Life as a first time Contractor

Life as a first time Contractor

So, you’ve left your permanent job, and decided to embark on a new life as an IT contractor.

Although much of the actual work you undertake may be the same, almost all other aspects of your life will change forever when you join the contracting world.

I spent several years contracting as a data analyst for some large London-based firms before turning my hand to running information sites for the contracting industry.

Drawing on my own experiences and those of many past colleagues, this article covers some of the situations and people you are likely to encounter as a first timer contractor.

The Agent

Many first time contractors find their first contract roles via recruitment agencies, either as a result of a direct CV submission, or via ad postings on the leading IT job boards, such as Jobserve or Technojobs.

Agents play an essential role in connecting their clients with suitable contractors, and unless you have found a role working directly with an end-client, then you will need to get used to the way agencies work.

Most contractors have a horror story to tell about their dealings with agents, however in reality, contractors need agents, and agents need contractors – it’s a mutually beneficial relationship.

A client will typically provide an agent with a list of roles they need to fill, and the budget they are prepared to pay.

The recruitment agent will then contact prospective contractors based on the skills and experience required by the client.

Agents make their money by taking a percentage cut of the gross contract rate paid by the client. Typically this will range from 10% to 25%.

Most clients will only recruit contractors via recruiters, for a number of reasons, and therefore, you should view agents as a necessary cog in the recruitment chain – even a ‘necessary evil’ if you are a cynic.

I’ve witnessed many ‘agency tricks’ in action over the years – either personally, or anecdotally via people I’ve met over the years. Essentially, they typically revolve around agents trying to source new work – and the most profitable method for doing this is by using the eyes and ears of contractors they already have on assignment.

Some typical ones include; “What’s your project manager called again?” (where the agent never knew this information in the first place – they’re trying to gain new leads), and “The client’s only willing to pay £40 per hour, maximum” (when, in fact, there’s a fair amount room for negotiation).

These ‘tricks’ are part of the trade, and many agents I’ve met over the years have a story or two to tell about some of the ‘dreadful contractors’ they’ve dealt with too!

Always be professional in your dealings with agents, and keep in touch, as recruitment is very much a people business, not merely a numbers game. If you stand out in an agent’s mind as a good person to deal with, they are more likely to consider you when future contract work is available.

The Accountant

You’ll soon find out that your accountant is your most important ally as a contractor.

When I first started as a contractor back in 1998, the web was in its infancy, and almost all accounting-related admin had to be conducted by post. Each month, I’d stuff all my receipts, timesheets and official looking paperwork into a large envelope and send it off, hoping for the best.

In all, I’ve used six different specialist firms over the past 15 years; two were truly awful (missed HMRC deadlines, poor communication), another two were adequate but overpriced, and the other two pretty impressive.

I’d say that the worst thing an accountant can do is to make a contractor feel uncertain – typically by not answering emails on time, or providing reassurance on any number of tax issues.

My first experience of a contractor accountant was in June 1998 – I’d chosen a firm which had a branch close to where I live in South West London. I’d pre-arranged a meeting with the senior accountant to go through all the basics, however when I arrived at the office, a very apologetic young woman explained that the accountant had been suddenly called away on ‘urgent business’.

Later on, I found out that the accountant had actually been hiding in a cupboard, half cut, after over-indulging at lunchtime, and had sent her assistant out to provide me with some half-baked excuse.

This could have been a one-off (amusing) event, but unfortunately, the customer service I received over the next 18 months was poor, and I felt responsible for chasing the accountant to submit paperwork on time, rather than the other way round.

Over the subsequent years, I’ve found that the majority of contractors rate the quality of service they receive as being the most important factor when choosing an accountant, more so than price.

You should try and choose an accountancy firm who have no entry or exit fee's to avoid the fun and games i experienced - knowing you can leave without any worries - plus the recommendation from an existing contractor – someone you trust - is also priceless.

Your First Contract

When you are hired as a contractor, you will be expected to settle in fairly quickly, and start work right away.

You may have been assigned a specific task (such as migrating code from a legacy system to a web-based platform), or receive a more general remit (such as analysing the current working practices in a unit of a large corporation).

You may be the sole contractor on a project (although I’ve found this to be rare), or in a large team – mainly made up of contractors, with a permanent manager, or even a contract team or project leader.

A one-month contract I took on, when I was a mere 26 years old, involved me showing a large team of staff what ‘search engine optimisation’ involved, in the very early days of the Internet.

Another longer contract saw me working with dozens of other contract data analysts and developers on a major database upgrade for a FTSE 100 company. It was a very cushy role, as I was ‘protected’ by a gang of older female contractors. I didn’t do a great deal of actual database design work, but I learnt a great deal about team dynamics, and how important it is to get on with your colleagues – whether they are permies or fellow contractors.

You can acquire a great deal of new industry and technical experience on a contract role.

IT contractors are sometimes pigeonholed as lacking social skills, but of course this is a sweeping generalisation. I’ve met project leaders who can barely string a sentence together, and hardcore developers who are very extroverted – to the point of being theatrical in some cases!

Being able to communicate is an essential part of being a contractor – both to gain the trust of your colleagues, and when demonstrating your ability to complete a task.

Although you may have taken a contract based on a vague description of the task you have been asked to undertake, you should always ask for a clear outline of what is expected from you.

I worked for a large Japanese car company in Chiswick for my second contract, back in 1999. I was expecting to conduct some data analysis on one of the company’s databases using Oracle’s Designer 2000, however not only had my remit changed as soon as I arrived, but by the end of the project I was working with the newly-formed web team on an interface between an ancient stock management system and a fledgling online search facility.

