1. Is IT contracting the life for me? An overview

So you want to become a contractor?

What's it all about? Being an IT contractor is very different from being employed. There are more risks, but there are also a great many advantages. You are a contractor if you work for somebody else for a fixed period under a fixed contract to help them complete a project. You will effectively be selling your skills and time, and will usually be paid by the hour - although IT contracts with a fixed price to complete a fixed project are also possible.

What's in it for your client?

There are several reasons why companies like to use IT contractors.

For example:

They are usually more flexible over hours etc. than permanent staff;

They are easier to hire and fire - and are not a long term commitment;

They provide skills the in-house team may not have. The other major reason companies like IT contractors is that they save money. If a company employs you they have to pay sick pay, holiday pay, redundancy pay and employer's national insurance. But if they use you as an IT contractor they don't have to pay any of this - so they can usually afford to pay you more per hour and still spend less money!

What's in it for you?

Every contractor has his or her own reasons for liking it. Some of the most common are:-

Being your own boss - which can be extremely enjoyable and satisfying;

More money - Contractors are usually paid more than employees working alongside them on a project;

Freedom - e.g. IT contractors can choose when and where to work,when to take holidays etc.;

Variety - by moving from contract to contract and company to company, contractors usually develop very varied experience and an impressive CV;

Less tax - IT contractors who take professional advice can also greatly reduce the amount of tax they pay.

The pitfalls

Of course, were contracting an easy and completely safe way to earn a living most people would become a contractor. Some skills are not suitable for IT contracting (e.g. where the employer needs a stable workforce and the customer expects to deal with the same member of staff each time). But even if your skills and experience are suitable for contracting, it may not be right for you. Only you can weigh up the pros and the cons.

Some of the disadvantages you will need to consider include:-

Less security - IT contractors are not protected in the same way as employees;

Uncertainty - there are usually no guarantees of another contract when your current contract ends;

Hassle - because you will be running your own business, there will be forms to fill in, rules to obey and accounts to keep;

You will be on your own - as well as sometimes being lonely, being your own boss means, for example, that nobody will pay you when you take a holiday or are ill.

What qualities make a successful contractor?

The successful IT contractor:

1 Has the ability to go from site to site, adapting to the different conditions, the different tools, the different culture, and the different ways of working. Those that can't do this will struggle, especially as a first timer in IT contracting

2 Has the ability to get on with other people and make new friends easily, or at least the ability to make new working relationships easily

3 Has a willingness to help other people without criticising their mistakes. IT contractors have a wealth of knowledge of how things are done at different sites, and it can be very useful for both permanent management and permanent employees to be able to tap into this reservoir of knowledge

4 Has the ability to know when his or her advice is wanted and when it is not. Sometimes, or at some sites, they'll want your advice about how to do things and sometimes they won't. A successful contractor will be sensitive to this, and not try to force unwanted advice on an unwilling audience. If it is clear that they don't want your advice, just get on with your job or go elsewhere

5 Is always aware of a potential business at a client's site. Any problem that the client has is potential new business for the alert contractor. The successful IT contractor may even have bid successfully to win pieces of work at various sites, e.g. to run part or all of a project, or to maintain an area of the system

6 Looks for their own work rather than just lets agencies look for them. That way they have the opportunity to tout for new business without having a restrictive agency clause in their contract which prevents them approaching the client for new work

7 Will have taken his or her opportunities to pick up extra bits of work for multiple clients over the years, and, therefore will be as far outside IR35 as you can get

8 Will have a database of potential clients, with those he or she has worked for before, near the top of the list. He or she will have permission to contact those potential clients every so often, say three months or so, and will do so

9 Will keep potential clients up to date with contact information when it changes, e.g. address, phone number and email address, so that there is never a situation when the client is desperately seeking him or her for work in an area of the system where he or she has knowledge, without being able to find them

10 The successful contractor will have such a good reputation for his or her work, and have such a good rapport with their clients that their various contracts are renewed whenever the client is able, or is contacted again when clients need to have work done on an area of the system where the contractor has expertise

The next step

If contracting is still attractive to you, and you believe you can cope with the disadvantages, the next step is to do some research. Don't give up your job (or spend money setting up a company) until you are sure that there is a market for your skills as an IT contractor. At the very least you will need to talk to the specialist contract agencies in your industry to see what kind of contracts might be available, whether you are suitable for them, and how much you could earn. You will also need to look into how to operate your own business including forming a company online, getting professional indemnity insurance and a business bank account. 

Further reading: IT Contracting First Timers