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9 Things You Must Consider Before Becoming an IT Contractor

Written by Sam Mikkelsen
Associate Director

When I first started working in Contract Recruitment, England was about to host its first major football tournament since 1966 and Alan Shearer became the world's most expensive player when he moved to Newcastle United for £15 million.


Just as the world of football has changed dramatically, so has the UK's IT Contracting marketplace, contracting is a career choice that can offer an amazingly rewarding work life balance. However there many things to consider before making the switch.

Below I have tried to highlight what I see are the key factors that really count when it comes to making this decision.

1. THE MONEY


The first big thing to consider if you're going to become an IT Contractor is money. With more job risk, am I going to earn more?

Many people decide to get into contracting because of the money, but should this be your main driver?

Generally speaking, contractors do earn more than their permanent counterparts, but it is worth considering that you might find yourself between contracts for at least a week at a time, when switching contracts.

Add in the fact that you don’t get paid for holidays with family or bank holidays, this could add up to 4-6 weeks per year where you might find yourself not working and not earning.

Other expenses that also need to be taken into consideration would be Umbrella Company fees and if you set up a Ltd Company, your accountancy fees, PI and Public Liability Insurance, travel expenses, website set up, laptop and mobile phone.

2. READ THE TAX REGULATIONS


Two of the most important changes to tax law for contractors have come in the last few years for IR35 assessment and changes to Umbrella Company contractors claiming travel and subsistence expenses.

In April this year the Inland Revenue will bring in new reforms for off-payroll contractors that are working for a Public Sector organisation and this will affect you if you decide to operate your own Ltd Company.

HMRC introduced IR35 in 2000 to combat disguised employment, but since then assessments were random and the contractor was able declare whether they fell 'inside' or 'outside' of IR35.

From April 2017 if your contract is with a Public Sector end client, then the responsibility for assessing your IR35 status falls with the Public Sector end client. If it is determined that you are operating ‘within’ or ‘inside’ of IR35, then the recruitment agency will be responsible for deducting additional Tax and NIC’s at source.

How you physically operate with the client can affect your ‘IR35 status’. Factors such as, but not limited to, the actual place you work from (home or on site), whether you use your own equipment, whether you work with multiple clients at the same time and whether you are under supervision, direction or control by the client can all determine whether you fall 'inside' or 'outside' of IR35.

Changes to 'Travel and Subsistence' (T&S) will affect you if you decide to run through an Umbrella Company. This will limit whether you can or cannot claim any expenses for travel and subsistence whilst performing the contract. So again careful research and due diligence should be done before taking on any contract.

Our team are always available to offer some guidance, but we advise you take tax advice from a qualified accountant or use a reputable Umbrella Company. We advise all of our contractors to choose an Umbrella company that is an accredited member of the FCSA.

3. CONSIDER JOB SECURITY


It’s safe to assume that there is less job security in a contract position than permanent role, and this should be a key consideration in your decision to become a Contractor.

A Contractor is expected to deliver an instant impact. You must be able to establish yourself in the project role almost immediately and deliver instant results.

Permanent hires on the other hand are made by companies who are looking to grow their business long term and therefore more time is taken to deliberate the hire and ensure the new employee has time to settle into their new role.

Furthermore, one of the reasons why a company will choose to engage with a Contractor is down to the nature of the project.

The organisation may have won a new contract with a new or existing client and a Contractor offers immediate access to skills that they cannot find or struggle to recruit for permanently - which is on of the reasons Contractors are able to command a higher rate of pay.

The flip-side, though, is that through circumstances that might be out of your control - like budgets being pulled or clients changing their mind, might result in having contracts cut short or terminated at short notice.

This unpredictability makes working in Contractor roles difficult for future planning. We recommend only considering a contract role if you have ample savings or measures in place to take care of your essentials (mortgage, bills etc) should an upcoming contract fall through at the last minute.

4. CHOOSING YOUR RATE


The key here is to not under sell your self but also be competitive and flexible when necessary.

So how do I set a daily rate?

If you are taking on your first contract it might be worth considering taking a slightly lower day / hourly rate than normal to get you on the first rung of the contract ladder.

The rates that you can demand for your services can also differ considerably, depending on your experience and skills. According to Jobs Stats Website 'IT Jobs Watch' the top three, ‘In Demand’ programming languages in the UK are SQL, JavaScript and C#, closely followed by Java, Python and PHP. As demand rises for these skills, so too does salary and rate expectations.

Thoroughly research the market, talk to colleagues, visit contractor forums, look at sites like the 'IT Jobs Watch' website and run some basic searches on your skill set and see how many jobs are being advertised and you will get a good feel for average daily or hourly pay rates.

