For many people who have made the leap into contracting already the advantages of the contracting working style massively outweigh the disadvantages and it can be hard to understand why everyone isn’t doing the same thing. But for new contractors, or rather potential contractors, taking the final step away from their old employment into the brave new world of contracting can often be difficult. That’s because they rightly do their research and see that there are a number of downsides to the lifestyle and that for some people it might not be the right move. For example, whilst many people thrive on the freedom and flexibility that contracting offers, others find they don’t have the discipline and organizational skills that they need to go it alone. Many successful employees find that once removed from the secure embrace of a large company where they were told what to do, things aren’t quite so easy. This article will look at some of those downsides and the barriers they present to potential contractors and highlight how the truly determined can overcome any potential problems that might come along.
But there’s no security in contracting…
The idea of being out there on their own is both the biggest draw and the biggest barrier to contracting. For people who are yet to make the leap one of the things that give them pause for thought is that when they leave their companies behind they also leave the security of their monthly paycheck. Not only that, they also leave behind company pensions and pension contributions, company holidays and any extra benefits such as health or dental, company cars or gym memberships. However for most this is the reason they do it. Most contractors are people who are sick of being told what to do and what projects to work on and who are fed up with the direction their career is heading. For these people contracting is the ideal solution. They see the way the world is going – there are no such things as jobs for life anymore – and think that they would rather rely on their own skills and determination than a company run by other people. For many contractors the flexibility and freedom of contracting allows them to ensure that no one ever derails their career. They are in charge and they can put measures in place to build their own security. How? By taking advantage of the extra pay that comes with contracting and putting some aside every month for those rainy days. By choosing their own individual contractor pensions (an excellent tax break for contractors incidentally) and health plans, contractor mortgages and other contractor oriented financial products. And by ensuring that there are few, if any rainy days:
So what happens if I can’t find any contracts?
Clearly if a contractor can’t find contracts then his/her contracting career isn’t going to last long. But most contractors find a way to ensure that they always have contracts lined up. And these days, provided a contractor has the required experience and skills there are more than enough jobs to go around as companies move increasingly to outsourcing certain jobs to temporary and contract staff. And if a potential contractor is having any doubts about the amount of work that is out there, all they need do is spend some time online browsing through the thousands of job boards and job sites offering a wide range of jobs across every industry – and the specific job sites targeted at each contracting sector.
Once a contractor can see that the work is there it is simply a matter of learning how to market themselves in the correct way to win those jobs. This involves everything from putting together a cv that concentrates on the skills being advertised to potential clients (rather than a broader cv that would be used for a full time job application) and on learning how to pitch those skills online or in an interview. Additionally, it is important to get into the habit of networking – online and in the real world and on spending part of the working week making or maintaining contacts. The best way to get new work is through word of mouth so a new contractor should concentrate on building a large contacts book and fostering good relationships – not to mention doing their best work on every project so people are happy to recommend them!
Will I Have The Right Skills?
Some contractors will look at contracting as a suitable career only for those people with a specifically niche skill and to a certain degree they would be right. Most contractors, or successful ones at least, do have particular niche skills that are clear-cut and in-demand and they therefore can charge a premium to companies for those services. They will normally be something that they did particularly well for their previous employer and want to concentrate on and which they therefore want to transfer into the contracting market. That is the standard model and it is true, it is possible not to be suited to contracting because of a lack of niche skills. However it is not always the case. There are hundreds upon hundreds of contracts out there for contractors who are good organizers or project managers, who have experience of managing capacity or who are able to slot into a firm for a few months because staff have gone on sick leave or maternity leave. Indeed if a contractor has experience of serious project management (on say, large scale IT projects) then they will find themselves constantly in demand. And at the other end of the scale it is also possible to be too niche for contracting. It might be that a contractor’s niche skills are redundant anywhere else but their previous place of employment. This could be because they worked on outdated computer code or an old legacy system which is all but extinct elsewhere. But even in such cases it is easy for employees who feel their skills might not be in massive demand in the contracting world to retrain before they make the leap. All it takes is some research as to the point where current skills and passions intersect with what the market is looking for.
