Working on Contract     

Meet Connie Contractor!!

Connie Contractor loves the freedom of working freelance.

Connie has several years of IT technical experience and really can't be bothered to climb the 'career ladder' or pursue a job in management.

Contracting allows her to earn good money doing the job that she really enjoys while providing the opportunity to 'pick and choose' where and when she works.

Here to Stay

The concept of contract working is very well-established in the IT field.

Some years ago, working freelance was considered 'less-than-respectable' but most computer people now spend some part of their career contracting.

Contractors can be found at all levels of the IT industry, from help-desk support to senior management.

Basic difference

The basic difference between contract and permanent jobs is that contractors are generally paid only for the hours that they work with no provision for holidays, sickness or other 'fringe' benefits such as pensions and insurance.

In compensation, contractors tend to earn higher hourly rates and can often benefit from paid overtime which is not traditionally available to 'white-collar' permanent staff. 

The tax regime is also more favourable though it has become less so in recent years.

In most cases, contractors attend the client site during normal working hours and report to an assigned Client Manager.

As with permanent jobs, holidays and other days off should be arranged with the employer and unavoidable absence should be notified as soon as possible.

Although there are some 'consultant' types in the market who can direct their own workload, most contractors are not free to come and go as they please.

Flexibility is the key to successful contracting and there is unlikely to be a rigid job description or established working practices.

There is probably a tendency to give the more-interesting work to permanent staff but most contractors learn to 'take the rough with the smooth'.

When the client says "Jump", the only question is generally "How high?".

As a contractor, there is no employer to provide a structured career development although it is often possible to gain new experience by being 'in the right place at the right time'.

In reality, most permanent employees don't benefit from very much training or planned personal development which is why so many of them leave to earn more money as contractors.

Contracts tend to start-off on a 'short-term' basis of perhaps a few weeks with one week's notice.

Depending on satisfactory performance, large clients generally extend in 3-to-6 month chunks while increasing notice to maybe 4 weeks.

Although permanent jobs are perceived as being more long-term and secure,  contracts often run-on for several years on the same site.

Of course, with contracting there are no guarantees.

The bulk of IT contract work is available through agencies who market the contractors, negotiate the contracts and provide prompt payment on a weekly or monthly basis.

There are contractors working directly for clients although employers prefer to use short-term external resources 'at arms length' for the very reason that they do not wish to become embroiled in 'personnel' issues.  

Most 'agency worker' IT contractors have their own Company with the only legal alternative being payment under PAYE.

We tend to encourage new contractors to operate their own company though  'umbrella company' organisations, which offer the benefits of Limited Company working without the administration, have become increasingly popular in recent years.   

Contractors working directly for clients fall outside the scope of the Inland Revenue 'agency worker' rules and can theoretically be 'self-employed'.

In most cases, the contractor maintains a weekly or monthly timesheet which is signed by a client representative and submitted to the agency for payment within a few days.

There is still scope for reduction of tax liability through the use of a Company although Tax cannot realistically be avoided altogether.

Day-to-day book-keeping shouldn't be too  difficult or time-consuming and we tend to recommend that most IT contractors do it themselves.

However, it is well-worth spending a few hundred pounds on the services of a good accountant for competent financial advice and year-end accounts

Alpha are also very experienced in handling the accounting requirements of IT contractors and offer a fixed-price service with quarterly billing.

They can also organise company bank accounts, if required

Shout 99 were originally a campaigning organisation set up to fight the IR35 tax legislation – Their regular email newsletter is a useful way of keeping in touch with contracting issues.

Eurofile also provide a telephone and on-site PC support service aimed at small businesses and individuals - Details on: www.eurofilesupport.co.uk

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