There are a large number of contractors in the UK currently. They are employed by organisations for a range of purposes, such as providing specialist skills and supporting transformation projects.
Although the grass may seem greener and the rewards more lucrative, I cannot stress enough that contracting is not the right choice for everyone. I have seen many people make the ‘jump’ from permanent to contract work without thought and they have regretted the decision almost immediately.
Therefore, if you are thinking of making the jump, then you need to think long and hard about it. Consequently, I have created a five-step process to (a) help you decide whether contracting is the right choice for you and if so, to (b) help make the transition as smooth as possible.
What is your reason to go contracting?
Before you decide to make the jump, you need to a have a clear reason why, otherwise you could be making a costly mistake. A list of popular reasons are listed below:
- You have poor job satisfaction - e.g. dull work with no career progression.
- You suffer a poor work-life balance - e.g. working long hours.
- You have been promoted away from your ideal job - e.g. you love programming but you have been promoted to team leader which you do not enjoy.
- You’ve been made redundant.
- You want to earn more money. However, be cautious if this is your main reason because chasing money could result in challenging assignments.
Are you happy with the downside of contracting?
While there are benefits for contracting (such as controlling your destiny, increased earnings, possibly more interesting work and reduced office politics) there are negative points that you need to be comfortable with.
- Gaps between assignments can be unsettling.
- Work arrives at short notice. For example, you could be interviewed on Monday and the client may want you to start on Tuesday. This can be unsettling especially if you want to take time off.
- No sick, holiday or pension pay.
- Overheads of running your company.
- Keeping your skills up-to-date.
- Constant need to keep networking and looking for work.
- No management progression. If you want to climb the ‘greasy pole’ then contracting may not be suitable for you.
Also, remember your personal situation. For example, if you have a young family or a large mortgage then you may need the stability of permanent employment and contracting may not offer the stability you need.
If you are uncomfortable with the negative points of contracting, then you may need to decide that contracting is not the right decision for you.
How to set yourself up as a contractor
If you are still reading, then I assume that you have decided to make the jump. However, it is not a case of leaving permanent work and starting contracting immediately. Preparation is required.
- Research your industry to see how contracting operates, e.g. the oil / gas industry works very differently to say government or engineering.
- Ask yourself: ‘Do I have sufficient skills to go contracting?’ I would recommend that you have at least a few years’ experience otherwise you will struggle to get work.
- Build a cash buffer amounting to at least three months’ money. This will provide protection (and peace of mind) when you are initially looking for work or waiting to get paid.
- Devise a strapline on how you would like to promote yourself or ‘why would somebody want to hire you?’. It should be less than 20 words. For example: ‘Programme Manager with experience of implementing changing within government.’
- Determine how you will get work. The most common route is via agencies but you could go direct to clients, via consultancies, or use word-of-mouth recommendations.
- Understand how you will charge for your services. This could be hourly / daily rates or fixed rates per piece of work. From my experience a daily rate is most common.
- Calculate what actual rate you will charge. This rate should cover your costs and match what the industry is willing to pay for you.
- Determine whether you are willing to work away from home. If so, then you will need to factor in the costs of travel and accommodation within your fee.
- Update your CV. A CV should be a ‘personal brochure’ to get you into the next stage of the selection process, such as an interview. It will be necessary to tailor your CV, depending on the assignment being applied for, to ensure any relevant experience is highlighted.
- Brush up your interview skills. Remember that interviewing is a two-way process. The client is interviewing you and you are interviewing them to determine whether you want to work there.
- Implement the most appropriate legal structure. The three most common types are umbrella, own limited company and sole trader. However, from my experience large clients will not use sole traders, so you will need to use an umbrella company or set up your own limited company.
- Understand the impact of IR35 - legalisation to stop tax avoidance by contractors supplying services where they are ‘disguised’ employees. IR35 has been rolled out to the public sector and is due to be rolled out to the private sector in 2020. Its implications are unclear so you should seek legal advice if you are worried.
- Ensure you have insurance in place. There are three main types (namely: public domain, professional and employer liability). However, each client will have different demands on the type and amounts required. Therefore, I would suggest that you check with your client about what is required.
- Update your social media presence to reflect that you are contracting.
How to get your first assignment
Once your preparation is complete, you can start to look for that first assignment.
One point to note is that if your notice period is longer than four weeks, then you will need to leave your permanent role before you have a contract. Clients will not wait more than four weeks for a contractor to start. This could be unsettling but a cash buffer should help mitigate this.
Firstly, you need to get your name out into the market to let people know you are contracting and looking for work. Let agencies, clients and industry colleagues know by sending them your CV.
You then need to start applying for roles. Most applications are via online job boards. To avoid your application getting ‘lost’, make sure you call the recruitment agency and speak to a ‘real person’ to see whether you are suitable. Looking for work can be hard, so you need to be persistent.
However, if you get shortlisted, then there will be some sort of interview - and if that goes well, then you could receive an offer. Before you start the role, your client will perform pre-employment checks and send you through a contract to sign. Once these are completed then you can start.
How to operate on a day-to-day basis
There are four main activities you need to do on a regular basis:
- Maintain your cash buffer. This will provide security for gaps between contracts.
- Keep your skills up-to-date. Make sure you keep training.
- Build a good reputation by doing an excellent job for clients.
- Perform administration tasks such as VAT returns, insurances, reviews, CV updates, etc.
Two final points
It can feel lonely as a contractor and therefore I cannot stress enough the importance of networking. It can help with getting work and providing a support network for any issues, such as IR35.
Finally, look after yourself and try not to spread yourself thinly. A burnt-out contractor is no use to anyone.
Paul Taylor is author of So you want to go contracting a step-by-step guide to the world of freelancing, interim management and contracting.