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So you want to be a contractor? Well, here's how it works

Free advice from Reg headhunter Dominic Connor

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Are you flexible?

You go where the work is to do things people will pay you to do. I emphasise this because of the number of commentards who whined about getting emails for jobs that are more than walking distance away.

My longest ever contract was 120 miles from home. Being single, gigs in Denmark, Italy, Sydney et al were - naturally! - great fun. Sure, take the offer that’s close to home and upgrades your skills, but contracting is a decades-long path. Sometimes the way forward is downhill.

Women

Even given the low percentage of women with proper jobs in IT, the number of women contractors surprises me, even though for many of them it ought to be a good option. If you put the effort in, it can be more flexible than permie work and you can handle issues like childcare vouchers and other issues more directly. Logically, it ought to be more common among women with kids. But it’s not, strangely. If you do know why it isn't so common then feel free to comment at the end of this article.

Heads down

A cultural change that comes with contracting is you’re there to just do a job. Advancing ideas about what is good for the firm is often unwelcome. This may lead you to the idea that being a contractor frees you from internal politics, but the reality is that you just have a different type.

At one site, the permies were told the lack of bonuses and pay rises this year was because (and I quote here) “the contractors are sucking the lifeblood out of the business”, said by the bloke who the week before had spent hours persuading me to come help a critical project that was going badly wrong. A few of the permies decided to buy me a beer to ask how they could move from being sucked to being a sucker.

A difference between managing permies and contractors is that you find things for your set of permies to do and hire contractors for the difference between what they can get done and what you’ve promised to deliver. When budgets get cut, the contractors might be more dispensable than the permies, with HR pushing the idea of losing the contractors first. This doesn’t always work so well because, after all, the contractors were brought in for specific tasks that needed doing.

Direct contracts

Some contractors never use agents. As there’s no middleman involved, you can make more money that way, assuming you have decent negotiation skills. However, some clients are slow at paying and you can get into arguments over what exactly constitutes doing the job properly.

I hope you’re not shocked to read of a correlation between their cashflow problems and a requirements change. It is entirely possible to build up a set of clients who know and trust you, especially if you follow the advice above, but it’s naïve to believe that you'll always be in demand. The odds are that you’ll have to deal with agencies at some points.

Endgame

A headache for IT managers is “fractional people”, where you need more skills than can be fitted within the headcount and there's not enough work to keep that many bods occupied. So if the project is coming to a successful end, it is worth coming to an arrangement for you to return occasionally and help out where needed. They keep their costs down and you smooth out the cashflow bumps in an uncertain future. I’ve done it myself where I’ve contracted to take N days of work from the freelancers in return for a commitment for them to come when called. They got the money, I showed my bosses that I kept costs in check and had coverage for occasional crises. One system I ran eight years ago is still supported that way.

That’s a key difference between contractors and permies. When you fire a permie he is not your friend. A request for help three months later might be met by mocking laughter. For a contractor it’s an earning opportunity, as long as he’s been smart enough to leave on good terms and has remembered to send the very occasional email asking how things are.

Rate cuts

Some companies are notorious for cutting rates part way through a contract if the profitability of one of their projects needs upgrading. They will say something like, “you accept the cut or we will terminate your contract”, sometimes without bothering to let your immediate manager know.

You need to start looking elsewhere as soon as you hear of the first cut, because it may not be the last. The reason they think cutting rates is efficient is that most contractors aren’t stupid enough to walk without a new contract. Instead they bide their time and walk at a time that suits them. Since the effect of your leaving (i.e. problems!) shows up much later down the line, the cause and effect of said problems is too far separated for them to notice.

IR35

Given the last government’s “close relationship” with bodyshops like Capita, it probably doesn’t shock you that they tried to shaft the freelancers that competed with them.

The Professional Contractors Group came into being and has fought the good fight ever since, offering help to contractors that HMRC is trying to screw over.

The main issue contractors face is whether you are a “surrogate permie”, i.e. just dodging tax by claiming to be freelance - like senior faces at the BBC, or even the tax people themselves. You need to ensure your contract doesn’t even look like one for permanent employment. So, no mention of holidays or any permie-style rights or obligations. Being in one place for too long can make you vulnerable to an expensive attack.

That’s why you need advice from an accountant. It’s probably worth joining the PCG as well; either will help you get the dividend-salary divide kosher. ®

Dominic Connor is a City headhunter who worked as a contractor. He has hired - as well as fired – contractors for 15 years.

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