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5 things to consider before becoming a contractor

Contractors are a growing part of the UK economy, contributing an estimated £109 billion a year

With companies looking to create more flexible workforces and some industries experiencing significant skills shortages, there are many opportunities for contracting work.

But it’s not for everyone – so what do you need to know before becoming a contractor?

Assess your skills

People who work in IT, nursing, finance, management consulting and oil and gas extraction are likely to find themselves in high demand, but there are opportunities in many industries. Think of yourself as a product for a moment: what skills do you have that are uncommon in your sector? Are there any skills that your company is crying out for? Can you get training in your permanent job that will make you more attractive?

Think about your personality

Being self-employed means that there’s no one to tell you what to do. If you want to take time off, you can. The benefits are obvious, but there are disadvantages that aren’t immediately obvious. Contractors need the confidence to make sure they don’t overload themselves – saying no to a client is not always easy. It’s also important to maintain and improve your networks, but some people find it can be difficult to justify ‘non-billable time’ to themselves.

Figure out who your clients will be

Many people who start contracting will end up working for their old employer. It’s an easy place to start: you know the people, the culture and the demands. It’s important to diversify and figure out where your next jobs will come from. Contact a recruitment consultant to get some feedback – they’ll be happy to help as you’ll be a potential source of income for them.

Understand the legal implications

Becoming self-employed means taking more responsibility for your tax affairs. For some contractors, this presents the opportunity to set up a limited company. By selling your services through your own company, you can take advantage of tax efficiencies and expenses that employed people cannot. Usually, this means paying yourself via dividends and taking a small salary to make use of the personal allowance. But make sure you are truly self-employed as HMRC regularly investigates cases of ‘hidden employment’ – known as IR35 investigations – to make sure large companies are not trying to avoid their tax responsibilities.

Decide when to give notice and what you want to do next

Timing your departure is an important part of becoming a contractor. Get that training done. Make sure you have support of your clients and line up a contract if you can. Speak to other contractors in your field. And make sure your financial affairs are in order. But it’s also worthwhile thinking about an end goal. If you’re looking to do contracting work before retirement, speak to a financial advisor. If you’re looking to move back into a permanent job at some point, make sure you keep investing in your skills and stay relevant to your market. For more advice on making the switch, read the in-depth permanent work to contracting guide from ContractingWISE.

Article by Jon Millar, Director, Contracting Wise

 

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