Independent contracting is not considered a good idea for new graduates, warns Professionals Australia.

Steve Packer, freelance writer

The continuing rise of independent contracting has many young professionals dreaming of working for themselves even before they have completed their qualifications. But as Professionals Australia and many experienced self-employed professionals will tell you, being your own boss or at least being able to choose who will be your boss on a temporary basis has many pros and cons.

The implications are particularly challenging for new or recent graduates, which is why Professionals Australia recommends that they begin their careers by being regular employees of a private or public sector organisation for a number of years. Anyone should be very wary of going out on their own without 15 or so years of experience in a variety of roles, says Professionals Australia member Lindsay Mulligan, a roads and bridges engineer who worked mainly for local and state government authorities for 26 years before becoming an independent contractor 12 years ago. You have to be fairly versatile and able to hit the ground running. You don't have time for anyone to teach you what to do. You're expected to know.

Another Professionals Australia member, who has been a consulting electrical engineer for 11 years, previously worked for a state electricity commission for 20 years and for a privatised offshoot for four years. I went contracting when the company kept downsizing its staff. Before I was pushed, I jumped, he says. I was out of work for four months, then got a phone call from a previous contact, and I've been busy ever since. But they knew me and knew what I could do. It would have been difficult without a lot of contacts.

For new or recent graduates, independent contracting lacks all-important opportunities for training and professional development, and matters of professional indemnity insurance are especially problematic (see breakout stories).

Furthermore, a contractor is by definition not an employee, says Dr Kim Rickard, Executive Officer of Connect, Professionals Australia special interest group for independent contractors and consultants. This means the contract is not covered by employment law, so minimum standards and conditions such as annual leave, parental leave and unfair dismissal provisions don't apply. Contractor relationships are governed by the law of contract. Independent contractors pay their own taxes and superannuation, must provide for their own holidays, sick leave and long-service leave, and cover business expenses such as travel and equipment costs. Unscrupulous employers may seek to engage independent contractors as a way to avoid paying these costs.

Mulligan says he put in a lot of thought and research before going independent. He formed his own company, which effectively employs him and contracts to various government road authorities. The paperwork was considerable but not insurmountable.

I was working with consulting engineers at the time, he says, so I had a reasonable understanding of the client-customer relationship and of the rates I should be paid.

Learning on the job

A fundamental difficulty with independent contracting and other forms of non-standard work, such as casual employment or working through a hire agency, is that training and development is compromised or not a priority. Ideally in the first three to four years after graduation, your professional development should include:

• Gaining and consolidating expertise in your discipline
• An organisation orientation, with exposure to a range of areas in the organisation.
• Mentoring and support.
• Training in business processes, client/customer service, sales and finance, team management, communication skills, and leadership and management skills.
• Training in health and safety.
• Application and understanding of the relevant code of ethics.
• A focus on career planning.

Professional development during your first few years of work should give you the chance to develop the skills you learned in your university course, says Dr Kim Rickard, Professionals Australia Connects Executive Officer. Your role as a graduate should involve undertaking tasks of increasing scope and complexity under the supervision of higher-level professionals. You should be exposed to different methods and approaches by assisting more senior professionals.

Of course, independent contractors are generally expected to have already been through these processes as an employee of one or more organisations, she says. But should they have made a direct transition from university to contracting, they would be denied these development opportunities.

Insurance within reason

If negligence of a contractor causes someone to suffer a loss, the contractor can be sued. The hiring company has no obligation.

Employers are legally liable for the actions of their employees, but not of any contractors they hire. If the negligence of a contractor causes someone to suffer a loss, the contractor can be personally sued.

Professionals operating as independent contractors or consultants need public liability and/or professional indemnity insurance.

The first question insurers seek to answer is whether the applicant is qualified, competent and experienced. This is because a court of law, when assessing a professional negligence action, will expect that the professional who performed the activities will have done so to a reasonable standard. Recent graduates or professionals with only a couple of years of experience in their discipline are unlikely to pass this reasonable person test.

Claimants in professional negligence cases engage independent experts to review and comment on the work completed. Their degree of expertise and the benefit of hindsight tends to raise what is regarded as a reasonable standard of work to an even higher level that of a very experienced and capable professional.

The implications are obvious for recent graduates or inexperienced professionals who take on contracting or consulting roles. They risk facing considerable problems should they have to defend any legal action, which makes it very difficult for them to purchase appropriate professional indemnity insurance to protect their personal assets.

(First Published in Career Edge 2009-2010)