5. CV AND INTERVIEWS


Prepare two versions of your CV. One version that is brief and lists the projects you have worked on and a version that is more comprehensive.

Even your comprehensive version should still be pleasing on the eye and describe the projects with enough detail but also give you something to discuss at interview stage.

Also be prepared to write specific addendum's to your CV based on the project description for the contract you are applying for.

We find that most organisations look for Contractors who can demonstrate flexibility and adaptability. They want to see that you have a history of successful projects and are able to adapt quickly. So it is important to mention project successes and how you made an impact or helped the client deliver.

Be prepared to interview at short notice, either over the phone or face to face. It isn’t always easy but the more flexible you can be for interviews the better.

At interview be prepared by reading up on the company, ensuring that you understand the project and have a copy of the job specification to hand. Take a copy of your CV with you and check to see which version your agency has sent to the client, so you can talk through your CV together. Prepare to expand on your experience and remember those talking points around your achievements and what was the positive result for the client on each of your previous projects.

If you are a Web Developer or Software Engineer be prepared to have example code available for them to review or use GitHub as a central source for clients to review any personal projects you can showcase.

Having references already written up in advance will also help when you are being selected and being able to take that with you to an interview could be the difference between securing a contract or not.

One last thing to remember at an interview is to finish off with a positive statement and cover off any objections that they might have. If you feel confident that the role is still something you can deliver on and that you are keen, saying something like this will really help. “I feel 100% confident I can deliver what you are looking for from this project, is there anything else you need to know from me, or am I able to clarify anything else that will help you make a decision?”

It goes without saying, but remember that first impressions count for everything, so be polite and courteous to everyone you meet, plan your journey to always arrive at least 10-15 minutes early. Unless specifically asked, always dress smartly, clean and pressed suit, shirt and always, always polished shoes!


6. SICK PAY & HOLIDAYS


The short answer is, you won’t get any!

Depending on the nature of the project and duration, most clients prefer you to not take too much time off during the project, for obvious reasons. So consider this when you book family holidays when your current contracts come to an end, as this can affect your chance of securing that next role.


7. WHEN SHOULD YOU START LOOKING FOR YOUR NEXT CONTRACT?


Some people say that certain times of the year are busier than others but overall, there’s no right or wrong time. Organisations can have projects come live at various times of the year and there are so many variables which affect this that it’s impossible to predict.

As for your notice period, if you have one, it’s going to hamper your chances. So if you are taking the leap, it is worth considering handing your notice in before securing a contract so that you are available to start immediately.

Again, it’s the question of who would you rather recruit? Someone who has just finished a contract and is therefore immediately available or the person who has to hand in a 1-4 week's notice after the recruitment process?


8. HOW TO FIND YOUR NEXT CONTRACT


It's worth speaking to IT / Technology Recruitment Agencies that have a specialist contract division and consultants who specialise in the technology or vertical market you work within.

If you have a niche skill set, being able to speak to a Recruitment Consultant who speaks your tech language and understands the type of roles your skills would be suitable for helps you secure more relevant opportunities.

As I've already mentioned, try be flexible on when you can interview and start. Contract roles can often move very quickly. I've seen contractors secure a project just because they could interview that day and start the following day, compared to someone who might have been technically stronger on paper, but required two days notice for interviews.

By registering with us, we can let you know about upcoming contract opportunities as your contract comes to an end.


9. GET THE SPECIALIST SUPPORT YOU NEED


If you choose to take a contract through a Recruitment Agency, it is worth checking what support they offer whilst you are on contract. Some agencies have a specialist in-house contractor support team in place which understand the unique requirements of a Contractor and can offer additional help and support.

Oscar's Contractor Care Team is uniquely placed to help guide you through the whole process. Certified Accounts people ensure your payments are made on time and are able to give expert advice on tax regulations.

The rest of the team have also dealt with Contractors for a number of years and are dedicated to making sure your contract goes as smoothly as possible - from dealing with any issues between Contractor and Client to sending you a little gift when you have began a contract.

In Summary...


Clearly there's lots to consider and some of the information detailed above, may seem quite daunting. I hope you haven’t been put off taking the leap. Being an IT Contractor can be incredibly rewarding and exciting, but it isn't for everyone and I trust you have found the above a transparent and honest overview of what to consider when looking to move into IT Contracting.

For the right person, contracting is an exciting career choice, offering greater variety of work and in some ways a perfect work life balance.

I’d love to hear what you think, especially if we have missed something. Feel free to drop me an email sam.mikkelsen@oscar-tech.com.

Where Next?

Contact our Contracts Team
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