The upsides of being a remote contractor
Hey,
I'm Sergio Pereira, and this is the Remote Work newsletter 👋
Last week I wrote 5 pragmatic tips to get the first remote job, especially for folks who don't have significant professional experience in tech.
Today I'm writing about the type of contracts used most often in remote work, and how they can create a feeling of fragility but at the same time unfold some opportunities.
Being a contractor is usually perceived as very negative by those who've never been in such an engagement model. But it's seen as very positive by those who have done it for a long time and learned how to leverage it.
So let's dive in. What does it mean to be a contractor after all??
People who work in the office live in the same country as their employer. So, usually they have a contract that abides by that country's labour laws. Those contracts usually have a number of protections:
• Paid time off
• Sick leaves
• Social security
• Some type of retirement plan
• And other subsidies depending on the country
In a contractor agreement, usually those protections don't exist. But most remote workers aim to work from their home country for a company that's incorporated abroad, which means that working as a contractor is many times the only way to do it.
It happened to me back in 2016, when I got my first remote job. Just like everyone else, first I hated it, but soon enough I learned to enjoy the benefits.
Let me tell you my learnings:
1) Being a contractor comes with overhead costs
As a contractor you'll need to handle compliance with local laws and paying taxes yourself. Your employer will simply pay your invoice at the end of the month, which is great. But everything else is your responsibility.
The actual actions you need to do for this sake depends a lot on the country you live in. But commonly you'll need a lawyer and/or an accountant. These usually charge you a flat monthly fee, which means you'll have baseline costs to run this operation.
At first it's all new and daunting, then it's just business as usual.
2) Being a contractor is becoming very common
A few years ago only freelancers and consultants would work as contractors. But in recent years with the growth of remote work, contractor engagements became the default for employers to hire employees in foreign countries where the company can't extend a local employment contract.
Millions of people are now contractors, especially in tech. There's tons of online materials about the topic, and lawyers/accountants specialised in this specific niche market. It's not longer a novelty.
3) As a contractor you're no longer under exclusivity clauses
I see this as a great upside of being a contractor!
Local employment contracts have exclusivity clauses by default, where you need to ask your employer for permission to any kind of side projects, even those that are simply hobbies without any income goals.
Since I started working as a contractor I developed more personal projects than before, and that's ultimately how my Fractional CTO work started in the early days. I started working a few hours on the side, and eventually made it my main career track.
4) Being a contractor is often more tax efficient
An international remote job often pays a much higher salary than the local market rates. This means it's taxed locally at a very high tax rate, which makes you lose most of your income to taxes.
What's good is that being a contractor gives you more possibilities, and having a lawyer/accountant to help you usually leads to optimisation. This includes expensing personal costs to the company and other legal mechanisms that you wouldn't be able to do on a local employment contract.
5) Contractor agreements are customisable
I learned this along the way. Usually templates for contractor agreements don't have paid time off, sick leaves, etc. However, it's an open contract between you and your employer. This means you can add or remove clauses, as long as you all agree with it.
Whenever I worked full time under a contractor agreement, I added clauses for a minimum number of vacation days, and a security for a 60 or 90 day notice period. I recommend you pushing for such clauses, it will relieve you from some sense of fragility.
For all the above reasons I learned to actually enjoy being a contractor. There's no way I'd ever go back to a local employment contract. Please share your story as a reply to this email, I'm curious to learn if you also enjoy being a contractor.
In case you're actively looking for a remote job, you might want to have a look at this list of 1000+ companies hiring remote roles right now. I built this free resource just about 2 months ago, and since then 15000 have visited the page and applied to remote roles listed there. Have a look!
I'm also launching soon my first ever cohort based course and private community, where I'll be breaking down my knowledge into modules, and will help a batch of remote job seekers find a remote job. The launch will be private, join the waitlist and stay tuned.
Thanks for reading this newsletter until the end. You can read all past editions here. Make sure to share the link with your friends and colleagues so they can read it too.
See you next Friday,
Sergio Pereira,
Startup CTO & Remote Work Lover
