Job seekers are increasingly chasing higher levels of flexibility, greater variety in their work and more autonomy over their career. Its no surprise then, that more are turning to contract work. In fact, a recent study revealed six in ten (56%) small and medium-sized businesses in London have seen an increase in permanent staff requesting to move to contract roles in the past three years. The IT industry has been particularly hard hit by this shift, with the number of permanent jobs in the sector falling 11% month on month.
Leaving the security of a permanent job to a contract work can be a daunting change however and not one to be taken lightly. Here are five things to consider to help make the transition from permanent to contract as smooth as possible.
What is a contractor?
Firstly, its important to establish the key differences between a permanent employee and a contractor before making the move.
Contractors are self-employed individuals who provide services to a business. Generally, they’re hired for their specialist skills, and or to help a team during busy periods. Employees on the other hand, have an employment contract and are provided with regular work and employment rights.
More people are considering making the shift from permanent employment to contract work to have greater flexibility and control over their work and the projects they work on.
What to consider when making the moving:
1. Plan for the long term
Often a permanent employee will decide to switch to contract work after identifying a specific opportunity. However, its important to plan for the long term and research the market you’re about to pursue. Contracting is a competitive market so it is important to make sure you have the in-demand skills needed. Establish your biggest strengths and how you can bring value to a business. This will bring clarity to your big decision.
It is also important to make sure you give full notice to your permanent employer in time to start your contract to avoid breaking your previous employment contract .
2. Align your skills
When interviewing for contract work, remember the client isn’t looking for a permanent employee within the organisation, instead they’re looking for a specific skillset to solve a specific problem. It’s important to constantly tailor your CV to each contract to ensure the client knows that you have the required skills and experience using those skills.
Always make time to maintain your skills and keep up-to-date with developments in your industry. Attending events, watching webinars and reading industry news is invaluable to help broaden your understanding of what is going on around you.
3. Stay on top of your finances
One of the biggest change when switching from permanent employment to being a contractor is that you will need to manage your finances yourself. Before you start the contract, establish your likely expenses. Prepare to keep all receipts and log expenses in order to make your company accounts simpler.
- The big decision- limited or umbrella?
Contractors can be paid in one of two ways: through a limited company or umbrella company. An important step is to decide whether you’re better off working through an Umbrella Company or starting your own Limited Company.
An umbrella company is a popular choice for many contractors due to its simplicity and convenience. When you work under an umbrella company, you essentially become an employee of the company, with all your contracts and payments managed by them.
Operating as a limited company has immediate tangible benefits and gives you more control and flexibility over your business. While it involves additional administrative responsibilities, it also offers potential financial advantages.
- Research and understand your IR35 status
Understanding the legal requirements behind contracting is another key step you need to be aware of. IR35 is legislation designed to catch ‘disguised employees’ and can affect how much you take home, if you are operating through a Limited Company. IR35 status will change depending on your working circumstances.
As more and more companies are looking for greater flexibility when it comes to employees, there are a wide range of opportunities for contract workers. If you are considering the move, or already have and you’re looking for your next assignment, its important to speak to an expert for advice and guidance.