Am I Experienced Enough?
Many people who are in employment thinking about becoming contractors will believe that they have the required skills to make the move but are lacking in the other thing that clients look for – experience. And again, to a certain extent this is true. When they are looking to hire a contractor to come in and work for their company, clients will choose the experienced guy every time, as they want someone who can come in, know instantly what they are doing and who can take the project from the very beginning and see it through to the end without any hand-holding. Any contractor who comes recommended and who has experience of the type of work they are offering will therefore be preferable to someone taking on their first contract. But, it is important to remember that every contractor started somewhere and there are a couple of things new contractors can do to escape this chicken and egg situation. Firstly, whilst still employed, if contractors get training in a skill they think will be marketable in the contracting world then they should stay on and try and get experience working on two or three projects involving precisely that skill. At least then when they start contracting they will have significant experience of an up to date skill on their CV. Secondly, as a new contractor starting out it is sometimes possible to offset the experience issue by lowering prices (just a little) below the going rate and offering value for money – although this should only be done on the first and perhaps second project otherwise clients might start to wonder why they contractor is cheaper than everyone else!
Have I Got Enough Money To Go It Alone?
The short answer is yes. This shouldn’t be a problem, provided people are able to prepare before they start contracting. Setting up a business as a contractor in the UK is very simple and inexpensive to do. All someone has to do is set up a company with Companies House (or alternatively as most contractors prefer to do these days – join an umbrella company), set up a bank account and get themselves all the required insurances and then they are good to go. Depending on the industry they work in there might be some costs for equipment but essentially that’s it. However, what any potential contractor must do to prepare is spend a good few months saving up enough money in a rainy day fund to keep them afloat for a minimum of six months. This might seem like a very large fund to aim for but it is entirely possible for a new contractor to go for a few months without work and then for the number of jobs to pick up very slowly – and for those jobs to not pay very highly. Consequently it is essential that someone thinking of moving into contracting thinks ahead and saves up enough money to have a good cushion to cope with any early setbacks and teething problems.
Am I Too Old?
Again, the short answer is no. If you’re entering the contract market later in life then the chances are you are going to be bringing more experience with you and have a lot more to offer than someone fresh out of university. This is something that older contractors should definitely play on as it will counteract any possible ‘ageism’ that they may or may not come up against in their contracting career. Provided they keep all of their skills up to date and have knowledge of the latest developments in their field, there is no reason that this combination (up to date skills with experience) should not win the contract every time. Indeed, during periods when the demand for contractors isn’t quite as high it is the older and the more experienced contractors who tend to find work more easily – although experience is something that young contractors can also have if they apply themselves carefully and thoroughly in their early contracts. So age is irrelevant, it is simply the right combination of experience and skillsets that equates with high marketability.
There are some barriers to bear in mind that are more difficult to get around but which most likely wont affect new contractors. The first is problems associated with a poor credit history or low credit score. If a contractor has had problems in the past and hasn’t managed to sort their credit file then they will almost certainly face difficulties getting work with clients in the financial sector. The best thing would-be contractors can do if that is the area they want to work, is to spend six months to a year repairing their credit file and saving money (something recommended above anyway) before making the move over to contracting. The second problem that comes along from time to time is the issue of security clearance. There are some jobs out there that may require a security clearance and a thorough examination of a contractor’s background. This could either be because there are industrial secrets involved or more likely, because the company has links with the government and all staff are required to be vetted. If contractors do come across one of these contracts it is worth bearing in mind that clearance can often take a long time – sometimes months – and there are very often reasons why people cannot be given that clearance.
Will I Have to Move To Where the Work Is?
Unless a contractor works solely online there is a very good chance that they will have to travel occasionally (or often depending on their sector) to get to lucrative contracts. This doesn’t mean they will have to move home, just that from time to time they will end up staying in hotels for a few weeks. Any expenses spent on subsistence (hotels, food, travel) can be claimed back from HMRC so it wont cost them anything – it just depends on whether they are ok with time away from home.