How contracting works

The relationship is essentially between three parties, Momentum (the agency), you (the candidate) and the client. 
There are two typical scenarios in terms of how contracting works.

Hourly rating

Momentum has a contractual relationship with the client, and also with you, the contractor.  Momentum is contracted to find the client “a solution”, ie you.  When we have found the most suitable candidate we sign them up on a couple of contracts.  The first contract is called  'Contract for Services'.  This establishes the legal relationship between Momentum and the Contractor and is signed only once and remains in place for the duration of the relationship.  It lays out the framework for the relationship and the obligations of both parties, and also states the fact that you are an independent contractor at all times and not an employee.  It also includes a restraint of trade clause between the contractor and the particular client they have been contracted too. 

The second contract is called a “Supplementary Agreement” and is specific to the assignment the contractor has been contracted too.  It includes things such as, who you report to, what you get paid, start and end dates.  You get a new supplementary agreement for each new contract you undertake for Momentum.

Week to week you will be provided with an electronic timesheet, which must be signed off by your reporting manager by midday Monday for the preceding week.  Momentum invoices the client on a weekly basis for your approved time.  Note: although Momentum invoices clients every week we pay the contractor on the first Thursday of each calendar month.  This is a cash flow measure. As you will be aware most organisations don’t pay their bills within 7 days!  Momentum on-charges Professional Indemnity and Personal Liability insurance at the rate of 45 cents per hour, this is simply deducted from your hourly rate. You can however opt out of this if you have your own policy which is equal or greater in value to the cover provided through our insurers, QBE Insurance.

Advantages
Hourly rating has advantages such as a degree of flexibility and autonomy as well as tax savings.  Some contractors establish themselves as Limited Liability Companies or some prefer to keep it simple and operate as a Sole Trader. By doing either of these things you are able to claim back expenses you incur while performing your contractual duties - for example: petrol, parking, mobile phone, home office etc.  In addition to this, hourly rating is remunerated at a higher level to offset costs like holiday pay, sick pay etc, which generally speaking are not included in this type of engagement.

Disadvantages
The only significant disadvantage of hourly rate contracting is that the client can terminate the contract without notice, however anecdotal evidence suggests that more often than not contracts are extended or go permanent, as opposed to being cut short.

Fixed term

Fixed term contracts are very similar to permanent placements. Momentum has a contractual relationship with the client so do you, the contractor. Momentum’s role is primarily to facilitate the introduction and screening process. The client engages the contractor directly and pays them in a similar manner to a permanent employee – fortnightly or monthly. Holiday pay is accrued throughout the contract and will either be paid on an ongoing basis or as a lump sum at the end, and sick leave is also available if the contract is for 6 months or more.

In some situations the client will permit the contractor to invoice them directly on a monthly basis. This suits those who are operating as a company or sole trader.

Each contract is different and every organisation has their own preference on how they like to do things.

Advantages
Fixed term contracts usually have more security and cannot be terminated without notice. A process must be followed, as set out in the contract.

Disadvantages
There is no tax advantage, this is especially problematic if you are used to contracting on an hourly, daily or weekly rate.