Is contracting a good idea?
Discussion
Okay due to various reasons I am currently stuck in a job that now has limited prospects, is underpaid and does not utilise my skill-set in any meaningful way. I have 15 years software engineering / management experience and I am thinking of making a move away from permanent work and into contracting. I'm still reasonably young (36) have no family commitments, and only real 'tie' is my house so relatively free.
If I was to carry out this plan I am thinking of carrying it out within the next 12 months. What is the job market for contractors really like? Are the rates any good? I have been looking at various contractor orientated websites but would appreciate peoples thoughts or experiences?
Thanks
If I was to carry out this plan I am thinking of carrying it out within the next 12 months. What is the job market for contractors really like? Are the rates any good? I have been looking at various contractor orientated websites but would appreciate peoples thoughts or experiences?
Thanks
I sense the contracting environment is healthy in a good few sectors due to organisations wishing to keep down headcount and overheads. However, I notice the BBC, in the wake of the tax avoidance issue, has taken on a whole load of workers in to 'employment' that were employed in 'non-tradional' ways! The interim market also looks healthy, for similar reasons to those I mentioned earlier. I'd do the usual trawls on the web and then start building relationships with the key recruiters for this area; I'm sure there's plenty out there for you. Good luck!
Whats your current notice period? From experience if they want a contractor they want them quickly & a long notice period is a negative. You may have to jump ship first then secure a contract. Also do you have enough in the bank to pay the bills for 3-6 months? There can be lean spells between contracts (although the longest I have been without a contract over the last 18 years is 8 weeks)
I contracted from '97 to '08 then went back into permanent employment... good while it lasted but after 2 years was made redundant once the recession hit, I leapt back into contracting and have been gainfully employed (touch wood) since.
What it made me realise is that no job is for life and you control your own destiny when you are contracting. Obviously you need to ensure you have enough funds to pay the bills if you are out of work for any length on time, this time of year is pretty bad for it as most employers don't want to take someone on near Christmas when they're winding down and likewise things don't tend to pick up until Feb/March so factor a good 3-6 months salary to fall back on and you should be OK. You'll lose pension, healthcare, paid holidays but you can cover that in the additional income if you so desire.
Get a good accountant (I can recommend one) and don't forget corporation tax which comes every year and can take a big chunk of your companies income in one swift blow.
What it made me realise is that no job is for life and you control your own destiny when you are contracting. Obviously you need to ensure you have enough funds to pay the bills if you are out of work for any length on time, this time of year is pretty bad for it as most employers don't want to take someone on near Christmas when they're winding down and likewise things don't tend to pick up until Feb/March so factor a good 3-6 months salary to fall back on and you should be OK. You'll lose pension, healthcare, paid holidays but you can cover that in the additional income if you so desire.
Get a good accountant (I can recommend one) and don't forget corporation tax which comes every year and can take a big chunk of your companies income in one swift blow.
It sounds like I need to carefully plan the transition. I like having a secure job but I too have come to the conclusion recently that there is no job for life.
My notice period is three months so I know I can't simply jump into contracting, but my plan if I go ahead with it is to reduce the risks as far as possible. Firstly to clear my debts (apart from the mortgage), save hard, and to set-up a part time side line business again which used to work quite well and supplement my income. Then hopefully with some negotiation I could make an arrangement with my current employer for them to take me on as a contractor to commence from the end of my notice period. (I am aware of IR35 implications). This should then free my up to look elsewhere.
I assume being prepared to work anywhere in the country opens up more opportunities? How practical is it to say stay local to site and return home at the weekends? I guess you get into a routine but need to be organised?
My notice period is three months so I know I can't simply jump into contracting, but my plan if I go ahead with it is to reduce the risks as far as possible. Firstly to clear my debts (apart from the mortgage), save hard, and to set-up a part time side line business again which used to work quite well and supplement my income. Then hopefully with some negotiation I could make an arrangement with my current employer for them to take me on as a contractor to commence from the end of my notice period. (I am aware of IR35 implications). This should then free my up to look elsewhere.
I assume being prepared to work anywhere in the country opens up more opportunities? How practical is it to say stay local to site and return home at the weekends? I guess you get into a routine but need to be organised?
All depends on your location to begin with and how much work there is within a commutable distance. Unfortunately for me there's only a few employers locally, others an hour or so away then it's the case of stay away from home all week. This also depends on the job role, my current role allows me to work from home full time (thus why I can post on here now) but there is some travel within the UK and Europe (1-2 times a month). That works extremely well for me although my daily rate is slightly reduced but it would be consumed in travel costs anyways.
I have a friend who I used to work with who now works in Basingstoke and travels down Monday and comes home on Friday, he's got a very good rate which he haggled for to cover his travel and accomodation, he's been doing that for a little over 12 months he's married, kids etc so it must be a bit of a drag on him, he does get to WFH a couple of days per month so that makes things easier.