Luckily, no issues ever arose on that particular project, however at no stage was my contract description changed to reflect the reality of the situation.

At the same time, flexibility is a key characteristic you need to possess as a career contractor, and dealing with changing requirements is something you need to expect on any project.

Renewals

Your initial contract will typically be for 3 or 6 months, and in many cases, you may be offered a renewal. I have met some contractors have worked on the same project for over five years, although one or two years is more typical.

Life as a first time Contractor

You should approach contract negotiations with an open mind, and with a sense of reality.

If the economic climate is challenging, for example, you’d be wise to secure a contract extension until more opportunities come your way. It may also be prudent not to be too pushy when it comes to increasing your current rate.

Conversely, if you feel that your position is strong, and you have made yourself indispensible to your team, you have more room to manoeuvre on the contract rate front.

I was offered an six month extension to my first contract, and despite being offered a renewal of the same length, I opted for a three month extension as I didn’t want to be stuck on the same project so early in my contracting career.

Looking back at my first experience of contracting, I should probably have stayed longer, and learnt more about working as a contractor, before moving on.

Contract work was abundant in the late 1990s and early 2000s, and there were less contractors competing for the same roles, so the ‘opportunity cost’ of leaving a role in the expectation of a higher rate elsewhere was fairly low.

These days, there are far more contractors fighting for the same work, and average rates are not far off what they were a decade ago, so I’d urge any new contractors to think carefully when offered the chance to extend their first contracts, as the old phrase ‘the grass is always greener’ is not necessarily true.

Permies

You may have heard that some employees are not so keen on contractors – mainly because you may be earning twice as much as they do. Others may dream about becoming contractors themselves, but have been unable to take the leap.

In some cases, departments have cut down on permanent hires, and replaced them with contractors, to lower the official headcount.

The age-old advice is not to stand out when you start a new contract – try to fit in, and don’t boast about your contract rate.

I’ve received a few comments over the years from permanent workers, always light-hearted in nature – such as the ‘flash Harry’ remarks I received when I parked my new Mark 3 Golf GTI in a rarely available space right outside the entrance to the client’s vast open plan office. I didn’t make the same mistake twice!

On the same project, I’d returned to a department I’d worked in as a permie myself a mere two years beforehand, but at a rate three times higher than my colleagues. This did lead to a fair few light-hearted comments at my expenses, but nothing I couldn’t handle.

On the team I joined, there were over 50 IT contractors, and a mere half dozen permanent staff (in managerial roles), so this provided me with a great deal of security – perfect for my first contract – and made up for the mild awkwardness I felt about rejoining an old department as a contractor aged 25!

Overall, I’ve found the banter between contractors and most permies to be good-natured on the whole, and provided you keep your contract rate to yourself, and don’t show off, you can only be judged on your performance.

Looking ahead

Perhaps the best advice I could give about life as a first time contractor is to treat your first contract as a valuable learning opportunity. As well as the practical ‘on the job’ experience you will gain on your first contract, you can learn a great deal from veteran contractors, who have seen it all before, and can typically provide some amusing anecdotes as well as practical advice on living as an IT contractor.

We hope you enjoyed this article.

For all other life stories, visit our Life as a Contractor Case Studies hub here, or click on the links below:

Why not also read SJD's plain English guide to Moving from Permanent to Contracting here. 

For more information or further advice on becoming a contractor and working through your own Limited company, call 0500 152500 / 01442 275789 or email jessica@sjdaccountancy.com to speak to a member of our Client Services Team.

SJD Accountancy

SJD Accountancy are the UK's largest specialist provider of fixed fee, Limited company accountancy services to contractors; we've been acting for contractors across the UK since 1992 and have more than 15,000 clients.

We are the only national specialist firm of contractor accountants with offices nationwide. SJD Accountancy has more qualified staff than any other firm in our market with qualifications from the following major tax and accountancy bodies - ATT, AAT, CTA, ACCA, CA, ACA and FCCA.

  • Unlimited face to face meetings. This is a unique service only SJD Accountancy offers - unlimited face to face meetings across the UK - tax is complicated and sometimes only a meeting will do.
  • UK's Largest contractor accountants with more qualified staff. No call centres, no outsourcing, no automated call handling. Simply telephone, email or meet your own dedicated accountant face to face.
  • Money back service guarantee. All your Emails received by 4pm on any normal working day will be answered the same day. Should it be necessary to leave a telephone message it will be answered same day/following day latest or we will make a full refund of that months fee.
  • Outstanding reputation. We have won more awards for customer service and accountancy excellence than any other firm in our market, including: Best Accountant for Contractors, Accountant of the Year and Best Professional Service Team to name just a few.
  • All inclusive low cost fixed fee accountancy package which includes completion of accounts*, payroll bureau, dividends and corporation tax computations, personal taxation, free bookkeeping software, your own dedicated accountant* and all company returns for a fixed fee starting from £120 plus VAT per month. Check our packages for more detail.

If you have any questions about contracting or would like any further advice please call our new client services helpdesk on 01442 275789 or email: janice@sjdaccountancy.com. Our new client services helpdesk is open Monday to Friday (8am to 6pm).

Appoint SJD Accountancy and never worry about your tax or accountancy affairs again.

Form your own Limited company with SJD - our same day online company formation service includes company bank account set up, VAT/PAYE registration and advice on optimum share structure. 

You may also find the following pages, guides and case studies useful:

*If you would like us to complete your company year end accounts we simply ask that you have been a client of SJD for one year or have made 12 monthly payments. All accountants are part or fully qualified.