Want to be your own boss? Contracting could be for you…
There are many key benefits of contracting, like higher rates of pay, flexible working hours, and the freedom to choose when and where you work. However, contracting can also come with less job security than a permanent position, so it’s not a decision to make lightly.
To help you figure out if it’s the right move for you, this guide covers what a contractor is, the pros and cons of contracting, and the key steps you’ll need to take to start your first contract worker role.
What is a contractor?
In the world of work, ‘contractor’ can actually mean two things:
- Self-employed contractor: You operate your own business, either as a sole trader or through a limited company or umbrella company. You’re responsible for your own taxes, insurance, and admin.
- Fixed-term contract employee: You’re hired by a business for a set period (for example, six months or a year). In this case, the employer handles taxes and benefits as with any employee; you’re just not permanent.
Throughout this guide, we’ll mainly focus on self-employed contractors – but knowing both options exist can help you find the right fit for your circumstances.
You can find both permanent contracts and independent contracting opportunities in almost any industry, from IT, engineering, and construction to marketing and design.
What jobs can I do as a contractor?
The demand for contractors is widespread across many sectors. Some of the most common industries for contracting include:
- IT: Roles like software developers, project managers, and cyber security analysts are frequently filled by contractors.
- Construction: Many roles, from project managers to specialised tradespeople, operate on a contract basis. If you’re looking for work with a construction company in England, you’ll find plenty of contracting opportunities.
- Creative industries: Freelance writers, graphic designers, and marketing consultants often work as contractors.
- Finance: Accountants, financial analysts, and consultants are regularly hired for specific projects.
- Public sector: Government contracting is a huge area, with opportunities advertised through services like the Find a Tender service.
What are the pros and cons of working as a contractor?
Deciding to become a contractor is a big step. Weighing up the good and the bad is essential before you take the leap.
Pros of contracting
- Higher pay: Contractors often earn a higher daily or hourly rate than their permanent counterparts to compensate for the lack of benefits like holiday pay and sick leave.
- Flexibility: As a contract worker, you have more control over your working hours and location. Want to take a month off between projects? You can.
- Variety: Contracting allows you to work on diverse projects with different companies, which can be great for building a varied and interesting CV.
- Skill development: Exposure to various business environments helps you develop new skills and adapt quickly.
Cons of contracting
- Less job security: Contracts are for a fixed term, so there’s no guarantee of continuous work. You’ll need to be proactive in finding your next role.
- No benefits: You won’t receive holiday pay, sick pay, or employer pension contributions. You need to budget for these yourself.
- Admin responsibilities: You’re responsible for managing your own taxes, insurance, and accounts, which can be time-consuming.
- Isolation: Moving from project to project can sometimes feel lonely, as you might not feel part of a permanent team.
Five self-employed jobs you could be doing right now
Full-time hours vs. part-time hours: What you need to know
How to become a contractor
Thinking about making the move to contracting? Here are the key steps to help you start out with confidence.
1. Research your market
Begin by assessing the demand for your skills:
- Use platforms like LinkedIn Salary Insights and Glassdoor to identify industries and roles that are strong for contractors.
- Browse job boards, check the salary checker to gauge appropriate rates, and speak with recruitment agencies in your sector.
- Participate in industry forums and join relevant groups to stay updated on trends.
- Attend networking events – many opportunities develop from straightforward conversations.
2. Build your personal brand
A professional online presence sets you apart:
- Keep your LinkedIn profile current and highlight your contracting expertise.
- Compile a portfolio or create a personal website that showcases your experience, testimonials, and skills.
- Join professional associations for exclusive job boards and industry updates.
- Let your network know you’re open for contract roles – referrals can be valuable sources of opportunities.
3. Find a contract
With research and preparation complete, begin your search:
- Use sites like Reed.co.uk and filter for contract roles, or search using terms like ‘contractor’ or ‘contract worker’.
- Review company websites for temporary projects.
- Engage your network to discover new openings, as personal connections often reveal unadvertised roles.
- Explore tender services – these platforms advertise government and public sector contracts. In the UK, the Find a Tender service is the go-to site for public procurement notices. You can search current opportunities and submit bids directly through these services, opening the door to public sector contracting.