Most if not all contract work would be done through an agency, they'll all be aware of IR35 so you might be offered to work under an umbrella company or your contract may be written specifically to negate any IR35 catchment, this works both ways for you and the employer so it's within everyone's interest.
As you have a 3 month notice period you need to think long and hard about this, you can setup a company in a day and a business bank account within a few days, VAT registration will take a little longer but not impaortant to start work, it will just mean you won't get paid until you have supplied all of this information, again your accountant will advise what is best and do all this for you. Contract work moves very fast i.e. a job will be advertised on a Monday and the role could be filled before the end of the week and starts the following Monday it's the nature of the beast. 3 months will give you plenty of time and opportunity to get all of the above in place and get your CV out there and start applying for jobs, sometimes you'll be head hunted (if you are lucky) other times you have to fight to get the chance.
Good luck
I have a friend who I used to work with who now works in Basingstoke and travels down Monday and comes home on Friday, he's got a very good rate which he haggled for to cover his travel and accomodation, he's been doing that for a little over 12 months he's married, kids etc so it must be a bit of a drag on him, he does get to WFH a couple of days per month so that makes things easier.
Most if not all contract work would be done through an agency, they'll all be aware of IR35 so you might be offered to work under an umbrella company or your contract may be written specifically to negate any IR35 catchment, this works both ways for you and the employer so it's within everyone's interest.
As you have a 3 month notice period you need to think long and hard about this, you can setup a company in a day and a business bank account within a few days, VAT registration will take a little longer but not impaortant to start work, it will just mean you won't get paid until you have supplied all of this information, again your accountant will advise what is best and do all this for you. Contract work moves very fast i.e. a job will be advertised on a Monday and the role could be filled before the end of the week and starts the following Monday it's the nature of the beast. 3 months will give you plenty of time and opportunity to get all of the above in place and get your CV out there and start applying for jobs, sometimes you'll be head hunted (if you are lucky) other times you have to fight to get the chance.
Good luck
I've been doing it in a different sector since April this year. I have a good accountant who came recommended from other contractors, and he does everything for me including my personal tax returns (which some don't) and charges a very reasonable £80/month plus VAT.
Would your business be expense intensive? I have very few expenses so for me flat rate VAT is a nice little bonus too.
I'd get your CV sorted, get some feelers for rates (I effectively doubled my personal net income overnight) and find yourself a good accountant. Your accountant should be someone well familiar with contractors, and should be able to offer sound advice on getting your company registered at Companies House, getting you appointed correctly as Director etc, registering you for VAT (and flat rate VAT, if good for you) and generally iron out all the things that might make you nervous. Mine also gives me a dividend figure whenever I ask too, making all the necessary allowances for Corp tax and dividend tax (kicks in if your personal income goes over basic rate threshold).
If you're any good and aren't always skiving off sick, contracting is a good way to earn a living (so far!)
Would your business be expense intensive? I have very few expenses so for me flat rate VAT is a nice little bonus too.
I'd get your CV sorted, get some feelers for rates (I effectively doubled my personal net income overnight) and find yourself a good accountant. Your accountant should be someone well familiar with contractors, and should be able to offer sound advice on getting your company registered at Companies House, getting you appointed correctly as Director etc, registering you for VAT (and flat rate VAT, if good for you) and generally iron out all the things that might make you nervous. Mine also gives me a dividend figure whenever I ask too, making all the necessary allowances for Corp tax and dividend tax (kicks in if your personal income goes over basic rate threshold).
If you're any good and aren't always skiving off sick, contracting is a good way to earn a living (so far!)
Just be aware that in contracting on a day rate you can into a very "every day counts" mentality. Not taking time off for holidays, despising the fact that the doctor doesn't open Sunday mornings etc etc.
I've just moved back into perm and taken a 35% hit on after tax pay. The money is addictive when you're contracting (especially if you keep weekly management accounts like me!)
I'm going to keep my Ltd Co open just in case.
I've just moved back into perm and taken a 35% hit on after tax pay. The money is addictive when you're contracting (especially if you keep weekly management accounts like me!)
I'm going to keep my Ltd Co open just in case.
It would appear that most of you are positive about contracting? Generally my health is good, I think I've had very few days off due to sickness during my working career (not that I want to tempt fate).
In regards to setting up I fortunately have prior experience of companies house, tax returns, VAT etc but certainly will find a better accountant this time around.
MoelyCrio, I find your comment about "every day counts" interesting. In the past I think I could have easily fallen into that trap. Why did you return into perm?
The improved financial side is very appealing and I think the rates I could achieve would double my income after tax. The money is not my only motivation though, more that I feel I need a fresh challenge, put my skills to proper use again and broaden my horizons.
In regards to setting up I fortunately have prior experience of companies house, tax returns, VAT etc but certainly will find a better accountant this time around.
MoelyCrio, I find your comment about "every day counts" interesting. In the past I think I could have easily fallen into that trap. Why did you return into perm?
