There are several character traits you need to possess (or improve upon) to become a successful long-term contractor. In addition to the prerequisite business and technical skills,
IT contracting isn’t for everyone.
According to a recent estimate*, there are around 100,000 IT / Telecoms contractors in the UK – representing around 10% of those working in the industry.
For the majority who make the move, contracting proves to be a wise and satisfying move. However – like all careers – there are likely to be challenges along the way.
Here are some key things to think about if you’re considering making the move into the world of contracting.
Are you a self starter?
Contractors are responsible for sourcing new contract roles and dealing with renewals. It can take a while to adjust to this new way of life, particularly if you have worked for the same employer for a long time.
New environments
Contractors are expected to join projects and rapidly get up to speed with the client’s requirements. Do you have the ability to acclimatise to new groups of people and locations quickly?
Dealing with finances
Whatever business structure you work under (limited or umbrella company), you need to spend some time dealing with your financial affairs and budgeting.
If you go down the limited route, a specialist accountant will take away most of this burden for you. Above all else, make sure that you meet your tax obligations in full and file on time.
The administrative burden is lower for umbrella employees, however, the limited route is more tax efficient for most individuals.
Contingency Fund
Contracting can bring its own share of uncertainties, particularly during recessionary times.
From the start, avoid the temptation to spend all your contract earnings. Set aside funds for a ‘rainy day’, when you may find yourself on the bench.
How long could you survive without contract income?
Try to set aside at least six months of living expenses in a savings account. Especially now that you can finally earn some interest!
IR35
If you work via your own company, read up on IR35. This is a notorious piece of tax legislation that has been a thorn in the side of the industry since its implementation in 2000.
To remain ‘IR35 free’, you must not be merely a ‘disguised employee’ (i.e. just a normal employee who has set up a company to reduce their tax bill). Find out more about IR35 here.
Networking
Most contract roles never even reach the job boards, or recruitment agents.
If a vacancy comes up in a project, contractors working in the team are often asked if they know anyone suitable to fill the role.
For this reason, keep in touch with old colleagues. Thanks to LinkedIn, networking has never been easier.
Skills
Alongside the traditional economic rules of supply and demand, your skillset is your most powerful tool if you want to secure the most competitive rates.
As a contractor, it is your responsibility to keep your skills up-to-date, and to pay for any training courses yourself.
Also, make the most out of online learning – which is ubiquitous these days.
Negotiating
Although you will undertake contract work on a fixed-price basis, there is usually some room to manoeuvre when setting your initial rate.
Assess your situation carefully when pushing for a higher rate, as your position of strength will depend on many factors.
These include: the level of competition for the role, the economic climate, and how much the client wants to hire you above other candidates.
Become an Expert
Contractors are hired for their technical expertise, so you will be expected to demonstrate your abilities from the off.
Although the temptation may be to keep your knowledge to yourself and just get on with the job, you can gain kudos and respect by offering help and guidance to colleagues.
If you develop a reputation as the ‘go-to’ contractor, renewals and word-of-mouth recommendations are more likely to come your way in the future.
Flexibility
This is a very important trait of the successful contractor.
Even if your heart is set on a particular type of role, or location, the whims of the contracting market can always scupper your plans.
Be prepared to travel, and take on contract work which may not fit your ‘ideal’ in terms of interest, industry or your skillset.
Are you ready to become a contractor?
If you feel you can work happily as a contractor, given the pros and cons involved, browse our other guides.
Our site covers everything from deciding upon the right business structure to operate under (limited or umbrella) to tax and legal issues.
To get started, try our 10-step guide to starting up as an IT contractor.
* Source – Contract Eye – Jan 2024.
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