Be your own boss: Learn how to become a contractor
A lucrative market awaits people pursuing a career as a contractor. People with the right specialist skills can find work in a lot of organisations and enjoy plenty of benefits.
In this blog, you’ll learn all about the world of contracting. We discuss everything from the benefits of being a contractor to the skills you’ll need and how to take your first steps.
What are the benefits of working as a contractor?
According to the respondents to a recent Hays poll on LinkedIn, the main benefit is getting to be your own boss. As an independent contractor, you can choose where you work, when you work and who you work for.
As a contractor, you can set your own rates. If you offer your services on an hourly basis, this could result in a higher annual income, which was rated as the second-best perk in the recent poll.
What steps should you take to become a contractor?
1. Make sure working as an independent contractor is right for you
Becoming a contractor has many pros and cons, so you need to make sure the move would be right for you. Try seeking out professional advice before making your decision.
Are you able to keep a calendar? Can you deal with professional indemnity insurance requirements? Do you know the best way to pay yourself? Are you proactive in finding projects?
James Milligan, Global Head of Technology Solutions, has compiled a list of questions to ask yourself here.
2. Prepare to move on from your full-time job
Working as a contractor alongside a full-time role is a smart way of building up a portfolio, but with the safety net of a permanent position. Check that your contract with your existing employer allows for this.
You need to be ready to move on from your existing position. The world of contract work is fast paced, so you should be ready for new opportunities.
3. Clarify your tax position with your employers
In the UK, contractors generally follow a set of tax rules known as IR35. IR35 tax rules help to make sure that companies can’t exploit permanent employees by employing them as contractors. Understanding IR35 tax rules is vital. HMRC regularly investigates companies to determine whether they’re in breach of these regulations.
Similar rules apply in countries like Germany. The German government introduced a process for assessing worker status and ensuring that self-employed contractors are not permanent employees in disguise. Learn more about the AUG labour licensing system in Germany.
For workers in the US, there are additional processes for clarifying your employment status. If you are unsure whether you are an independent contractor or an employee, either you or the company can complete Form SS-8. This declaration allows the IRS to review your circumstances and determine your status. If an employer in the US incorrectly classifies an employee, the company may be liable for employment taxes.
Make sure to clarify your contract status in line with your local laws and regulations.
4. Think of how you want to set up as a contractor
As a contractor in the UK, you can set yourself up as an employee of an umbrella company or start your own limited company. Choosing an umbrella company can be straightforward and reduce admin. However, starting a limited company offers tax advantages and allows you to claim for more expenses.
Similarly, in the US, the most popular options are to operate a sole proprietorship or a limited company. Like umbrella companies in the UK, a sole proprietorship is the simplest option, but the main disadvantage is you’re left personally and financially liable.
5. Find an accountant and set up your banking
Using an accountant may cost money, but they can keep your accounts in order and avoid any complications with your tax bill. Accountants are especially useful if you have set up a limited company, both for tax purposes and to make sure you have the right type of bank account.
6. Create your contractor portfolio and online presence
A Hays poll revealed that 52% of the 10,045 respondents believe the ability to build and maintain relationships is the most important trait for a contractor.
Are you active on LinkedIn and comfortable in reaching out to your network? Having a strong online profile and portfolio can make it easier to connect with new clients. Start with our personal branding checklist:
- Make sure your LinkedIn profile is complete: Choose a high-quality and professional profile picture, fully optimise your headline and create a summary that sets you apart.
- Remember to show your personality: Use a friendly and authentic tone, add personal facts or hobbies and share your vision and values.
- Have an active online presence: Post relevant content, engage with other users, join groups or communities and reach out to potential contacts to make your account more visible.
- Consider creating a website or blog: Try purchasing your own name as a domain. Add examples of work, a brief bio, a contact email address and links to the rest of your online presence, such as LinkedIn or Facebook.
7. Start working as a contractor and seek out new contract roles
As a contractor you must be proactive in finding new contacts and opportunities. Marc Burrage, Managing Director for Hays Asia, has written about the search process and how to stay positive.
Can I learn more from recruitment agencies like Hays?
The expert team at Hays can offer invaluable advice on becoming a contractor and how to establish your career. Read more of our blogs on this topic and reach out to us today.
We think these articles will also interest you:
Author
