Is contracting right for you?

11/10/2016   Industry insights  

On paper, a huge daily rate sounds great, but is the grass greener? Being an IT contractor is very different from being permanently employed. Contracting can perhaps be a little riskier, but with that comes some great advantages (and disadvantages). Make sure you have armed yourself with all the information before you make the decision to turn to the contract world... 

The Money

It’s no secret that you can earn a lot more as a contractor than as a permanent employee, with a day rate often a lot higher than a comparable permanent role. You may also be able to benefit from tax benefits that can come with being an employee of your own Ltd company, who is providing contractual services to the end company.

However, with this comes additional administration to manage your Ltd Company, and you may need to hire an accountant to ensure you are compliant and tax efficient. You must also be acutely aware of issues like IR35 and Right of Substitution.

While you will be able to earn more money as a contractor, it is also important to be aware that you may have some additional costs to consider for things like pension, sick pay, holiday pay and professional development funds, which would be part of a permanent salary, but not for contractors.

It’s also important that you don’t price yourself out of the market as a new contractor, and consider roles that can offer good credibility and experience rather than just focusing on the rate, as this credibility will be what means you can increase your rate down the line.

The Security

The uplift in earning potential is partly in response to the potentially lower job security that you would have as a contractor, so you’ll need to invest more effort in maintaining steady work. This can sometimes be a challenge if the market slows down, or your skills aren’t in demand. There is also the risk of having a project terminated, so you’ll need to have a contingency for these possibilities.

However, while you may not have the stability of a permanent role, you gain flexibility and freedom - and that can be really important for some people. As your own manager, you choose whether or not to accept work so you can select contracts according to your own preferences, which is great to spend more time with the family, work on a private project, or change your work-life balance.

The Skills

Contracting work is predominantly project orientated, with roles typically ranging from three months to twelve months. This variety means you would be likely to get experience working with a wider array of technologies and environments, which gives you a chance to update and further your skills. In general, contractors are expected to have more advanced skills (in the specific areas you are tasked with anyway) than their permanent counterparts, which will give your career a great boost.

While contracting offers some good learning opportunities, these opportunities are very different from a permanent role. The expectation of a contractor is that they will have a strong technical ability from the start, and it’s unlikely that there would be any structured training. If you need to go on a course or get certified in anything, you’ll have to pay for it yourself.

It’s also worth noting that contracting does not always align with career progression, as you’re being brought in to perform a specific function. While you can build up skills and increase your rates, you’ll generally stay at a similar level for a number of years, so it depends on what you want to achieve in your career. It’s rare to find managerial contracts, so if you have a longer-term objective to move into management, you may need to consider moving back into permanent roles at some point - though contracting can help improve your skills and experience in the meantime.

If you’re considering making the move into contracting, you will need to be honest and do a bit of self-assessment. Are you actually at the required level? Do you have the right skills? You’ll need a well-rounded set of skills and the right mindset to manage your own time, resources, and initiative. You’ll be expected to make fundamental decisions on important strategic direction, and must be able to hit the ground running from day one. If you’re not there just yet, doing a bit of research on what you might need to work on is a good way to plan your professional development.

The Network

Being a contractor is a great way to work in different teams and build your network. If a company likes your work you may open up further contracting opportunities or a recommendation, helping you to build up a strong reputation and improve your value in the market. However, many contractors find that work can be slightly more lonely than being in a permanent team (though not always!), so you may need to be more proactive to find a good community.

Networking is key for contractors, as you have to keep an eye out for new roles constantly, which means staying active within the community as much as possible. You also will have to consider that you will have to undertake an interview and selection process fairly regularly. Contractor interview processes are usually slightly quicker and have fewer stages than their permanent counterparts. It’s often the case that, due to the flexibility of contracting, you’ll often find that companies don’t always ask you to ‘prove’ your abilities in as much detail as is typical for a permanent role, with more of an acceptance of what you say you can do, you can do. Of course, if you can’t, you will be looking for a new role quite soon! That being said, any interview process still requires preparation and study for each role, which isn’t for everyone.

So, is Contracting right for you?

  • You need to be able to adapt well to the different work environments, cultures and tools you’ll come across.
  • You’ll need to be personable, and able to make working relationships easily.
  • You’ll need to be able to use your knowledge constructively- avoiding too much criticism of existing practices you might come across
  • You’ll need to get your head round all the taxation and other legislation
  • You’ll need a good, relevant technical skill set
  • You’ll need a good reputation (or be prepared to build one!)
  • You’ll need to be prepared to search for a new contract potentially every three to six months
  • You’ll need to be happy losing half your daily rate every time you go to the dentist/doctors!

If you have the skills and you aren’t too concerned with the potentially reduced security, then it’s likely that you will thrive in a contracting role. However, both contract and permanent work have their advantages and disadvantages, and it is ultimately a question of your priorities, but with the variation of contracting opportunities out there, it’s definitely worth consideration.

If you’d like a bit more insight into the dark world of contracting, give us a call, we’ll be more than happy to have a chat about what the market is like, what skills are in demand and what to expect(and there’s no obligation to go contracting!)

Drop us a line on 0203 714 3961, or email us at