Six things to consider before becoming a contractor


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.

Instead, prepare yourself for the transition from permanent to contracting by considering these six questions.  

1. Do you have the right mentality? 

When considering a contract role, you need to think long and hard about your motivations for making the move – is it to grow your experience in a new industry, learn and enhance your skills, or achieve a better work/life balance?

Someone that will be perfect for contracting will get excited about delivering projects and seeing what the next challenge is. If you’ve got the right mentality for contracting, you’ll always want to give the best service to the client and make sure you become an invaluable member of the team, regardless of how long your contract lasts.

2. What are the financial implications?

The salary attached to contracting roles will largely depend on the nature of the project and the demands in the market at that time. Most companies will offer a gratuity completion bonus which can be included in the salary package, while others may offer an increase on basic salary to move into a contract role.

Depending on the role, candidates might need a significant pay increase to help cover additional outgoings and make the switch worth it. In some sectors, such as Technology, contractors should be aiming to earn at least twice as much as a permanent salary. You might be away from home a lot, and you’re not guaranteed work, so you’ll need this extra money to act as savings to cover additional travel expenses, living expenses and employment gaps.

Also, don’t forget to check when you’re going to be paid. Agencies will only pay you once they’ve been paid themselves, so if they’re on 60-day payment terms, that means you’ll have to wait two months for your first pay cheque.

3. How will the change affect your lifestyle?

When thinking about taking a contractor position, the impact on your lifestyle — particularly if you have a family — should be one of the most important things you consider. This is often overlooked by candidates who focus too much on the financial side of the role and less on the practicalities and the impact it’ll have at home.

Depending on the location of the job, the type of role and the contract length, you could be faced with a complete lifestyle change. Some contracting roles might be outside your usual commutable distance and if you have to live away from home, you’ll need to factor in both the financial cost and the impact on your home life.

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

When you’re a contractor, all the benefits you used to receive as a permanent employee you now have to manage yourself. Using an umbrella company is one-way contractors can get help in organising these benefits. You pay them to handle things like tax, pension contributions, and holiday entitlement, although obviously all this comes at a cost and the umbrella company could take as much as 15% of your salary through their fees.

The other option for contractors is to set up as a limited company. If you set yourself up as a limited company, you’ll take home more money, but you’ll be responsible for things like your own pension plan and submitting your own tax returns (which could mean having to employ an accountant to help deal with the financial side of things).

5. What impact does contracting have on benefit packages?

If the benefits of a new role are important to you, make sure you discuss them with your potential employer before making the switch. Benefits could include medical cover, annual leave and a ‘completion of contract’ bonus. Contracting is becoming increasingly popular, so benefits are now on par, or even more attractive than those offered for permanent positions. This makes it more appealing to permanent employees to make the move into a contract role.

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

On average, 70% of well-performing contractors will be considered for a permanent role within the company when their contract ends. This is often because of the soft skills contractors possess, as these are the skills that really set them apart.

Technology and business have changed so much over recent decades meaning that tech professionals have gone from sitting quietly at the back of the room to leading whole organisations through digital transformations.

They now have to be able to talk to a number of different business stakeholders, understand what they need, and translate the technical aspects into a workable space that the business can use. Technology is no longer separate from the business strategy, it’s a driving force, and as a result, programme managers, business analysts, CIOs and CTOs can now effectively communicate with other stakeholders across the business. It’s hard to underestimate just how important soft skills have become.


Should you make the move?

Any change of job will always require serious thought, but, due to the transient nature of contracting, the move from permanent to contract will often require more thorough consideration. Candidates need to consider what their main motivations are when moving careers to ensure that they’re making the right change for themselves and their families, as well as their future career development.


Visit our career advice page for more information or contact one of our specialist consultants to help with finding your next role.



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