Follow these top tips to get started on your new contracting career. And remember, if you need help with understanding the processes or advice on how to move into contracting, give us a shout.
1. Know your value
Rates are driven by market demand and can vary considerably between sectors and industry markets. Understanding your market rate is crucial to securing the right work, at the right skill level, for the right pay rate. Quoting too high may result in losing out on work, while quoting too low may make you appear inexperienced or underqualified.
Rates can be calculated either hourly or daily and should take into consideration your ‘total package value’ (i.e. your current permanent salary, plus benefits) as well as the sector – especially with regards IR35. If you would like help with assessing your market rate, please contact one of our specialists who would be happy to help you benchmark your skillsets.
2. Restructure your CV
You’ve probably heard that in the eyes of many employers, contracting is contracting, and permanent is permanent, and never the twain shall meet. While this isn’t strictly true, many employers can still be nervous about CVs that mix the two.
To mitigate this, ensure that your CV breaks down specific projects from your career and lists skillsets and technologies used, as well as listing key achievements and known technologies at the top of your CV.
3. Expand your networks
When looking for contract work, there are more avenues to explore than simple job boards. Many recruitment agencies (including Lorien) work with a network of market-leading clients – sometimes exclusively – to supply contractors for contingent work. That means that engaging with agencies can often uncover new opportunities.
At the same time, growing your circle of contacts, both with potential clients and with the wider contracting community, can enable you to anticipate upcoming vacancies (i.e. if a contractor is exiting early, if the team is expanding or upcoming projects). Winning favour with clients can also open up doors in the future, with hiring managers passing on recommendations or requesting tried-and-tested resources for new projects.
4. Master the legal stuff
Contracting can appear intimidating from the outside, but there’s plenty of help on hand to navigate any complexities. Ensure that you do your research on IR35 tax regulations to avoid misclassification, paying incorrect tax or penalties. If you’re not sure, consider getting a professional lawyer to review any contracts.
Limited company contractors will also need to file a self-assessment tax return every January. You will need to provide details of the salary paid to you for the tax year, any taxable benefits or reimbursed expenses and any dividends declared to you. Professional accountants can help out with any tax calculations and often provide fixed fee packages to help you process financial data throughout the year, including advice on IR35 taxation.
5. Choose your model
There’s one key question that all contractors must face: limited or umbrella? Limited companies are managed by the contractor as the ‘director’ of the company; the contractor is responsible for ensuring compliance to legislation including corporation tax, payroll calculations and managing company accounts.
In an umbrella company, all accountancy, taxation and administrative matters are handled by a third party supplier, including invoicing the client and making payments to the contractor following necessary tax deductions. Click here to see our approved umbrella company list. There’s no right or wrong answer, however there are a number of points to take into consideration when making your decision.
Firstly, whether the administrative burden of being a limited company contractor offsets the potential financial losses of being an umbrella company worker (as MSC legislation dictates that using an umbrella company will put you in scope of IR35). Secondly, whether the status of being the director of your own company is important to you. And thirdly, the potential longevity of being a contractor for you – if it’s just for one assignment, it may be more costly to set up and then dissolve a limited company.
However you choose to contract, make sure that it works for you by reading up, networking and speaking to experts – legal, financial, or recruitment (and Lorien would be a good start!). With the right knowledge we’re confident that you can lead a successful career in contracting, and if you’d like to get started by checking out the career opportunities we currently have available, feel free to take a look.