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Guide: How to Become an IT Contractor

9 months ago by Ben Collerton
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In the ever-evolving digital landscape, becoming an IT contractor is becoming increasingly popular for those working within the technology industry.

So, what exactly makes this career path so popular over being employed by a business? As an IT contractor, you can choose which areas you would like to specialise in, often enjoying a higher take home pay, flexibility, autonomy, and the opportunity to work on a whole range of diverse assignments, with the freedom to choose how, where and when you work.

We’ve produced a guide to highlight the main steps and considerations you need to make, when deciding to pivot from employee to contractor. This includes:

  • What is an IT contractor?

  • Is contracting the right choice for you?

  • First steps to becoming an IT contractor

  • Take charge of your own career and development

  • Learn about IR35

  • Build a strong reputation for long-term success

What is an IT contractor?

Unlike employed IT professionals, contractors tend to either set up and work through own individual limited company, or they can choose to work through an umbrella company. An umbrella company acts as the contractor’s employer as the intermediary between the contractor and the end-client, whereas a limited company can work individually, often working through a recruitment agency or directly with a client.

As an IT contractor you will work tend to work on a project for a client with a business-to-business agreement, on a fixed-term basis.

Is contracting the right choice for you?

To succeed as an IT contractor, you need to be a self- starter, who is willing to take on a certain amount of risk. For this reason, contractors need to have prior experience in their area of expertise, so they have confidence and expertise to deliver a client’s deliverables without direction or supervision from the company’s existing employees.

As a limited company contractor, you are your own boss, and will generally take home more pay, but you will no longer enjoy company “benefits and perks”, a regular monthly salary or holiday pay, for example. You will also need to be organised and structured enough to complete all the general administration tasks of being a business owner, for example tax returns etc… If you decide to work through an umbrella company, many offer a range of benefits and perks, but you will generally take home less pay as they manage a lot of the administration.

As well as assessing the business practicalities of being a contractor, you should also do an honest assessment of your skills and experience, to decide which areas you could specialise in. Some of the most popular areas for IT contracting include, software development, infrastructure, data, cyber security, UX/UI design, for example.

However, you may have a more niche skill, and if there is a skills shortage in that area, you may find this a good path to explore, with higher pay, and plenty of project choice.

When considering your area of expertise, consider if you need qualifications, and if you have a strong portfolio of work you can reference to win new work.

First steps to becoming an IT contractor

Careful research and preparation are key to pursuing an IT contracting career. Here are some of the important steps to take:

  • Research: Review how big your market is, how many jobs are being advertised, what rates do the roles offer. Understanding your own worth and experience level is key to selling yourself to a business.

  • Decide your route: Decide if you want to set up your own limited company or you want to go through an umbrella company, then implement the set up. For a limited company, this could include picking a name, forming a limited company, setting up a bank account, setting up insurance, and completing the incorporation process. A good approach could be to work through an accountant, to help talk you through the process to make sure you remain compliant. If working through an umbrella company, they will generally talk you through the whole process.

  • Update your CV: Revamp your CV, tailoring to the area you want to specialise in. Demonstrate how you have worked independently or led projects.

  • Update your LinkedIn profile: LinkedIn is a fantastic way to find IT contracting work, so make sure your skills and experience are updated. Connect with recruiters that specialise in your area of expertise and reach out to see if they have any suitable roles.

  • Finding work: Consider how you will find work. Approximately 20% of contractors work directly for an end client, with the remaining 80% working via recruitment agencies. You could apply through a jobs board, liaise directly with a recruitment agency, ask your contacts if they can recommend any businesses looking for your skill set, or even ask your current employer if you can transfer from permanent to contract.

Take charge of your own career and development

Being in charge of your own development is one thing, but as an IT contractor you are also responsible for your place in the market. This means more than sourcing new clients but also your position within your field. Questions you should be asking yourself include: Is there a market for my niche?

  • How many contractors are already working within the specialism?

  • What are their rates and how can I compete whilst keeping my value?

  • How am I going to use the latest advances in the industry to stay at the forefront? What courses, seminars, conferences can I attend to learn and develop.

 Keeping up to date with industry updates, news and technologies will allow you to not only continually grow, but also stand out in a competitive market.

Learn about IR35

Designed to reduce the amount of companies disguising full time employees as contractors, it is important to understand how the IR35 tax legislation affects you as an IT contractor.

Whilst this is especially vital for those working under a limited company, being confident in what makes you ‘self-employed’ is key to legally running your business. If you work through an umbrella company, they will ensure you are IR35 compliant.

Being self-employed is defined by gov.uk as someone who is responsible for paying their own National Insurance and Tax, is not entitled to sick pay or holiday leave, and is not under direct supervision.

Read more about the IR35 legislation over at contractoruk.co.uk.

Build a strong reputation for long-term success

Creating a positive reputation is what will keep contracts coming your way, with recruiters sending you the best latest roles, and clients wanting to work with you repeatedly. Great connections and reputation will help you achieve long-term success.

  • Open communication will allow your clients to build trust in you, and regular updates will aid in building an ongoing relationship.

  • Know your worth and don’t back down. Charging too much for your service will leave a bad taste in your client’s mouth but charging too little could lead to them not respecting your expertise, and delay your career development.

  • Celebrating your successes with your clients over lunch or dropping updates into emails will give them a reason to brag about you. Let them know how your career and achievements are growing and what they can expect from you in the months or years ahead.

Setting up an limited company

If you do indeed decide to go down the route of operating as a limited company it is important to know how this process works. Common questions involve when to start this process and the best way to go about it.

  • We would recommend starting the process at the point of receiving a contract offer –the process tends to only take a few days to complete and will rarely affect the start date of your contract.

  • We would recommend setting up through an accountancy service as they will manage a lot of the small details and make sure you don’t miss any of the finer details.

  • We would be happy to recommend some specialist providers of this service if you are interested.

  • There is also the option to set up a company yourself which is a viable option if you feel confident enough with this process.

Ready to find work as an IT contractor?

If you are ready to become an IT contractor, and start looking for your first contract, we can help. Browse our IT contract jobs, or reach out for advice and we’ll we happy to help you in your next exciting career move.

Find out more about the author Ben Collerton, Principal Recruitment Consultant, here.

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