Things to think about before becoming a contractor

A lot of people are tempted by the benefits of becoming a contractor, swapping their permanent role for the excitement of contracting, but there are a few things to think about before you make the change. It’s important to be fully prepared before committing to becoming a contractor, as it can be a big lifestyle change. Though it’s a great opportunity and has a number of benefits, there are risks that come with saying goodbye to a permanent role. Below, we have taken a look at the things to consider before becoming a contractor.

What are your motivations for making the move?

You need to have the right reasons for making the change, and you need to be motivated to make it work. Are you becoming a contractor to grow your experience in a new industry, or are you hoping to achieve a better balance between your work life and home life? To be good at contracting, you need to have a passion for delivering projects and taking on new challenges. You need to be able to continuously deliver a high quality service and solidify yourself as an invaluable member of the team.

What are the financial implications of contracting?

Depending on the type of project and the market at the time, the salary that comes with a contracting role can vary hugely. A lot of companies will offer a completion bonus, which is usually included in the salary package, but others offer an increased basic salary to encourage you to move into a contract role. The implications of this will depend on your lifestyle. For example, you might need a pay increase to cover additional outgoings. You will also need to think about the financial risk of not having guaranteed work and the cost of employment gaps.

How will becoming a contractor change your lifestyle?

Think carefully about how taking a contractor position will impact your lifestyle, as this is something that a lot of people overlook. The location of the job, the type of job and the contract length will all impact your home and family life. You might find yourself needing to commute a lot more, meaning less time at home. You might find yourself with larger outgoings, meaning a change in family finances. It’s important to weigh up the pros and cons of how contracting work will affect your lifestyle.

Should you set up a limited company or an umbrella company?

As a contractor, you will be saying goodbye to a lot of benefits that come with being a permanent employee. However, using an umbrella company can help. For a fee, umbrella companies handle things such as tax, pensions and holiday entitlements. You could also choose to set up as a limited company and manage this yourself. This will allow you to take home more money, but you will be responsible for the admin side of contracting.

Do you have the important soft skills to become a good contractor?

A lot of contractors are offered permanent roles when their contract ends, and this is largely due to their soft skills. If you have good soft skills, you will stand out from other contractors and showcase yourself as a valuable member of the team. This means being able to talk about the business, communicate with colleagues and solve problems as a team. Regardless of the contractor role you take on, soft skills will enable you to be versatile and flexible in the workplace.

Becoming a contractor is a big change, especially as it can be a somewhat transient way of working. Before you swap from a permanent role to a contractor role, weigh up the pros and cons, and think about your motivations for doing so.