How to become an IT contractor

Once you have decided that you want to become a contractor, there are a number of stages you will need to negotiate before starting work on your first contract assignment.

1. Make sure that contracting is right for you

Ask most contractors if they regret their decision to make the leap, and the vast majority will say no. Contracting offers far more financial freedom and independence than permanent work can every do.

On the other hand, there are a number of risks involved in starting up on your own, and the inevitable market downturns to negotiate along the way. To help make the choice, try our article on the pros and cons of IT contracting.

2. Research the market

If you decide that contracting appeals to you, you need to find out the strength of demand for your skills, what rates you are likely to command, and the strength of the general contracting market. A number of key factors will affect your contract rate – your skills and experience, the strength of the general economy, the location of the contract role, as well as other things which you have a degree of control over – such as how much commission the agent charges, and which business structure you contract under.

The overall demand for IT contractors rebounded significantly during 2013 and 2014, although average rates for core IT skills have not risen for quite some time – in line with general job market conditions since the recession.

3. Quit your current job

The nature of the contracting market means that clients are often seeking contractors to start right away or within a few weeks at most. Clearly, most permanent employees will have to give notice before they are free to accept a contract position. You can either give notice and wait until the notice period has expired before seeking work, or more likely start to apply for roles whilst serving your notice period.

Your current employer may have a flexible approach to your decision to leave, allowing you to leave early, or you may have to ‘do your time’ – this is obviously something which will vary from person to person.

4. Secure your first contract

To find your first contract, you will typically search for suitable roles on the major contractor job boards, by direct approaches to recruitment agencies, or via recommendations from contractors you may already know.

Social networking sites, particularly LinkedIn, are likely to play an increasingly important role in the contract search process.

You will need to ensure you have a professional-looking contracting CV, and brush up on your interview techniques.

Once you have negotiated the interview stage, and have been offered a position, you will need to negotiate your contract rate (with the agency or client if you’re working direct) and any other matters such as how you will perform your contract.

At this stage, you should consider contacting an IR35 specialist to help you comply with the notorious IR35 tax rules, and help ensure that the wording of your contracts and working conditions keep you outside the legislation.

5. Company Structure

You will also need to decide whether to work via your own limited company, or via an umbrella company scheme.

There are several factors which will influence your decision – do you want a ‘hassle free’ solution, do you want to control your own financial affairs, are your contracts caught by IR35, and how long you intend to contract for. You can read our expert guide to limited company or umbrella, which will help you decide.

If you have taken all five steps in this guide, you will be about to start your first IT contract, which for many contractors turns out to be the best thing they have ever done. You can access hundreds of further guides to setting up and working as an IT contractor elsewhere on our site.

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