First Timer's Guide to Contracting
Is it right for you?
What makes a good contractor?
Money
Being your own boss
Tax
Are there disadvantages
Setting up as a contractor?
Writing your CV
Selecting your agencies
Some other pointers
The Interview
Many people are pointing to the 'flexible workforce' as the way ahead in employment. Increasingly companies are seeking to take on specialist skills when and where they need them, rather than recruiting them as permanent staff.
Also, there is a growing shortage of skilled IT professionals, which means that freelance skills are constantly in demand, even during times of recession.
This guide aims to give you a brief insight into life as a contractor, together with an overview of the commitments and stages involved.
But is it the Right Move for You?
Although contracting is becoming a more and more popular way of working, it doesn't suit everybody. Read this guide, talk to colleagues or established contractors, and only make the decision once you feel confident that you have all the necessary facts in front of you.
Notice:
The information contained in this document is necessarily of a very general nature and is not intended to be applicable to every situation.Should you require further information, or guidance on your specific situation, contact your local Modis office.
What Makes a Good Contractor?
Look at the following list of key attributes of the successful IT contractor.
- At least two years' commercial IT experience
- Marketable technical skills
- A flexible approach to work
- Well developed interpersonal skills - a diplomat
- Ambition
- Good organisational skills
- Entrepreneurial streak
- Coolness under pressure
- Adaptability - can fit in with different environments and cultures
- Open to change
If this is you, or mostly you, it could be the right move!
Money
Contractors traditionally command much higher rates. This is a two-way benefit.
For the employer, they save on most of the statutory payments to permanent staff (pensions, sick and holiday pay, redundancy etc.), and gain a great deal of flexibility in the make-up of their workforce.
For the contractor, the higher rates can offer a better standard of living. The lack of job security can be offset by better insurance policies, pension or savings schemes but the choice is yours and not your employer’s.
Being Your Own Boss
Being in charge of your own destiny is something that is enormously satisfying for many people. It also means that you can remain unaffected by office politics, leave behind anxiety over change, and map out the right career path for you.
Tax
A well organised contractor may be able to accrue significant tax benefits. Your accountant (see later in this document) should be able to advise on the most advantageous set-up for your work.
Are there disadvantages?
Administration
Because you will be running your own business there will inevitably be paperwork to attend to. It is therefore vital to be well organised - or to employ the services of someone who can organise you!
No Job Security
Such is the demand for most IT skills that this should not be an issue, but you should realise that you are not covered by current employment legislation.
No Holiday or Sick Pay
Another reason for higher rates - they compensate for the times you are not working. A good health insurance policy may be advisable in case of long-term incapacitation but you may be able to claim sick pay back through your company. Raise this question with your accountant.
Accountancy Services
It is highly advisable to find a good accountant straight away. There are many who now specialise in the IT contract marketplace, but you will of course be required to pay for their services!
But a good accountant will often pay for themselves in terms of additional savings or tax benefits, as well as bringing you peace of mind.
Setting up as a contractor?
There are four different ways in which you can work as a contractor in the UK and mainland Europe.
Limited Company
The most common and recommended approach - and it's much easier and quicker than you might think! Our advice would be:
1. Get a good accountant! They can help you through this procedure and do most of the work on your behalf. They may carry out a number of the next steps for you.
2. Set up the company. Look in the Yellow Pages for company formation specialists. You will be asked to fill in some forms and they will probably buy an 'off the shelf' company for you. After about a week, and an outlay of around £160 - £230 you will have the papers of ownership.
3. Maintain good accounts. Keep details of all expenditure and income. As a contractor you may well have to register for VAT which your accountant will be able to help you with.
4. Issue invoices for payment. You will need to produce headed stationery for this. List the work done and the appropriate charges.
Self-Employed
Not recommended. Most agencies in the UK and mainland Europe will not deal with self employed people as they are required to deduct PAYE and NI at source. The Inland Revenue too can be most discouraging and over attentive to self-employed people.
Agency Employee
Whilst this may seem an easier option, in effect working under a fixed term contract for the agency, the agency is required to deduct PAYE and NI at source. So you would be working as a permanent employee, but you will not enjoy the security of permanent employment. You would however have full Social Security benefits.
The Co-Operative
By doing this you avoid the need to set up your own company, or if you already have one, the Co-Operative can run it for you.
The Co-Operative, itself a limited company, can handle your tax, VAT payments, NI, invoicing and receipts in return for a weekly or monthly service charge.
Writing your CV
There are many lengthy books written on this subject but we have summarised this within our Web site.
Selecting your agencies
For various legal reasons, most employers will only employ contractors through an agency. It is vital, therefore, that you make agencies aware of your availability. But selecting the right agencies is very important.
Choose the number of agencies you believe you can comfortably manage - 4 or 5 is a good number to aim for (any more and you may get too many calls duplicating vacancy information or questions).
A mix of large, well-established generalist agencies (such as Modis) with one or two specialising in your field should ensure you are covering the market well.
Some other pointers:
Look for a REC Computing Division Member
The Recruitment and Employment Confederation (REC) is the watchdog of the agency marketplace. The computing division includes a large number of companies who have agreed to abide by a strict code of conduct, which governs all of their activities. This code is a guarantee of professional and ethical conduct by the agency. Modis can supply you with a copy of this code should you wish to see it.
If there are contractors on your site, ask them who they would recommend. Often word of mouth is more accurate than glossy advertisements, and working contractors can often provide you with a very down-to-earth view on the market.
Speak to the Agency
How do they answer the phone?
Do they understand you and your requirements?
Do they seem to understand the IT market?
Do they seem keen to work with you?
Are they willing to meet you to discuss your requirements?
Do they guarantee not to send out your CV without permission?
Get to Know Them
If there seems to be an individual at an agency you 'click' with, cultivate the business relationship. It may prove invaluable! They may run social events from time to time. Take the trouble to go (at the very least you'll be fed and watered) and meet them. It helps all parties to put faces to names.
The Interview
We have put together an Interview Tips section within the Modis Web site under Candidates > Career Resources, please take the time to read this if necessary.
Call your agency as soon as possible to let them know how the interview went and what your reaction was. Try to be as decisive as possible:
- Are you interested?
- Are there any questions left unanswered?
- If you are offered the role what will you say?
It may well be that the client has already called the agency with his/her decision.
If you are offered the role you may well have very little time to make up your mind. The agency, naturally, will be keen for you to say yes, but make sure that you are certain before giving a positive response. One of the worst 'crimes' a contractor can commit is to say yes and then go back on his/her word when something else comes up. If you decline the role, give the agency your reasons. Feedback is vital to ensure you retain the goodwill of the agency and employer.
But all being well though, the job is exactly what you are looking for and you are more than keen to start.
The agency will then ask you to sign the contract committing you to the assignment for the dates agreed. Sometimes, where time and distance allow, the agency representative will visit you to talk you through the deal. Make sure you have read and understood the terms and conditions before signing (for example, what happens if the job goes wrong? Do you have the option to give notice?)
As well as yourself, you will also be representing the good name of the agency on site, and they may well have their own code of conduct for their contractors. Take the trouble to understand what the agency expects of you. Also ensure you know what is expected in terms of timesheets, invoicing, and performance review periods.
Once you have signed the contract you are committed to the assignment.
GOOD LUCK!