The improved financial side is very appealing and I think the rates I could achieve would double my income after tax. The money is not my only motivation though, more that I feel I need a fresh challenge, put my skills to proper use again and broaden my horizons.
MoelyCrio said:
Just be aware that in contracting on a day rate you can into a very "every day counts" mentality. Not taking time off for holidays, despising the fact that the doctor doesn't open Sunday mornings etc etc.
Definately....its my first year contracting, and every time I looked at holidays this summer, my first thought was how much it was "costing" me just to take the time off 
t that comes with permy work. Ido my hours, do a good job, go home without work baggage.MoelyCrio said:
Just be aware that in contracting on a day rate you can into a very "every day counts" mentality. Not taking time off for holidays, despising the fact that the doctor doesn't open Sunday mornings etc etc.
Hehe! Too true - I've been contracting for just coming up 22 years and my record is 2.5 years without a day off on holiday.I have also never taken a day off sick (I'd like to know just how many people would take a day off sick if it hit them in the pocket directly).
These days I think that having the right contacts and the right experience in a stable sector is absolutely paramount. I've spent almost five years now in gaming and it's pretty recession proof. But experience and a CV chock full of top-flight clients helps too.
I also have a partner who can cover all our outgoings should I be out of work; I wouldn't dream of contracting without a safety net like that, or if I had kids and a low earning partner. I wouldn't be able to sleep at night.
98elise said:
MoelyCrio said:
Just be aware that in contracting on a day rate you can into a very "every day counts" mentality. Not taking time off for holidays, despising the fact that the doctor doesn't open Sunday mornings etc etc.
Definately....its my first year contracting, and every time I looked at holidays this summer, my first thought was how much it was "costing" me just to take the time off Got my first contract a few months later and haven't been out of work for a day since. Haven't been on holiday since either
Still the best decision I ever made though...
It would appear that holidays are not easily taken? It's not a big deal for me but everyone needs downtime.
Is there a reason why holidays are not easy to take? Is it because of knowing you are not getting paid for the time or that one contract leads onto the next one without a break?
Given that contacts (rather than just agencies) are an important aspect to finding work. Does anyone have any suggestions on good ways to make them?
The more I consider my options the more attractive contracting appears to be.
Is there a reason why holidays are not easy to take? Is it because of knowing you are not getting paid for the time or that one contract leads onto the next one without a break?
Given that contacts (rather than just agencies) are an important aspect to finding work. Does anyone have any suggestions on good ways to make them?
The more I consider my options the more attractive contracting appears to be.
raredevil said:
It would appear that holidays are not easily taken? It's not a big deal for me but everyone needs downtime.
Is there a reason why holidays are not easy to take? Is it because of knowing you are not getting paid for the time or that one contract leads onto the next one without a break?
Its pretty much a mindset thing.Is there a reason why holidays are not easy to take? Is it because of knowing you are not getting paid for the time or that one contract leads onto the next one without a break?
They are easy to take, but its the thought of missing that many days unpaid. When you're PAYE obviously its salary/12 regardless. When you're paid by the day, a two week holiday = half pay for that month + the expense of a holiday.
There is also the element of not wanting take days off, when there might be gaps between contracts.
My current (first) contract has been for about a year, and will end at christmas. I've taken 2 weeks off in the summer so far, If I get extended I'll take time off over christmas, if not then I'll be working every available day.
A mate is also a contractor, and he took 5 weeks off this summer, and will take at least a week over christmas. His attitude was that he's paid well enought to be able to take PAYE levels of time off, and life it to short to be working every day.
If I pick up a contract reasonably easy next year, then I will probably take 3-4 weeks over the summer. You can't buy back time with the kids!
raredevil said:
It would appear that holidays are not easily taken? It's not a big deal for me but everyone needs downtime.
Is there a reason why holidays are not easy to take? Is it because of knowing you are not getting paid for the time or that one contract leads onto the next one without a break?
Given that contacts (rather than just agencies) are an important aspect to finding work. Does anyone have any suggestions on good ways to make them?
The more I consider my options the more attractive contracting appears to be.
For me, a key step in my contracting was to differentiate in my mind the income to my limited company and the income to me as an individual. Once I managed to separate those two mentally, it became much easier to take holiday as I still got the same income in the month, even though my company didn't bill as much to the clients in that month.Is there a reason why holidays are not easy to take? Is it because of knowing you are not getting paid for the time or that one contract leads onto the next one without a break?
Given that contacts (rather than just agencies) are an important aspect to finding work. Does anyone have any suggestions on good ways to make them?
The more I consider my options the more attractive contracting appears to be.
A colleague of mine plans out his whole year with a target number of worked days to hit his company's billing target. This then lets him plan his family holidays and other time off effectively.
Contacts - my best ones have been through my previous permie and contract work. After that LinkedIn can be useful as can local small business "clubs" (although beware of big charges to join etc).
There was a guide to starting contracting in the latest copy of Freelancing Matters, the magazine from the PCG. I'd strongly consider joining the PCG.
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