You meet your new colleague, you find out he is a contractor, you also find out that he has just returned from his annual 3 month break traveling exotic shores. You look at your own holiday calendar and realise you have two days left until next year… hummmph… and you ask yourself, “How do I create that lifestyle?”
I am sure this is one of many scenarios that might make you wonder if working as a contractor is for you.
Middletons Assured Talent are pleased to present this comprehensive guide to becoming a contractor. Our advice is not limited to IT, the same rules apply to other professional sectors such as finance, engineering, business change and business operations. But it is not all rosy and it is important you fully understand the challenges and implications of creating a career as a contractor.
NICK MIDDLETON – 5 STEPS TO BECOMING AND IT CONTRACTOR OR INTERIM PROFESSIONAL
1. Is contracting going to be for me?
It is important to consider the pros and cons before you make the leap, particularly if you are resigning from a permanent job in order to make the transition to being a contractor.
- Freedom of not being committed to one organisation
- Control over your own career and working style
- Potential to break out of the standard 9 – 5 with 28 holidays a year
- The challenge of quickly learning about new companies and how they operate
- The diversity of experience working in lots of different companies brings
- The opportunity to travel and work, UK and abroad
- The ability to not be involved in office politics
- The instability, not having the perceived security of a permanent role and having to find a new engagement every 3/6/9/12 months
- Having to attend lots of interviews and go through the pain of job searching
- No benefits, paid holidays, sick pay
- Depending on the market, you might need to work away from home for long periods of time
- Contractors are often expected to ‘hit the road running’ so there often is a lot of pressure on you to be constantly adding value
- You may be expected to work long hours and on weekends. You will often be paid a day rate so this can feel like time unpaid
- You are responsible for your own learning and development
- The market can change very quickly and demand for your skills can disappear over night
- On occasions, depending on the agency you work through or the end client, you might not get paid when expected and in rare and worse case scenarios, you can end up unpaid if a business goes bust
- You can be treated like an outsider and permanent employees may resent you (as they will usually have an idea of the rates you are earning)
2. Investigate and identify if there is a market for your skills, experience and abilities
Before you can make the step in to contracting you need to fully understand what the market looks like and does a contract market exist for your skills.
What you need to discover and understand is:
- How buoyant the market is for your skills
- The predominant locations of suitable roles – will I need to work away
- The rates available
- Any clear trends in your market area
- What threats or opportunities are around the corner (often driven by legislation change)
To do this I would recommend you:
- Speak to specialist recruiters
- Look at job boards
- Speak to specialist accountants who support contractors
- Speak to other contractors in your market – grow your network
- Follow one of the many online forums/blogs written for contractors
3. First steps to becoming a contractor
You have decided it is a working style you would like to try and you are confident there is a market, now you have to make it a reality.
- Manage an exit from your current employment – most contract roles will be looking for someone to be able to start in a month or less. Does this mean you might have to resign before you secure a new contract? If not, skip to the next step and then resign once you have secured your first contract
- Update your CV (start with this CV writing blog) and if pertinent, have different versions that best suit the different sort of roles you are applying to. Your CV is critical and you must make your CV is as aligned as possible to the market you are targeting, start the leg work of applying for contracts by:
- Speaking to specialist recruitment agencies
- Applying to job adverts on the job boards
- Uploading your CV to job board databases (chose the version of your CV that aligns best with your ideal role but also contains as many relevant keywords as possible)
- Networking with other contractors or people you know who might be able to recommend you for contracts in their business
- Speaking to previous employers (they will know your strengths and the value you can bring)
- *Note* remember that the contract market moves much quicker than the permanent market so be ready to submit applications as soon as you see a suitable opportunity and be prepared to attend interviews at short notice. This is a factor worth considering if you are applying while still in a permanent role
Speak to a specialist contractor accountant. They will talk you through the different set up options and whether an Umbrella company or your own limited company is going to be the best option for you. Typically, if you are dipping your toe in to the contract market, an umbrella company is the most straightforward option and there is no administrative burden if you return to a permanent role. The downside is that you lose the tax advantages of operating through your own limited company. If you are committed to this as a career and confident the market will support that, they will likely advise that you set up a limited company. An accountant offering you a complete service including filling your self assessment tax returns will typically cost between £150 – £220 per month (inc VAT) and they will likely charge a start-up cost to register your business, set up your VAT, NI, Corporation Tax and create the rest of the infrastructure you need to start contracting. This may seem a lot but it is money well spent as they will take most of the administrative burden of running your company off your hands and they will often help you maximise your tax efficiency.
