Taking Holidays as an Independent Contractor
As an independent contractor you are responsible for managing multiple areas of your client engagements, including tax payments, health insurance, expenses and payment. It is easy to forget that you will also need vacation time and have to somehow build that into your client’s project needs and communicate the timing.
It is tempting to forego vacations when working as a contractor given the pressures to maintain income and work flow, but everyone needs time off to recharge and relax. Here are a few guidelines to help you manage your holiday time:
- Don’t take any holiday time in the first month of a contract, as you are trying to establish your value
- You can decide how much time off you need, since you are not paid when you are on vacation
- Don’t take more than two weeks holiday during a current contract
- Expect to work every day for a short contract (one month) with no holiday
2. Tell Your Client Before Starting the Contract
It is a good idea to tell your client before the contract begins when you plan to take a holiday. Your independent contractor status allows you to choose your holiday period, as long as you can still fulfill the work terms and meet client deadlines.
If you have a long-term contract (longer than 6 months) you need to think about how much time off you need and when to schedule it. This can be included in the contract with your client, so there is no misunderstanding and they will know when you will be absent. You might want to wait until you actually get the offer before you bring up planned holidays.
3. Try to Schedule Longer Holidays Between Contracts or Renewals
Long weekends built around public holidays can be taken spontaneously as needed during the contract for a short break. At times the client may even suggest you take a few days off if they have a lull in workload. But, the issue arises of how to handle longer vacations while under contract.
For holidays longer than two to three weeks try to schedule your time off between active contracts or planned renewals. Otherwise, you will be diluting your income while you are working on an active contract. You may want to have your next contract or renewal locked in before your vacation to avoid gaps in income since it may take a few weeks post-holiday to find a new gig.
4. Plan Your Finances
Unlike employees, contractors are not paid for holidays and time off. So, when you set up your contract and payment terms planned holiday periods need to be included. If you are paid an hourly or daily rate, then it is easy to plan your finances to account for days off. A day worked is a day paid, and there is no ‘grey area’ of leave entitlements.
However, if you arrange a monthly contract rate based on 20 days of work, the contract should state the rate includes a certain number of days off during the contract period. This approach is not ideal since it starts to look like an employee relationship, so a better method is to allow the client to deduct days off pro-rata from the monthly rate.
Whatever payment method that you use, it is wise to remember that you are a separate business entity providing services, and really need to default to client needs when taking time for holidays. This will ensure that you are seen as reliable and professional and should contribute to your chances of securing a renewal of your contract.
For Remote Contractors
If you are a remote contractor for one or more clients, the issue of holidays is less of a burden since you can manage your time and projects independently. There is the added advantage of taking a ‘working holiday’ where you can stay available or engaged in projects even while traveling. It is a good idea to let clients know in case of loss of communication or low quality internet service.
If you need assistance with client payments, contributions, taxes or other parts of managing your international contracts please contact us at Contractor Taxation.