IT contracting cheatsheet

As the director of A K Computing Ltd, Adam King is an IT contractor with 5 years under his belt. Here are his tips for newbies venturing into the world of contracting.

If you're considering going contracting, but are full of unanswered questions and doubts, chances are you're not alone...

You, the would-be contractor

"Can I do it?" Unequivocally, yes. Confusing contracting and consulting is common. As a consultant or subject matter expert, you might be expected to lead as a point of technical authority, but contracting is simply about flexibility. A permanent staff member might expect a job for life, possibly with a pension and benefits package and this all needs budgeting for, this year, next year, and the year after that. As a contractor, you offer a much reduced admin overhead, with the client safe in the knowledge that they can hire someone to do x amount of days/weeks/months work and part ways afterwards if there is no further work required. No Employers NI contributions, no appraisals, and no redundancy payoffs if the client needs to tighten its belt. Whatever your level of expertise, there is a role somewhere for you. The various certification paths are worthwhile, but don't put barriers in your own way if you don't have them yet. Don't decide that the market won't want you, be open-minded and ask the market.

Your new tools

Make sure your CV is bang up to date. The various agents and agencies will see a huge amount of CVs every day, so try and make yours stand out, especially the first page. Your GCSE results are probably not as important as a table of your key skills, or a snapshot of your most recent role, so organise accordingly. Try not to exceed 3 pages. Browse Jobserve and other similar sites for positions that are being advertised, and don't be afraid to cast the net wider to include roles that require a lengthy commute or even staying away during the week. Check your CV clearly includes the skills required. Apply for anything/everything relevant, including anything that might be a bit of a stretch. Don't lie about your skills, but make it clear that you're keen to learn new things. Don't wait for the agent to call you. Pick up the phone and ask if you can discuss your suitability. Don't limit yourself to one agency, and save the contact details of the agents you speak to so that you can update them when your situation changes. The LinkedIN network and the Outlook Toolbar can also be useful tools for staying in touch and building a rapport with agents.

What to say

Regarding rates, explain that you want to find a balance between pricing yourself out of the market, selling yourself short and not being taken seriously, (after all the agency is usually on a percentage, so when you earn more, they earn more). Explain that you understand the market conditions are tough so you're trying to get a feel for what market rates are? Push your luck and ask what sort of range other candidates are being put forward at. Does the agent (or client) want good or cheap? Everyone wants value, but cheapest isn't always best value...

How to set-up

You'll already be familiar with paying Income Tax and Employees NI, but as a contractor you'll also be responsible for paying Employers NI, and you will require insurance as well.

Umbrella companies are a good way to find your feet as a contractor. As a contractor you will be able to offset some costs against tax, but be wary of the hard sell on dispensation. Take-home pay in excess of 80% sounds appealing, but if you need to spend £20 a day on food to achieve this, consider if you are really better off. Be aware that some agencies have a 'preferred list' and you may need to change company if your umbrella is not on their list. The umbrella is effectively a middleman who you are paying to make life easier. There is absolutely nothing wrong with paying for good service, but be aware that an extra link in the chain can cause extra delays/issues.

Setting up a limited company is worth considering, especially if you fall outside the remit of IR35. There are a number of services that you will need to find yourself. This is a long but excellent read. The other links are very worthwhile too, and will likely replace a lot of your questions with answers.

Who you might consider

For me at the moment, I'm happy to pay a little more than I could pay elsewhere for the excellent service I get from SJD Accountancy. I don't want to have to chase my accountant for the sake of £20 a month.

Cater Allen offers Business Banking facilities (the provided link goes to a 'no charges if you remain in credit' deal with CUK.)

Caunce O'Hara have an accurate quick quote system (click on the product you need and you'll find the quote system linked to at the bottom). Employers Liability, Public Liability, and Professional Indemnity cover is required for contract work.

PCG Plus membership if you'll be outside IR35. There are all sorts of areas where you can save money and get things cheaper, but then we get back to the 'value' aspect.

A Microsoft TechNet Subscription can be worthwhile for the software and licenses you get, and keeping sharp with the latest kit in a VM environment is worth considering.

Finance-wise, ContractorMoney are very helpful.

Be prepared to travel (including staying away during the week) to be considered for higher paying roles. Familiarise yourself with the vetting procedure before applying for security cleared roles, but be aware that if you can get sponsorship, then cleared roles usually attract a premium.

Rough breakdown of outgoings

~£350pa for Insurance
~£250pa for PCG Plus
~£150pa for Microsoft TechNet Subscription

So even if you're earning just £11,500 in salary a year you'd need to budget about £4,500 a year (including about £1,200pa to the accountant) including tax. Plus, remember you'll have unpaid leave (bank holiday, holiday and sick) and periods out of work to contend with when you're calculating day rates versus salary etc ( CUK's calculators can help you work out what level of tax you might need to pay).

The flip side is that the rates should be higher, and IR35 exemption plus the flat-rate VAT scheme should bolster your overall take home earnings if you're good, flexible and lucky enough!

Working at the client premises

Try to avoid getting involved with the politics. Part of the flexibility of being a contractor means that you've no interest in one-upmanship and point-scoring in the name of a promotion or a salary increase. Remember that you're selling your expertise and don't get involved in petty rows.

Basic technical skills are common. Try to set yourself apart from other contractors by relating at a non-technical level rather than blinding non-technical colleagues with science. Customer-facing skills are very important. A full, formal suit is not always necessary, but make an effort to be presentable and professional at all times.

Networking with colleagues is worthwhile. If you're contacted regarding a role that isn't suitable, consider if you know anyone that might be interested. The agent will appreciate the tip, and other contractors might be more inclined to return the favour. Word-of-mouth recommendations are extremely valuable, as reputation is key.

Making friends among colleagues is important. Take the time to help others if you can, and be sure to ask if you don't know something. The only dumb questions are the unasked ones, and it's better to confirm your understanding than guess and get it wrong. Don't be afraid to take ownership of a problem, rather than just fixing one little piece of the puzzle. Always be honest, but perhaps not too honest when diplomacy, common courtesy and professionalism are at stake, or can get you by instead!