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Introduction 

Before Community Day began in Berlin, I’d seen that the topic “working as an independent consultant” had been proposed for the agenda.  The proposer had had to withdraw, so Mike Prokraka volunteered to take over.  I met with Mike, and suggested that we do it together.  But the agenda was set, so we didn’t have the opportunity.  I’ve just checked Mike’s blogs, and he hasn’t written about this already, so I thought I’d give it a go.  In the following I use the terms Freelance/Independent/Contractor interchangeably,  so lets go…

The Good

Freedom!

For me, the biggest plus of working independently is freedom.  Theoretically, at least, I get to choose where and when to work.  Part of that is that you’re outside of office politics, though some of the work you do may have political consequences, you, as an external have (or should have) no vested interest.

Money!

Externals, on the face of it, are paid considerably more than internals.  However, the money that they actually receive may well be nothing close to what the company is paying.  Most independent consultants work through agencies.  It is not unknown for a consultant to be paid 2/3 of what the agency gets.  The client most often doesn’t know what cut the consultant gets, and the consultant usually doesn’t know how much the agency is charging the client. 

So, why do clients use independents at all?  Well, the cost of an internal isn’t just their salary.  You may not be aware of it, but in most European countries, for every €1 you earn, your company pays a percentage of social security on that.  In the UK, it’s around 12%.  Further, if an internal is ill, the company may be obliged to keep paying full salary.  In Switzerland, some companies do this for up to two years.  There are insurances for the company against this, but of course, there are the premiums to pay.  Externals don’t get paid during public (or voluntary) holidays, usually don’t have training paid for, or the costs of conferences, like Teched!

Also, with freelancers, there’s more flexibility.  The contract between client and contractor is not subject to employment law.  That means they can, if they both chose, have varying and unequal notice periods.  Perhaps call-off contracts.  Or fixed price contracts.  

HR – Personnel

Imagine.  No appraisals!  If you work as an independent contractor,  your work is judged mostly by results.  If you’re not up to scratch, you’ll be disposed of.  If you’re good, you’ll get renewed.  In many  companies, the hiring and firing of independents is outside of the responsibility of personnel.  We’re NOT staff.  We’re NOT employees.  We are simply an item on the purchase order.  The  British government have recognised the difference.  If you work throught a limited company in the UK, but behave and are treated as an employee, you don’t get any of the tax benefits that true independents are entitled to – in recognition of them really being in business on their own account.

New people, new environments

One of the biggest attractions for many people is the opportunity is to meet new people and work in new environments.   Whether you travel internationally, or remain in your country, or even your local area, every time you start work with a new client, you encounter different working practices, procedures, mindsets and attitudes.  Often you are able to bring different ideas and suggestions, as you’ve worked in so many different ways.

The Not So Good

By now, you may be wondering why anyone would want to work as in internal!  Well, it isn’t all wonderful.  There are aspects that should make any sane person think twice – or even three times.

Security

Forget job security.  Your security is to the end of you current contract.  And rest assured, if the client doesn’t need you any more, you’ll be gone.  Currently, I’m working on a call-off contract – the client budgets for, say, 90 days over a 6 month period.  They’re under no obligation to use all those days.  From one week to another, I may not know if I’ll be working in the following week!  (Though to be honest, I kind of like this – I certainly don’t get bored!)

You’re also on your own – there’s no-one looking after your interests. There are various contracting groups established, for example the PCG in the UK.  You’d be well advised to join such a group, if one exists in the country your working in.  Often there isn’t, as getting contractors to work together in such a way is not unlike herding cats.

Training

Training is your responsibility.  Not only do you have to pay for your own training, usually you won’t be billing while you are training.  And you have to pay all the associated expenses.  Though I’ve found all training to be beneficial in some way, there have been courses where the investment really hasn’t paid off.  Pre-2000 it was difficult for independents to get onto SAP training courses – they simply weren’t set up for it.  Thank goodness that has changed.

While we’re on the subject of training, there’s the related issue of breaking into new technology areas.  Most often, clients want someone who can hit the ground running.  They’re not interested in someone who’s done the training course, but has no practical experience.  So, if you’re an ECC (R/3) ABAP programmer, and you want to do BI, it is very difficult to make the switch – even though you may be brilliant at it.  It can be done, but you need to have built up a relationship with your client, and perhaps offer to work at reduced rate for a while.

New people, new environments

Again!  When you start a contract with a new client, the chances are you won’t know anyone there.  They don’t know your reputation.  You have to prove yourself every time.  Initially, this can be frustrating.  You get treated, for example, as “just another developer”, when in fact, you could be a Thomas Jung or Rich Heilman-in-waiting! 

