Contractors' Questions: Do I quit before or after I land my first contract?

Contractor’s Question: Are there any practical tips for going from being employed to being a contractor? Do I secure my first contract with an agent then hand in my notice where I work, or does it not matter which order I do things? Perhaps I should fit my initial contract around my current 9-to-5, even though this would be very difficult due to the long shifts I work and my full-on family life.

Expert’s Answer: It’s definitely best having a contract in hand before quitting your current employment. However, some hiring managers really do want someone to start tomorrow. You therefore need to consider very carefully if and for how long you could survive, both emotionally and financially, and consider the rigours of being ‘on the bench’ for a while before securing your first contract.

The jump to contracting is a big one, and while it’s always achievable, there are some steps you should take to prepare yourself as best you can before you start out. First and foremost, you need to decide how you’re going to set up your business. There are a number of different business structures that might be best for you – limited company, partnership, umbrella company; these are the main ones.

Then make a plan for handling your finances, making very sure you put aside money for tax bills and VAT payments. You might consider hiring an accountant to ensure you’re always compliant with the UK’s complex tax laws.

Crucially, you should always try to put aside funds to cover you for periods with no contract. There are also some other financial considerations, like professional indemnity insurance and pension planning. IPSE has a pension scheme with very low charges available to members, but you should strongly consider consulting an Independent Financial Advisor

Then it’s time to get your name out there and establish a client base! You sound like you already know that agencies can help you find new roles, and in many sectors they are the prime source of roles. And once you’ve landed that vital first contract, a good referral can open many doors.

Finally, there’s the matter of deciding your worth and negotiating rates. As a new contractor, it’s important not to undervalue your services; being relatively new doesn’t mean clients should offer you less than the industry rate. Agree your terms, hand in your notice and then launch your freelance career – you won’t look back!

The expert was Chris Bryce, chief executive of IPSE, the Association of Independent Professionals and the Self-Employed.

Friday 15th Jul 2016
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Written by Simon Moore

Simon writes impartial news and engaging features for the contractor industry, covering, IR35, the loan charge and general tax and legislation.
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