Is Becoming a Contractor Right For You?

So you want to become a contractor?

Life as a contractor is often considered the greener side of the grass. And why wouldn’t it be? Those who embark on the transition from employment to contracting rarely steal glances back at the old embankment of employment they left behind.

Contracting usually conveys a much more autonomous, enjoyable livelihood. But emphasis must be drawn to the use of ‘usually’ here, as this employment status is admittedly not for everyone.

But how can you be sure if contracting is for you or not before taking the plunge?

The first indication is your characteristics. In order to succeed as a contractor, you will need to first and foremost consider yourself a self-starter. Whilst searching for a job as an employee may be difficult, you can guarantee that sourcing your own contracts will be ten times harder.

Contractors must also have the ambition and determination to succeed, especially as many anticipate times when work will be scarce, often at the beginning.

Cast your eye upon any contractor-related forum and you’re bound to spot a thread accommodating contractors on the bench, deploying their best efforts to secure a new contract and asking for advice.

It’s already been noted that sourcing your own contracts will be extremely difficult, a million miles away from finding a new permanent job, but there are a few pieces of advice that seem to regularly crop up in these aforementioned threads to avoid being benched.

Whilst you should primarily consider yourself a self-starter, this should also embody organisation and preparation. Time and time again, contractors become so entangled in their current projects they fail to notice the last grains of sand escaping the hour glass. Before they realise it, their contract is up, with no new one lined up.

Therefore, it’s imperative for a contractor to be attentive. By the time the last two or three months of a contract are approaching, a contractor should have ideally began sourcing succeeding ones. Keeping an eye on contract sites, investing in relationships within your network, or maintaining your social network interaction, however you do it, it’s vitally important you avoid a stagnant period in your contracting career.

As a contractor, you will no longer have the safety nets put in place by employers, for example sick pay, holiday pay, or even regular pay for that matter. Therefore, if you are particularly adverse to any risk-taking or uncertainty, contracting perhaps won’t be your best route.

Following on from this, as a contractor, it is repeatedly advised that one of the best things you can do is to save. Putting a little of your earnings aside on a regular basis will lessen the fear and panic instigated if you were to ever find yourself at the end of a contract/ill/etc.

Therefore, if you find inexplicable holes in your pockets regularly, again, contracting may not be your best bet.

Having said this, there are many advantages that make up the scenic greener grass. Many contractors have the chance to, and often do, at least double their income. They’ll benefit from more control over their working life, eventually being able to choose the work they take on. But perhaps the most advantageous element of contracting is the fact that whilst earning considerably more, you will also accommodate a much more favourable tax bracket.

Contractors make more money than employees do. It’s that simple.

That is because contractors can take home a lot more of their pay than employees are able to. Contractors have two major advantages: they pay less in taxes, and they can deduct their expenses.

Expenses are a massive perk of contracting. For example, as an employee, how much do you spend on lunch? Perhaps £5 a day? £25 a week? £100 a month? £1,200 a year?!

And all this comes out of your own pocket. But not for a contractor. The contractor pays for their lunch out of pre-tax expenses. This makes a considerable difference.

For example, let’s assume a cost of £100 per week in expenses. This costs the permanent employee the full £100 from their net income. However, the contractor can claim these expenses resulting in only a £61 drop in their net income.

And the contractor can claim expenses for all of their work-related equipment, things like laptops, mobile phones, office equipment, broadband connections and so on.

As with most things, there are pulls and pushes that reside within the contracting profession, but the decisive factor, as stated, is your characteristics. Your characteristics are generally the only indication you will have before actually test driving the career as to whether it will suit.

To give yourself the best chance of success when first starting out, you would be in the strongest position of doing so if you have already left your permanent role. This is simply because many recruiters will require a contractor to start a role at very short notice, sometimes within a week or two. However, if this is not viable, some recruiters will be willing to wait if they feel they have found an ideal contractor for a specific role.

As stated at the beginning, a majority of contractors have no regrets once they gain residence on the greener grass of contracting. The profession can be extremely rewarding, not to mention enjoyable, albeit riddled with potential challenges and a few hurdles along the way.

If you're interested in becoming a contractor, make sure you check out the contractor insurance products and services that we have available.
By:Sam Greenwell

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