to the general public then public liability may also be worth considering (for instance art installations).

In the UK, which is not Canada of course, the general rate for contractors seems to be about 2x what a senior perm employee would earn before tax.  Niche fields might be up to 3x (£60-75 per hour I've seen!)

Get an accountant, unless Canadian taxes are ridiculously simple.  You'll want to see if, and how, you can transfer your existing equipment towards your business, as that may be tax deductible.  And you might be able to claim expenses for working from home, if you do that.

I've noticed there are a lot more contractor roles out there for specialised areas.  So Linux kernel engineers, FPGA engineers, certain embedded software platforms/stacks (Bluetooth on such-and-such a chip) are commonly advertised.  It's rarer to just find someone looking for just a "general electronics engineer" ie I need schematics, PCB...  That doesn't mean these roles don't exist, but they may be more oversubscribed and would likely be done more by perm employees.  You'll probably do better in a niche field, one where it's not worth hiring someone to work full time.  Especially because you can command a higher rate.  From what you've described of your skill set, my honest impression is that contracting might be hard work for you, but I'm speaking from a UK position, as a perm employee, so YMMV.

nctnico:

--- Quote from: tom66 on November 04, 2022, 11:03:54 pm ---IMO, I would avoid being a contractor in the current economic climate, unless you've just been made redundant from a perm position.  Most people think the West is likely to fall into a recession, even the US is not immune. That's a bad time to be a contractor, as companies look to cut those first (as they're expensive) and they avoid new projects, which are of course the lifeblood of contracting. 

--- End quote ---
Actually a recession is the best time to be contracting development work. Companies finally have time to invest in new products and changing economics force the design of new products in order to stay relevant. I've been contracting full time for about 12 years already. Economic downturn means my business is booming. It is the economic highs that give me trouble because everyone is busy selling products and new development is pushed ahead into the future.


--- Quote ---Legal:  depends on the area you work in, but at minimum professional indemnity insurance covering your field, but if you work on any products that are exposed to the general public then public liability may also be worth considering (for instance art installations).

--- End quote ---
That is bad advise. Professional indemnity insurance doesn't exist unless it is legally required. If you contract for companies then rule out any liability in terms and conditions. When selling consumer products, setup several limited liability holding companies. One that keeps the money + intellectual property and one that takes care of the sales. This is something to talk about with a lawyer; the aim is to make sure you can keep your home in case something goes really wrong with a product. Where it comes to consumer product liability it is extremely important to make sure a product complies with all regulations and is certified by third parties. That at least shows that you have taken steps to make sure the product is designed to be safe.

It is good to have an accident liability insurance though in case you knock over an expensive piece of equipment at a customer; these insurances are not expensive.

To the OP: this subject has come up many times already and very usefull advice on all topics you have questions about has been given already. Try the forum's search function

Kasper:

--- Quote from: tom66 on November 04, 2022, 11:03:54 pm ---IMO, I would avoid being a contractor in the current economic climate, unless you've just been made redundant from a perm position. 

--- End quote ---
More of a sinking ship than a redundancy.  I'm job hunting and trying to decide between contractor positions and perm.


--- Quote from: tom66 on November 04, 2022, 11:03:54 pm ---Most people think the West is likely to fall into a recession, even the US is not immune. That's a bad time to be a contractor, as companies look to cut those first (as they're expensive) and they avoid new projects, which are of course the lifeblood of contracting. 

--- End quote ---
I'm betting on recession in Canada at the least.  Makes sense, as my employer's funds got lower, we put contracts on hold and shovelled more work on my plate.


--- Quote from: tom66 on November 04, 2022, 11:03:54 pm ---If you are sure you want to do this, I'd make sure you have a minimum of 12 months expenses banked, ideally 18 months, because generally once you go contracting, you want to stay that way and therefore need to survive a long period without work comfortably.  It's harder to get hired as an employee again if you've been contracting, *especially* if you're looking for a job in a downturn, because a savvy employer thinks you'll just leave as soon as things pick up again.

