Is contracting for me?

Stepping into the world of Contracting may initially seem a daunting prospect. There are several factors to take into consideration before working on a contract basis:

Location – there is a high probability that your assignments could be much further away from home than your usual daily commute. Partners and children do need to be taken into consideration (if you value your family life!) when deciding. However, with our focus on the North of England, we always try and place locally based Contractors with our clients wherever possible.

Day rate – generally contracting is perceived to be highly lucrative. It is true that the day rates may seem initially high but don’t forget, you have to take care of all your tax and NI payments, pension, run your own car, provide your own lap top and often pay for accommodation out of the overall day rate. However, once you are established and have worked out how many billable days you want to achieve in any given tax year, it can provide a healthy income.

Where there is risk, there is reward – if you have a large mortgage or substantial monthly financial commitments, contracting may not be the best route for you at this stage. This is due to the fact that there are no guarantees of continuity and the majority of Contractors will allow for “downtime” between contracts.

People will pay for a specialist –work out what your area of specialism is. This may be harder than you think as most people will have got to a stage in their career where they view themselves as having a breadth of experience. The Contract market is a competitive place and hiring managers want to see specifics on a CV in terms of what you have delivered, your ability to influence and stakeholder engagement/management skills. Your specialism will typically be sector specific or skill specific (ie thorough knowledge of mortgage back office processes, CRM implementation specialist, lean sigma trained etc).

IR35 – this has been a topic of discussion for a number of years now. HMRC implemented a stricter interpretation of it in 2016 across the Public Sector. The new rules were due to be implemented across the Private Sector in April 2020 but have been delayed until April 2021 for various reasons. After 5th April 2021, the end user of the contractor service will have to make a determination as to whether the role falls inside or outside IR35. There appears to have been confusion in understanding the proposed changes with organisations making blanket decisions and forcing contractors down a specific route (ie moving onto payroll or working via an umbrella). For specific advice you should employ the services of a reliable and experienced practicing accountant/specialist IR35 advisor. No-one wants to fall foul of HMRC. The above however is only current Government policy. In the present climate, the new rules may be again postponed or dropped altogether. This is an important issue that must be closely watched.

It isn’t for everyone – Contractors are often recruited to make some difficult decisions within an organisation. This is what the client is paying for. Your focus always has to be what is best for the paying client, which could mean identifying headcount reduction or dealing with poorly performing third party suppliers. Though these are decisions that can be difficult to make, Contractors have the luxury of not having to get too involved in company politics, which is often one of the key driving factors for going into contracting in the first place.

For more information, please contact one of our experienced consultants for an initial discussion on 0845 9002175.

 

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