What Is Contracting?
When looking to jump into contracting, there is a lot to analyse and be cautious of. How much can you earn as a contractor? What is IR35? Will I be under umbrella company or starting your own limited company? Will I be needing an accountant? All what you need to know and be aware of is here in our first timer guide for you to begin.
Individuals need to firstly know if the contracting life suits them and if they are up to it.
When you work as a contractor, it is a different lifestyle from being a normal employee for a company. There are more exposures, however there are also many beneficial factors. What makes an individual a contractor is when they are working for an individual under a set period, under a set contract to assist them complete an assignment. Contractors will be operatively showcasing their skills and time, and they tend to be paid by the hour.
The benefits for your clients – There are many factors why companies like using contractors, for example; Contractors tend to be more flexible over hours compared to permanent employees. Contractors are easier to recruit and dismiss as they are not a long-term commitment. The skills the employees in the workplace have aren’t always as good as the contractors. The other huge reason that companies like contractors is that they save money. When a company recruits an employee, there are many payments they must pay for, for example; sick pay, holiday pay, redundancy pay and employer’s national insurance. However, if you work as a contractor they do not have to pay for any of this, and as a result they can pay you the more money per hour allowing them to still spend less.
All contractors have their own individual reasons as to why they like the contractor lifestyle. A few of the most known are;
More money – as mentioned previously, contractors tend to be paid more than the employees working with them on an assignment.
Being your own boss – contractors usually like the feel of being their own boss, which can be really satisfying and enjoyable.
Having freedom – IT contractors have the ability to decide when and where to work, also when they want to take their holiday, this is a huge bonus as you will feel free.
Paying less tax – The contractors that take professional advice can by a great margin decrease the amount of tax they pay.
Lastly, another factor why contractors are happy with the contracting lifestyle is because of the variety it offers – due to the fact they move around from contract to contract and company to company, contractors tend to build very varied experiences and impressive CV's.
The Disadvantages Of Contracting
As well as the advantages of the contractor lifestyle, there are also disadvantages that you need to be aware of when looking. Individuals should keep in mind that, if contracting was an easy and safe way to earn money, many people would become a contractor. Some individuals are not used to being moved around and may not like the fact that they are communicating with different members of staff each time. However, whether or not you have the right skills and experience for the contracting lifestyle, it may not be what’s best for you. Only you can shoulder the advantages and the disadvantages.
Some of the disadvantages that you need to take into consideration are;
Uncertainty – When you’re a contractor and you have been given a contract, there tends to be no renewal with the current contract. Unless the contractor has been informed any different there is no confirmation with regards to a new contract.
Less Security – Contractors are not guarded in the same way the employees are in an organisation.
Hassle – Due to the fact you will be conducting your own business, there will be many applications to fill in, rules and accounts to obey and keep may not be an easy process all by yourself.
You will be independent – Being your own boss could mean you’re by yourself, meaning for example, when you want to take a holiday, you will not be receiving money for holiday pay, or if you are you would not be entitled to sick pay.
How To Be A Successful Contractor
1. You have to be 100% sure that you want to be self-employed as there are disadvantages as well as advantages, meaning you have to face the consequences yourself.
2. You should not try to do everything by yourself, there is no problem with outsourcing if you need to, as it could save you time and money.
3. Never be in a rush to expand your business unless you feel you are ready, willing and able to. The more you expand, the more workload you would have to partake, meaning you may need to hire someone as you cannot do it all by yourself.
4. It is important to be professional at all times, you should remember that because you are not an employee or working alongside others that you should forget your professionalism. This can be from your dress code to answering calls etc. Customer service is important when answering phones and if you want good reviews from your business.
5. Do not forget the rest of your life, yes you can put the business first, but you should also remember to balance your lifestyle by doing other things. Putting all your energy and time into your business may not always be a good outcome.