How to become an engineering contractor

With today’s job market arguably more dynamic than ever, we’ve seen the continued rise of contracting and freelancing across many industries, including its increased popularity within the engineering sector, writes Matthew Reilly, managing director of Osprey Engineering Solutions.

Contract engineering in 2023; what does it look like?

Employing more than six million people across the UK, engineering as a sector encompasses a vast range of roles, ranging from mechanical and civil engineers to electrical and environmental specialists.

But interestingly, the UK engineering industry continues to face a significant skills shortage, with more job openings than skilled individuals available.

And while there is often a tendency for businesses to lean towards permanent hires, there are still many instances where hiring a contractor makes the most sense, and if played correctly, there are many benefits for you -- the professional candidate -- in choosing to become an engineering contractor in 2023.

Full-time engineering jobs versus engineering contracts

Often within the engineering sector, businesses which hire permanent employees tend to do so to retain both niche skill-sets and the knowledge of technical products or projects. This is particularly the motivation of SMEs.

When an engineering employee or contractor leaves the organisation however, this sometimes-unique knowledge is at risk of being lost.

Despite this, whether motivated by heavy workloads or the inability to find suitable replacements on a full-time basis, there are ample instances where businesses seek out the expertise of contractors, with such temporary roles spanning Design and Project Management, through to Service Engineers and Shop Floor Technicians.

Meet the big-names requiring contractor engineers

These four and many more areas of engineering contracting are regularly hired into by BAE Systems, Rolls Royce, JCB and in the Oil & Gas sector, Wood Group. Generally speaking, the larger the outfit or operation in the engineering sector, the more plentiful the contract opportunities.

We believe the nature of engineering as an industry and its continuous demand for highly skilled workers plays into contractors’ hands, as it can be very financially advantageous for individuals possessing strong technical knowledge to set up as an engineering contractor.

How much money can I earn as an engineering contractor?

In terms of pay, contract rates are typically far higher than those of permanent employees. For example, top-tier contract Design Engineers can often earn twice as much as their senior, permanent counterparts (for whom an annual salary of £40,000-£50,000 is typical).

In addition to higher take-home pay, engineering contractors also get to enjoy more variety in their work across a more diverse range of projects with different companies. Or, if in between contracts, they can exercise their freedom to take time off -- a luxury not usually afforded to permanent employees with limited vacation days.

The sharp end

However, the benefits of working as an engineering contractor can come at the cost of increased risk and less job security, with periods ‘on the bench’ such as if contracts become scarce.

It’s therefore important to consider how you’ll manage your funnel of contract opportunities. To that end, while it’s critical you possess a solid understanding of your key engineering contract skill, and the industry you work in, building a strong network of hiring managers and businesses that may require your services is equally important.

This is where partnering with the right engineering recruitment agency and executing a considered networking strategy with hiring managers can greatly aid in helping you both secure contracts and better understand the full scope of suitable upcoming projects.

Structure and set-up as a contract engineer

With all this addressed, your next crucial step is to explore some of the practicalities of setting up as a contract engineer, in terms of the structure which you’ll operate through.

You’ll need to choose whether to establish yourself as a limited company; set up as a sole trader, work through an umbrella company, or arrange an agency PAYE agreement. Each has its own benefits and potential drawbacks.

For example, setting up a ‘LTD’ company offers various tax efficiencies and may also project a more professional image to clients, often allowing you to attract and win more business. But the paperwork, admin and compliance risks of running an incorporated business are heavier.

In contrast, setting up as a sole trader and working through an umbrella company are easier routes to get started as an independent engineering consultant, with the umbrella route ideal if you want your tax administration taken care of. But agencies might insist on their own umbrellas and might not engage sole traders at all.

Influencing factors

Ultimately, there is no ‘one-size-fits-all’ answer to the question of what structure is best as an engineering contractor. The most appropriate route will vary in accordance with your unique position, including factors such as your projected earnings; your appetite for risk/admin, and how many businesses you intend to work on behalf of.

As a newcomer to freelancing as an engineer, your decision on how to set up may also be influenced by how much upfront investment will be needed. For example, many contract engineers will manage their workload from a home office. Such an endeavour may require an upfront investment in CAD software and a suitable PC to deliver on complex projects. How you acquire these funds as well as potential tax savings are all factors to consider in the decision of how to set up for engineering contracting.

With your now structure in place, the next step is to go about attracting and landing your first engineering contracts.

No prior (permanent) experience necessary

You don’t even necessarily need to have worked permanently in the industry prior to stepping into a career as a contractor. Providing you have a unique enough skill-set, the challenge will simply be putting yourself in the best position to find relevant opportunities. As mentioned, these can be found through agencies, job boards, and networking within your sector.

Attending and introducing yourself at industry expos directly to relevant companies is an excellent way to help build the foundations of a robust network, particularly if you’re interested in direct-to-client opportunities.

Once I’m up and running, how to differentiate myself as an engineering contractor?

If you want to stand out as engineering contractor (for the right reasons), my recommendations are:

• Thoroughly understand your desired contract or professional opportunity;
• Invest in your tools and skill-set to demonstrate your commitment to potential clients, and;
• Ensure you possess transferable skills that can be utilised by a wide range of engineering companies (mainly so that you’re able to remain agile and adapt to your offering to different commercial opportunities).

Excelling as an freelance engineer looks like this…

Finally, to stand out from the competition as an engineering contractor, I’d advise you to recognise your own strengths and weaknesses, so you remain honest to yourself and potential clients. Typically as a contractor, end-clients will expect you to be highly competent and make a swift impact -- compared with permanent hires, so there is nowhere to hide any gap in your skill-set because you’ll be expected to hit the ground running.

With annual headline pay of between £80,000 and £100,000 for the very best, becoming an engineering contractor can be a financially-rewarding and professionally fulfilling choice for technically-minded professionals. It offers flexibility and varied projects, but it also demands competence and a proactive approach to securing contracts if you want to succeed in the long term.

What are you waiting for?

You’ll also want to account and prepare for periods of downtime between contracts, much as contractors in IT and other industries have to do. With the UK engineering sector continuing to thrive however, there remains the need for contractors with technical skill-sets. By being well-prepared, building a strong network, and remaining resilient, you will have laid the foundations to embark on a successful career as an engineering contractor.