Being a contractor is very different from being employed. You no longer have a boss! On the other hand, you're completely responsible for your successes and failures. If you coast, you'll be found out.
You’re defined as a contractor if you work under contract for somebody else for a fixed period to help them complete a project. You're effectively selling your skills and time, and will usually be paid by the hour - although contracts with a fixed sum for a particular project are also available.
What's in it for your client?
There are several reasons why companies like to use contractors.
For example:
• They are usually more flexible over hours than permanent staff.
• They are easier to hire and fire as the needs of a project evolve.
• Contractors provide skills the permanent staff may not have.
• Contractors are cheaper. Companies normally won't give contractors sick pay, holiday pay, redundancy pay and National Insurance.
What's in it for you?
Every contractor has her own reasons for liking it:
• You’re your own boss.
• More money - contractors are usually paid more than employees working alongside them on a project .
• You can choose when and where to work, meaning you can structure it around holidays, etc.
• Variety - by moving from contract to contract and company to company, contractors usually develop a highly varied CV.
• Less tax - contractors who take professional advice can also greatly reduce the amount of tax they pay.
The pitfalls
Of course, were contracting an easy and completely safe way to earn a living, everyone would be doing it. Some of the disadvantages you’ll need to consider include:-
• Less security - contractors are not protected in the same way as employees
• Uncertainty - there are usually no guarantees of another contract when your current one ends.
• Hassle - because you’ll be running your own business you’ll have a fair bit of paperwork.
The successful contractor:
1. Has the ability to go from site to site, adapting to the different conditions, different tools, different cultures, and different ways of working. If you can't do this, you’ll struggle.
2. Has the ability to forge new working relationships easily.
3. Is always willing to muck in. Contractors typically have a wealth of knowledge and experience into which staff and management can tap.
4. Knows when their advice is wanted and when it is not.
5. Is always on the alert for potential business leads.
6. Looks for their own work rather than always letting agencies look for them.
7. Will have taken opportunities to pick up extra bits of work for multiple clients over the years, and will therefore be as far outside IR35 legislation as is possible
8. Will have a database of potential clients they contact every three months or so
9. Will keep potential clients up to date with contact information when it changes, eg. address, phone number and email, so that is should be impossible for a client to be unable to contact them
10. Will have cultivated such a fantastic reputation that they are the first person anyone thinks of when they have a project
The next step
If contracting is still attractive to you, and you believe you can cope with the disadvantages, the next step is to do some research.
Don't give up your job (or spend money setting up a company or talking to a contractor accountant!) until you are absolutely sure that there is a market for your skills as a contractor.
At the very least you’ll need to talk to the specialist contract agencies in your industry to see what kind of contracts might be available, whether you are suitable for them, and how much you could earn.
Further steps:
- Setting yourself up as a contractor
- About IR35 legislation
- Section 660a legislation
- Contractor finance
- Contractor insurance
- Find an IT contract job
Disclaimer: the information on these pages is provided for your information and reference only. Before making any important decisions regarding your employment or any legal matter, you should consult a qualified professional adviser who can provide specific advice based on your individual position.