--- End quote ---
I've got some cushion, if the job market sucks, I should be ok by focussing on renovating my home, selling it and repeat.

Good point, never thought of that (not wanting to hire ex-contractors). 


--- Quote from: tom66 on November 04, 2022, 11:03:54 pm ---Legal:  depends on the area you work in, but at minimum professional indemnity insurance covering your field, but if you work on any products that are exposed to the general public then public liability may also be worth considering (for instance art installations).

In the UK, which is not Canada of course, the general rate for contractors seems to be about 2x what a senior perm employee would earn before tax.  Niche fields might be up to 3x (£60-75 per hour I've seen!)

Get an accountant, unless Canadian taxes are ridiculously simple.  You'll want to see if, and how, you can transfer your existing equipment towards your business, as that may be tax deductible.  And you might be able to claim expenses for working from home, if you do that.

I've noticed there are a lot more contractor roles out there for specialised areas.  So Linux kernel engineers, FPGA engineers, certain embedded software platforms/stacks (Bluetooth on such-and-such a chip) are commonly advertised.  It's rarer to just find someone looking for just a "general electronics engineer" ie I need schematics, PCB...  That doesn't mean these roles don't exist, but they may be more oversubscribed and would likely be done more by perm employees.  You'll probably do better in a niche field, one where it's not worth hiring someone to work full time.  Especially because you can command a higher rate.  From what you've described of your skill set, my honest impression is that contracting might be hard work for you, but I'm speaking from a UK position, as a perm employee, so YMMV.

--- End quote ---

I have an accountant and already claimed my equipment.

What you say about specialization makes sense. It's kind of ironic because I've purposely tried to be broad and general as I've worried specializing would limit my options.

Kasper:

--- Quote from: nctnico on November 05, 2022, 12:05:21 am ---
--- Quote from: tom66 on November 04, 2022, 11:03:54 pm ---IMO, I would avoid being a contractor in the current economic climate, unless you've just been made redundant from a perm position.  Most people think the West is likely to fall into a recession, even the US is not immune. That's a bad time to be a contractor, as companies look to cut those first (as they're expensive) and they avoid new projects, which are of course the lifeblood of contracting. 

--- End quote ---
Actually a recession is the best time to be contracting development work. Companies finally have time to invest in new products and changing economics force the design of new products in order to stay relevant. I've been contracting full time for about 12 years already. Economic downturn means my business is booming. It is the economic highs that give me trouble because everyone is busy selling products and new development is pushed ahead into the future.


--- Quote ---Legal:  depends on the area you work in, but at minimum professional indemnity insurance covering your field, but if you work on any products that are exposed to the general public then public liability may also be worth considering (for instance art installations).

--- End quote ---
That is bad advise. Professional indemnity insurance doesn't exist unless it is legally required. If you contract for companies then rule out any liability in terms and conditions. When selling consumer products, setup several limited liability holding companies. One that keeps the money + intellectual property and one that takes care of the sales. This is something to talk about with a lawyer; the aim is to make sure you can keep your home in case something goes really wrong with a product. Where it comes to consumer product liability it is extremely important to make sure a product complies with all regulations and is certified by third parties. That at least shows that you have taken steps to make sure the product is designed to be safe.

It is good to have an accident liability insurance though in case you knock over an expensive piece of equipment at a customer; these insurances are not expensive.

To the OP: this subject has come up many times already and very usefull advice on all topics you have questions about has been given already. Try the forum's search function

--- End quote ---

Perhaps your differing opinions come from differing size of companies? In downturns, small companies are trying to avoid bankruptcy while big companies are trying to avoid severance payments?

I have followed some posts on this subject, and found them very interesting.  While info for people with different skillsets in different locations at different times may still be relevant, I hope the description I provided of myself will garner some more accurate info.  We are in unprecedented times, things are changing quickly.  For example the first 2 responses referenced the current economic conditions.  The economy was different half a year ago. 

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