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You’ve been working in the IT corporate world for a while now, earning money for someone else, putting in all the long hours for not much in return - so is it time to venture into the world of contracting?
Life as an IT contractor can be both exciting and rewarding, along with the flexibility to be your own boss and to establish a working pattern that fits around your personal lifestyle. No more 9-5 office hours but a way of working the hours that you want to work.But starting out as a contractor isn’t the life for everyone and moving away from employment to contracting is something that needs to be carefully considered.
Here are a few points to think about when considering an IT contractor career:
Do you have what it takes?If you’re considering becoming an IT contractor, research is the key to see whether you fit the bill. Is there a market for your skills? Is there opportunity for you make a living in this area? Research online to see what rates contractors are charging in your local area, or whether you might be better off travelling to a bigger town or city. You can gain market strength by looking at contractor job sites to see the types of salaries you can expect.
Do you have the capability to work for yourself and the strength to keep going in good and bad times? Do you rely on other people or are you someone who can project-manage and time-manage well?
Go it alone or work with an agencyThere are two ways of looking at working as a contractor and they are a) working directly for your clients on a contract term by creating your own business, b) working for an agency. Both have their benefits and it will depend on what it is that you are looking to achieve as an overall outcome. If you want to go it alone and set up your own business, you’ll need to think about the details behind running a business, i.e. accounting.
Set upWith this in mind, you can set up as a sole-trader, freelancer or Limited company. Most IT contractors will choose the Limited company option, rather than becoming a sole-trader. This is due to the legislations that accompany contractor workers and your clients will be liable for certain employment rights if you do not work via a company structure.
Contracting via a limited company is typically more tax efficient than working via an umbrella company. Limited company contractors usually take a small salary which minimises PAYE and NIC liabilities, and then withdraw the remainder of their income in the form of dividends. National Insurance Contributions are not payable on company dividends.
Setting up a Limited Company is not a difficult process (2020 Accountancy can help) and can be a good choice for those people wanting to own their own business and see it develop into new or bigger entities. It will allow you to have complete control over your financial affairs whilst being the most tax efficient trading option to maximise your income.Typical take-home pay for a contractor operating through a Limited company is approximately 75-90% compared with 60-65% for other options or working through an agency.
When starting out in your first contract, it’s advisable to aware of the implications of IR35 - setting up as a limited company will be best for you if you plan to contract long term, you fall outside the IR35 rules and estimating that your earnings will be higher than average. Having a limited company will allow more flexibility long-term.
Finding a contract
Social mediaYou could use social media and online networking. LinkedIn is a great place to make people aware of your skills and that you are available for work. Join groups and discussions where you ask enquiries for contracts in your area. LinkedIn is extremely popular for IT contractors and if the professional social platform of choice for many companies looking to take on workers. Ensure that your LinkedIn profile is up to date with all relevant experience and qualifications.
Jobs boardsIt’s always a good idea to keep your eye on jobs board online and can provide potential contract openings if not advise you of the skills you would need to secure your ideal contract. Reading available jobs will give insight into what is required for certain roles and enable you to get equipped and gain experience if you’re looking into certain areas that you’ve not ventured down before.
Personal recommendationsBeing referred is an honour and a privilege. Knowing that you’ve made an impression on someone who is then willing to recommend you to another company is a great feeling. Recommendations speak volumes and are very valuable and going down this route will enable you to skip agencies and go directly to the client.
Whatever you choose to do, make sure that you are ready to take the next step into becoming an IT contractor. If you’re like further advice on the steps to get started, we’d be happy to help, simply get in touch!