Becoming a contractor can be very rewarding, it usually means increased financial incentives and you have the enjoyment and freedom of controlling your assignment destiny.
Of those brave souls who move away from the stability of permanent work, the vast majority never look back. Here is our guide to becoming a contractor for the first time.
This will be the most important question to ask yourself. To succeed as a contractor, you need to be a self-starter and willing to take some risks. You’ll no longer have the comforts of a traditional job, the perks of being a permanent employee, or even a regular salary at times. But you will have the chance to significantly increase your income, have far more control over your working life, and a choice of assignments that best suit your ambitions. It’s an opportunity to enjoy a wide variety of working environments, colleagues, and roles.
Once you take the initial leap into the world of contracting, the majority of the journey becomes administrative. To start, we would recommend reviewing market demand for your skill-set before taking the plunge. As a general rule, there isless need for general support skills and more demand for specialisations – consider whether your experience and education allow you to stand apart from others in your field, you may well be an expert without even knowing it!
Around 20% of contractors work directly for their end-clients and the remaining 80% work through recruitment agencies. When searching for a suitable assignment there are many approaches to consider. You could use contracting job boards, apply directly to recruitment agencies (allowing them to find placement based on your skills), ask to be recommended for a position by someone you know, even transfer from a permanent to contract arrangement with your current employer.
The contracting industry is largely fueled by recruitment agencies who are experts at placing skilled contractors into suitable roles efficiently. The easiest way to present yourself as a first-time contractor is to register with several recruitment agencies at once. Please remember that there are a few recruitment agencies dedicated to specific job sectors (do your homework before you start applying). Registering with multiple agencies that specialise in your chosen sector could help you find a more suitable contract role quicker.
The search can be challenging at first, especially if you don’t have a large network of contacts. You can grow your network by staying in contact with colleagues, putting your CV on job sites, and updating your LinkedIn profile page to reflect your career aspirations.
You don’t need to be unemployed to start searching for your first contracting role, but you should consider that the majority of clients will want to interview candidates immediately and some roles may have a short notice period before the start date. You will be in a more flexible position if you have already left your previous role or you’re able to come to an arrangement with your current employer (if they support your decision to become a contractor).
There are no strict rules in this arena and some end-clients will be prepared to wait for the right contractor to fulfill a role.
The contractor industry is extremely fast-paced and competitive by nature, so if you find a great opportunity be prepared to act quickly… or someone else will.
The top two methods of payment for contractors are via an umbrella company or through your own limited company.
Operating your own limited company may mean that you may have a slightly higher take-home pay than an umbrella company employee, but you will be responsible for all administration, invoicing and paperwork duties associated. (It’s also important to consider point #5 on our checklist).
Choosing to contract with an Umbrella Company means that you rid yourself of the administration and paperwork, leaving you to do what you do best; contracting. An umbrella company works quietly in the background to support your contracting lifestyle, they generally offer same-day payments, hassle-free service, and rock-solid compliance.
Every single contractor, recruitment agency, and umbrella company should now be fully aware of IR35 legislation.
A brief overview: If your contract falls inside IR35 you will need to pay Income Tax and National Insurance as an employee. If your assignment is outside IR35 you can be deemed as genuinely self-employed and can enjoy increased levels of control when it comes to tax planning.
The IR35 rules, which were first introduced in 2000, set out to reduce or remove the practice of so-called ‘disguised employment’. A watered-down example would be that an individual leaves their job as a permanent employee, only to return as a limited company contractor for the sake of tax efficiency. The individual in question would typically carry on performing the assignment in an employed manner, under complete control and direction of their client, i.e. disguised employment.
Contracting through an umbrella company means that you do not need to worry about IR35 as you would be in a fully employed (yet flexible) position. This leaves you with freedom of assignment choice, regardless of IR35 determination.
Your IR35 status will vary from contract to contract and it’s not your determination to make, rather that of your end client. If you conduct your work through a limited company and your contracts are deemed to be inside IR35, the financial consequences can be significant.
Remember, if you choose to contract as an employee of an umbrella company, IR35 will no longer be an issue. Please do your research or get in contact with us should you need further clarity on IR35.