Away from home

Especially in SAP, it is unusual to be working in your home town, even if there are several large SAP customers near where you live.  You have to be prepared to weekly commute.  When I started contracting, I was living in the West of England, and working in Calais, France.  So every Monday, I’d get up at 4:15 am, and drive three hours, so as to get to the tunnel by 7:30am, and be at my desk sometime after 9 – the French being one hour ahead of the UK.  Then on Friday, I’d leave at 5pm, and get home at 8 or 9. I then moved house, to East of London, and lo and behold, got a contract in the West Country.  So I ended up doing nearly the same commute, but in the other direction!

Agencies

Viewed by some as a necessary evil, if you’re a freelancer, then the chances are you’ll have to work through a recruitment consultancy/agency.  To be honest, it is very difficult to get contracts without agents, and, having one done a stint as an agent, I can tell you it’s pretty horrible job!  Agencies charge the client more than they pay you – well, they have to make a living, they don’t do it for free.  Usually, that markup is in the region of 15-20%.  It does happen, though, that it can be 33% or even 50%.  If you’re getting your rate, then you may not care.  The difficulty is, you could actually be costing the client more than the chap sitting next to you.  Guess who’ll be first out of the door when budgets are cut?

Agencies will usually factor your invoices.  This means that they pay your invoice, before the client pays them.  This gives you added security.  Agents are also useful if you want to negotiate with the client.  First, they’re very good at negotiation – probably better than you – second, they’re removed from the coal-face of the job, so they have a more neutral position than you. 

Conclusion

So, there we have it.  A few pros and cons of the freelancing life.  I love it, and wouldn’t really want to be an internal employee again.  But it isn’t all roses.  There is a price to pay, and not everyone thinks it is worth, or is suited to the uncertainty.  If you’re thinking about going freelance, consider long and hard on the effects on your family.  What will you do if you’re out of work for 3 months?  What will you do if there’s serious illness, or you have an accident?  Can you handle having to prove yourself in each new place?  Can you handle not being part and parcel of the client’s organisation – perhaps not being included in briefing meetings, or the Christmas party.  Many people go back to the security of a permanent job after only one or two contracts.  If you’re going to take the plunge – make sure you count the cost.

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9 Comments

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  1. Michael Koch
    Hi Matthew,

    I had been contemplating for ages to write a similar blog post on contracting. You literally beat me to it! In fact, I was speaking to Craig and Mike just before TechEd Berlin as I had heard that Nigel had to drop out. But as you said, it didn’t happen. Still had lots of poeple asking me about freelancing though.

    I am in my 5th year as a freelancer and I haven’t regretted making the switch. But as you’ve pointed out very well, contracting is not for everyone and everytime. You certainly need nerves, determination, passion and the right client-focussed mindset.

    I was at Community Day in Berlin, too – Amazing we didn’t bump into each other.

    Kind regards,
    Michael

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  2. Michael Koch
    Hi Matthew,

    I had been contemplating for ages to write a similar blog post on contracting. You literally beat me to it! In fact, I was speaking to Craig and Mike just before TechEd Berlin as I had heard that Nigel had to drop out. But as you said, it didn’t happen. Still had lots of poeple asking me about freelancing though.

    I am in my 5th year as a freelancer and I haven’t regretted making the switch. But as you’ve pointed out very well, contracting is not for everyone and everytime. You certainly need nerves, determination, passion and the right client-focussed mindset.

    I was at Community Day in Berlin, too – Amazing we didn’t bump into each other.

    Kind regards,
    Michael

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  3. Veronika Vnukova
    Very interesting topic for me.

    You wrote that you use pcg. Is it possible for foreigners work at this site? Could you give some other such sites?

    Regards,
    Veronika.

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    1. Matthew Billingham Post author
      The PCG is an organisation that works for the benefit of freelancers living and/or working in the UK.  Lobbying government, doing research, advising freelancers etc. If you move to the UK, or work there, then it’s a good idea to join – otherwise there’s not much point.

      I’m not aware of similar organisations in other countries, but they may exist.

      If you, or anyone else, has any questions about any aspects of freelancing, I’d be glad to assist to the best of my abilities.

      matt

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    1. Matthew Billingham Post author
      Good point.  In a number of European countries, healthcare isn’t a usual company benefit as the various systems work differently from the US.  The UK, for example, has free healthcare…  but if you want to be treated quickly, for non-emergencies, and flexibly, you’ll need private health care.  In Switzerland, you’ll need to buy your own accident insurance – normally paid by your employer, but now you don’t have one!

      Other insurances are Professional Indemnity – to cover you if you muck up client systems; Liability – to cover you if a client employee hurts themselves tripping over your laptop bag; income protection for long term sick etc.  You also need to plan for your own pension.

      matt

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  4. Harish Narayan
    Matt – excellent piece on an age-old topic! Next time someone asks me this question, I will just point them to your blog instead of rambling along myself!
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