The contracting industry is growing by leaps and bounds each year, as a large number of working professionals wake up to the flexibility and freedom that contracting offers. However, no matter how interested in contracting some professionals are, they often struggle with figuring out how to contract, especially when it comes to transitioning from their current position and lifestyle to the unfamiliar demands of contracting.
If you’re one of those that are still finding their footing, below are a few tips to help you along the way:
Quitting Your Job
This is probably the most difficult part when it comes to transitioning from being a full-time employee to a private contractor. Most professionals find it difficult to leave their cushy jobs that provide steady paychecks for the seeming uncertainty of contracting. However, you don’t have to be afraid of quitting your job if you’re confident about your skills and expertise, as there are plenty of clients looking for contractors every day. Just be sure to respond speedily to job invitations and communicate well with both prospects and clients. That way, you’ll be able to create a steady income for yourself, while still enjoying the freedom and flexibility of working wherever, whenever.
Getting Your First Contract
For the first few months, you’ll most probably have to approach clients in order to acquire contracts as you’re still building a reputation for yourself and learning how to contract, but as time goes you’ll start getting approached by clients either directly or through a recruitment agent. Also, familiarize yourself with online job boards and apply for jobs there using your updated CV. Don’t forget the specialist sites that are always willing to hire new contractors, and be willing to put up with lower rates in the beginning as you work to prove yourself, and slowly increase them until you reach a comfortable earning threshold.
Structuring Your Contracts
Structure your contracts appropriately, and consider your status in relation to IR35, as including it in your contract could decrease your earning potential by up to 25%. Make sure to consult with a professional accountant or tax practitioner if you’re unsure about your position, to ensure that you’re on the right side of the law when it comes to the latest legislation. Figuring out how to contract is an ongoing process, and tax and accounting experts are just a few of the professionals whose expertise you’ll require in order to successfully make the switch from full-time employee to contractor.
Determining Your Payment Structure
Your options when it comes to the payment structure are either to register yourself as a limited company or to work under an umbrella company. Although it provides you with plenty of legal and accounting expertise, one disadvantage of working with an umbrella company is the deductible fees that almost amount to the same amount you’d pay if you were fulfilling a contract under IR35.
On the other hand, getting registered as a limited company could save you a lot of money when you pick contracts outside of IR35, but then you’d have to hire an accountant to help you remain compliant with the relevant tax and accounting legislation. Therefore, it’s important to think carefully about this decision as both options come with their own advantages and disadvantages.