4. Set up your business structure
Once you secure a contract, choose your trading structure. Here’s a comparison:
| Business Structure | Pros | Cons | Costs |
|---|---|---|---|
| Limited Company | Tax efficiency, financial control, professional reputation | More admin, legal obligations, annual filings | Registration, accountancy fees, insurance |
| Umbrella Company | Less admin, PAYE managed, quick setup | Less take-home pay, lower control, service fees | Umbrella company fee per payslip or contract |
- Limited company: Offers more control and the potential for greater earnings, but involves extra administration and ongoing compliance requirements.
- Umbrella company: Suitable for newcomers or those who prefer a simple approach. The umbrella company manages invoicing, taxes, and compliance, deducting a fee for handling these processes.
Factor in setup and administrative costs and select the option that best matches your needs. To find out more, check out gov.uk’s guide on setting up a business.
5. Understand IR35 legislation
IR35 legislation determines your tax status as a contractor:
- It distinguishes between genuine contractors and those who are essentially employees for tax purposes.
- If you fall ‘inside IR35’, your earnings will be taxed like an employee. If ‘outside IR35’, you maintain the usual contractor tax benefits.
To stay compliant:
- Use an IR35 status tool (such as HMRC’s CEST tool) before signing new contracts.
- Consult a contractor-specialist accountant if needed.
- Keep thorough records that demonstrate your independent contractor status, such as multiple clients or setting your own working hours.
- Stay informed, as IR35 rules can change.
6. Get insured
Professional insurance is an important safeguard:
- Professional Indemnity Insurance: Covers claims arising from your professional advice or services.
- Public Liability Insurance: Protects against claims if someone is injured or property is damaged during your work.
- Cyber Insurance: Recommended for IT contractors or anyone handling sensitive data.
Clients may require certain types of insurance as part of their agreement.
7. Upskill and maintain your online presence
- Earn certifications relevant to your industry (for example, Agile, PRINCE2®, AAT, Google Analytics).
- Update your LinkedIn profile and portfolio with new qualifications and completed projects.
- Take short online courses to broaden your skills and stay up to date with industry developments
Frequently asked questions
What’s the difference between a contractor and a freelancer?
The terms are often used interchangeably, but there can be a difference. Contractors typically work on-site for a single client on a long-term project (e.g. six months), while freelancers often work for multiple clients at once on shorter-term tasks, usually from their own office.
How do I set my rates as a contractor?
Research is key. Look at job adverts for similar roles, use online salary guides, and talk to recruiters. Consider your experience, skills, and the industry standard. Remember to factor in that you won’t get holiday or sick pay.
Can I switch from a contractor to an employee?
Yes, it’s possible to transition from a contractor to an employee if a permanent opportunity arises that you’re interested in. This would involve signing a new employment contract and your employer would then handle your tax and National Insurance contributions.
Do I need a special CV for contracting?
Your contracting CV should be tailored to highlight your skills and project experience. Instead of focusing on job titles, showcase the specific projects you’ve worked on, the skills you used, and the results you delivered. Our free CV template can help you get started.
What is government contracting?
Government contracting involves providing goods or services to public sector organisations, such as local councils or government departments. Projects can range from IT and construction to consulting and administrative support. Contracts are usually awarded through a competitive bidding process.
What is subcontracting?
Subcontracting is when a contractor hires another individual or business to perform part of their contracted work. This can help manage larger projects or bring in specialised skills. As a subcontractor, you’ll report to the main contractor rather than directly to the client.
Final thoughts
In short, becoming a contractor means more than just seeking a higher rate – it’s about building your expertise and developing a strong professional reputation to help secure steady future contracts.
Becoming a contractor offers a fantastic opportunity for greater flexibility, higher earnings, and diverse work experiences. However, it also demands careful planning, from researching your market and managing your finances to understanding complex legislation like IR35.
By following the steps outlined in this guide, you can navigate the transition smoothly and set yourself up for a successful and rewarding contracting career.
Ready to try contracting? Search all available contractor jobs on Reed.co.uk now.
