Six things to consider before becoming a contractor

Are you tempted to give up your permanent role for the benefits of contracting? Make sure you’re fully prepared before committing to this lifestyle change.

Contracting is a fantastic opportunity for you to take control of your career, and for some people, it’s the best decision they’ll ever make.

But, leaving a permanent role doesn’t come without risks, so don’t let yourself get caught out by thinking the grass is always greener on the contracting side.

Here are some questions to think about if you’re considering the switch.

1. Do you have the right mentality?

Make sure you’re making the switch from permanent to contract for the right reasons. Are you doing this to experience in a new industry? Do you want to learn new skills? Is it to achieve a better work/life balance?

Those most suited for contract work are dedicated to giving their clients the best services. They want to become a part of the team no matter what the duration of their contract is.

2. What are the financial implications?

The salary for contracting roles fluctuates depending on the project and market demands. It’s important to take those financial changes into consideration, as it could drastically affect your lifestyle.  

Generally, companies provide a gratuity completion bonus. However, working as a contractor could increase your travel and living expenses, so be sure to consider those factors when considering the salary increase. Work isn’t always guaranteed as a contractor, so it’s important that some of your salary can act as savings to cover those employment gaps.

3. How will the change affect your lifestyle?

One of the most important factors to consider before becoming a contractor is the impact on your lifestyle. While the financial details are important, it’s critical to consider how the change will impact your family. You may need to work outside of a commutable distance for long periods of time during contract work. Be sure to consider the financial and home life costs.

4. Will you set up as a limited company or use an umbrella company?

As a contractor, you won’t have a stable parent company to manage the usual work benefits.

There are a few ways to handle this. One way is to hire an umbrella company. They can help you with things like taxes, pension, and holiday entitlement. However, they can charge quite a lot for their services, possibly up to 15% of your salary.

Another option is to set yourself up as a limited company. This is the cheaper option, but you’ll be responsible for many of the tax, pension, and other responsibilities that would have been handled by the umbrella company.

5. What impact does contracting have on benefit packages?

Be sure to discuss the benefits of the new role with your potential employer before making the switch. Some benefits to consider include medical insurance and annual leave. Contracting companies may offer attractive benefits, but don’t forget to negotiate for any benefits that are important to you.

6. Do you have all-important soft skills as well as the technical know-how?

A successful contractor has many important soft skills that make them more attractive to companies. A positive attitude and willingness to learn are some of the soft skills companies look for in contractors.

The ability to translate technical aspects of the work into something that the business can understand is also an essential skill that contractors need. Companies look for these kinds of skills when offering attractive permanent positions.

Should you make the move?

Any change of job requires serious thought. However, due to the transient nature of contracting, the move from a permanent to contract role will often require more thorough consideration. It’s important for candidates to identify their motivations for making the switch to ensure that they’re making the right decision for themselves, their family, and their future career development.