Presuming you go down the limited company route, the specific steps you will need to take (with or without the help of an accountant) include:
- Deciding on a name, ensuring that name is available and registering it with Companies House
- Register your VAT, corporation tax, National Insurance and PAYE with HMRC
- Open a business bank account – often you need your certificate of company registration to do this. Shop around for the best deals, unlike personal banking which is usually free, business banking has costs although you will find some banks offering free periods for new customers. Also ask how long the set up will take and don’t be surprised is it is weeks rather than days
- Decide how you are going to keep track of your accounts. There are plenty of cheap tools available in the market such as Xero and Receiptbank – your accountant my have recommendations for this
- Purchase the right level of professional indemnity (PI) and/or public liability (PL) insurances. The level required can vary from contract to contract, anything from £100,000 to £2,000,000. Specialist accountants may offer cover as part of their service packages
- Learn about IR35 and the implications to how your contract is set up once you secure one and then how you act while in your contract
4. Starting your first contract
Starting your first contract will look and feel different from when you have previously started permanent roles. The expectation is often that you come in and start adding value immediately and you need to be prepared to be thrown in at the deep end and confidently start swimming.
- Don’t expect a detailed induction process. Create your own induction by having a clear list of the information you need to quickly become effective and then go and get that information as soon as you start (or even before if possible). Typically, the list might include:
- What is your clear objective in the role – it is very important you understand what they are expecting from you
- Who are the key stakeholders involved, introduce yourself to them ASAP
- Systems access and who to go to if you have issues
- What are the working hours expectations of contractors and the general office ‘rules’ – this is sometimes different to permanent staff so ask another contractor in the business presuming there are other contractors
- Who signs timesheets and if relevant, expenses and what the process looks like – you won’t get paid until you have a singed timesheet so it is critical to be on top of this
- Once the objective is clear and you know how to make it happen, get your head down and get on with it. Successful contractors understand that the more value you add in any engagement, the more stable your contracting career will be. Sometimes that will involve rolling your sleeves up and participating in activities that might be seen as below your level of responsibility
- DON’T GET INVOLVED IN OFFICE POLITICS! – Remember you are there as a consultant to deliver something specific. Within some environments, contractors and permanent staff members have an amicable working relationship and are very integrated, while in others you might find you are kept in a back room and no one wants to speak to you. Either way, enjoy the benefit of not having to be involved in office politics and take relief in the fact that your time there is finite. Successful contractors understand that floating above office politics means you are unlikely to create enemies along the way which will add to the stability of your contracting career.
- As soon as you start earning, start saving! You may have gaps between contracts so it is important from day one that you are putting enough away to still be able to pay yourself while you are looking for the next engagement
5. Maintaining a successful contracting career
You are coming to an end of your first engagement and you know the contracting life is for you. You now need to focus on the short term of gaining your next engagement but also the long term of making your contracting career a stable one.
- 6 to 4 weeks before the end of your current engagement, speak to your reporting manager/contractor coordinator and recruitment agent to ask about the possibility of extension. You might not have an extension offer until the final days but there is no problem asking a few weeks before. Try and get a sense of how likely it is but be aware that there is no extension until you have a piece of paper in your hand with an extension offer
- At the same time update your CV with the most recent engagement and start distributing it to your network, recruiters and the online job boards. Let them know what your availability is so they know whether you can be considered for opportunities they have coming up
- If you want to finish one contract on a Friday and start the next one on a Monday you will need to create time to attend interviews. Consider how possible this is in your current engagement
- Make sure you are building your network on every contract and take the contact details of people you have met and who could be valuable to you in the future
- It is important to think of your own continual development. As a contractor this is your responsibility so keep a budget for training and take any opportunity available to keep your skills and knowledge up to date. Some contractors are able to select contract engagements based on what opportunities it presents to expand their knowledge and abilities. This isn’t always possible but it is worth being mindful of the possibility
- Your reputation is critical to your contracting career. Do everything you can to maintain an excellent reputation, wherever you work. Deliver what you said you would deliver, don’t terminate contracts early unless absolutely necessary, never get involved in politics and make sure you always look to add maximum value to any client you work for. While these things may not directly mean you earn a higher rate, they do greatly increase the contract engagement options open to you when you next come on the market
- Take breaks. It can’t all be work work work, you need to stay healthy and take the opportunity for breaks whenever you can. There are not issues with contractors taking holidays (unpaid) during engagements, although you might have to work them around project deadlines etc.
- Remember to think about your long term financial security, speak to financial advisors to make sure you are effectively managing your earnings
For more information on our Assured Selection Interims service, please contact us on 0113 416 6114 and email@example.com.