So you want to be a contractor…

I have had several conversations recently with friends who are thinking of making the jump from the wonderful world of “permanent” work into the world of contracting.  So I’m writing this in order to crystallise a few thoughts on the process.

Disclaimers

I went from the wonderful world of “permanent” work to contracting via an enforced redundancy – the firm I was working for suddenly went into administration, and we were all out of work.  The first job that I was offered after this was a contract role, and I’ve stayed in those roles ever since.  Therefore, my making the jump wasn’t necessarily the most controlled of experiences.

I am not (yet) a long term contractor – I’ve been doing this for over a year, but I am not well versed in all aspects of the business.

Preparation

Make sure your CV is up to date at all times.  Just finished a contract?  Update your CV.  Just delivered on a project?  Update your CV.  Just started a contract?  Update your CV.  You also need to keep track of which job boards your CV is on, and keep them up to date.  Make sure that you put your next availability date somewhere prominent on your CV – it helps cut down the “I’ve just found your CV, are you available?” “erm, no, sorry, not for another 6 months…” calls.  Note that many contracts are recruited as an immediate requirement, or within a couple of weeks, so be prepared to move quickly!

It’s also an idea to make sure that your bank balance can stand a period of you being out of work.  Again, I’m slightly protected from this as my wife earns a reasonable amount from her job.

Decision – self-employed (own company) or Umbrella, or some other way

This is one decision that I haven’t fully thought through.

Umbrellas – I’ve gone with an Umbrella firm, so, technically, I’m a salaried employee of another organisation.  (Incidentally, if you are going to go this way, drop me a line first, and I’ll put you in touch with my umbrella firm – I get a kick-back that way, and it’ll probably run to a couple of pints when we meet…)  An umbrella company typically provides accounting services for you, will process your timesheets, and invoice the company (or agency) providing you with the work.  They will also calculate the tax implications of your expenses, and will adjust your actual received pay accordingly.  They may also provide indemnity insurance, and liability insurance.  From many perspectives, this is the easiest way of doing things, but it isn’t necessarily the most cost-effective, as they do charge you for the privilege – but it is tax deductible, and they should only charge you for weeks when you are working or getting paid.

Self-employed – not something I have direct experience of, but you will need to have your own company set up, and go through your own accounting, tax, invoicing, expense processing etc.  You also have to deal with the issues around paying yourself from your company, corporation tax, maybe VAT, IR35…

There are other ways of doing this – Managed Service Companies, for example.  However, I have so little knowledge of them and how they work that I shall stop here, other than to say that some agencies will not deal with you if that’s how you go.

Maybe, when I am a bit more settled and my life is less chaotic, I’ll switch to being self-employed.  Maybe.

Agents

The bulk of short-term / contract work seems to come via agencies (big well-known companies such as Elan or Hays, or more niche agencies such as TimothyJamesConsulting, to name but two).  They are approached by companies with a need for short-term staff, and handle the advertising, candidate screening, negotiation of terms, and invoicing of the client.  They also charge for their services, but their charge comes out of what the end client pays.  If you see a contract rate of £300, chances are the agency is charging £400 or so, and raking off the excess for themselves.  Out of that, however, they may provide some services to you – Elan, for example, makes available a large number of on-line training courses – and most of them operate some kind of payment-ahead-of-time system, meaning that you get paid somewhat closer to the time when you worked (see below).  Don’t try to haggle with this unless you’ve got a very good relationship with the agent, as it’ll probably affect his pay / bonuses, and all those Porsches and BMWs don’t run themselves, so I’m told – I wouldn’t know, I’ve only got a Skoda Fabia!

As you work through the business and assuming you do a good job and the client is happy, you find that the agencies start marketing you – they may talk about you to their clients on a more speculative basis rather than just when there’s a specific need, for example.  They may also keep an eye out for other roles that are being recruited by their colleagues and put in a good word for you.  This is another reason to not irritate them, and, indeed, to actually meet them if possible to create a better relationship.  (It also helps the agent when marketing you for them to be able to say “I’ve met him”.)

Return phone calls / emails to agents.  Another one I’m not always good at, particularly when I’m a while away from finishing a contract and therefore not really looking for the next one.  However, if they do send you details of something interesting, it’s an excuse to give ’em a call and say something along the lines of “looks good, but bad timing – can you keep an eye out for similar in three months for me?”

Money, Pay, Moolah, Filthy Lucre

As indicated above, Agencies may operate a system whereby you, the worker, get paid shortly after working, rather than having to wait for invoices to be received, ignored, buried in soft peat and recycled as firelighters.  In my current role for my current agency, I get paid weekly and on a delay of about two weeks; the previous contract, with a different agency, the delay was slightly longer.  (This appears to be the case if you’re covered by an umbrella, or self-employed, BTW.)  Note that the end client almost certainly hasn’t paid its invoice by this time, and so the agency is in effect paying you out of their own pocket, and they cover the costs of that in the excess funds mentioned above.  Another reason to keep the agent on your side!

While we’re on the subject of money, remember to get receipts for everything – even for coffee – while you’re away from home.  Also, if you’re working more than a few miles from home, get receipts for your lunchtime sandwich – you can use this to support your claim for subsistence expenses.  Also, keep on top of claiming them – your umbrella company may operate a policy of disallowing any claims received more than two months after the event.  You’ll need to keep subsistence invoices in your own filing system; receipts for accommodation and fuel you may need to submit to your umbrella – note that you may also be required to demonstrate a certain level of expenditure on fuel to support your claim for mileage.  I currently have to show a purchase of £11 of fuel for each 100 miles travelled.  I sometimes have a problem with this, as my car is easily capable of averaging over 60mpg on a run down to the office at motorway speeds!

Professionalism

Sorry, this bit is a bit preachy.  Your client has brought you in to do a job, after all.  You are expected to do this to the best of your ability, and to follow the appropriate directions from your in-house manager.  And, if you’re good, and the work & budget are there, you’ll get invited for a contract extension.

Dress code, ah, dress code…  Start with a smart suit, unless you’ve been told otherwise.  Work out what the in-house style is, and try to stay a little above it in terms of smartness.  I’m a little bit hindered in this, as I seem to have an internal scruffiness field – I can put on a brand new DJ (“tux” to those of you on the other side of the pond) and look scruffy.

Your professionalism should carry on through all aspects of your work and your presentation at work, including punctuality, meetings and any documentation you generate – and that includes emails and instant messaging systems.  I’m sure I’ll have more to say on the subject of documentation later.

What else?

There’s bound to be something I’ve missed here, but this post has rambled on for the best part of 1500 words, and I suspect that some of you will have got bored and wandered off.  Leave comments, and I’ll address them in a later post.

Finally, I would like to thank K & N & I for their help, comments, queries and suggestions during the writing of this article.  Cheers, guys, I owe you beer!

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2 Responses to So you want to be a contractor…

  1. Perry Whittle says:

    Thomas

    I would add that for first tine contractors definitely go the umbrella route, once you decide contracting is for you open your own company. You don’t want to go to all the rigmoral of opening a company only to shut it down 6 months later cos you found a new permy post 😉

    I have been contracting for over 5 years now and have my own company and have to worry about paye, Corp tax, vat, etc. Its hard but satisfying. If you’re lucky you’ll be looking for work once every 2 years otherwise sooner.
    If you have your own company always wear a suit, the company want to see someone who looks like they earn £400 a day not a scruff in jeans and t shirt!

    Also, Never discuss rates with permys

    My 2 cents for what it’s worth
    Regards
    Perry

  2. Pingback: Housekeeping, News, No SQL content | The Lone DBA

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