The Advantages Of Contracting in the UK 

The financial benefits of contracting are well understood. Most IT contractors can earn at least 2 to 3 times the salary of a permanent person in the same role.

The average contract rate is approximately £40 per hour (compared to the average IT salary of approx. £35,000 per annum). Of course, rates vary according greatly depending on your skill set, the buoyancy of the market and the location of the contract.

Contractors are much more independent than their permanent colleagues - freer to decide when and where they work and for what length of time.

There is a degree of risk involved too - you are on your own, responsible for finding roles, negotiating terms and conditions, managing your finances and accepting that the market fluctuates. The contract market crashed during the recession of the late 1980's and is relatively quiet at the moment with uncertainty about IR35.

Although IR35 will undoubtedly change contracting in the short term, the principle of obtaining increased earnings and flexibility of work on short term contracts will remain.

Finding Work

There are several key ways to find your first contract role. The majority of IT contractors use Internet sites (such as Jobserve) to find vacancies posted by recruitment agencies. Some contractors may choose to work direct for clients, rather than via agencies.

The Internet is the perfect medium to use for job hunting - a wide number of search engines will provide you with access to the majority of contract vacancies on offer at any given time. Type in the type of work you are looking for and the location, then scan the results for roles you are interested in.

Once you have found a contract which appeals to you, simply email your CV via the search engine to the agency advertising the role and follow up with a phone call to emphasise your interest in the job. It is worth expressing an interest in a number of similar roles to improve your chances of securing the right job.

Agencies are often bombarded with CV's for popular contracts, so telephone contact will improve your chances of getting an interview. Persistence will do you no harm.

There are a couple of things to be aware of when searching for jobs online. Many clients will have a number of 'preferred suppliers' (agencies acting on their behalf), so you are more than likely to see the same job posted several times on the major job boards with different reference numbers. The recruitment industry has also come in for some criticism for posting 'phantom vacancies' - false jobs with widespread appeal, the sole aim being to capture a large number of fresh CV's with minimal financial outlay.

We are also seeing the emergence of 'contract direct' sites which aim to place contractors in touch with clients directly, often charging less commission than traditional agencies, so you should check these sites out as well. In these cases, you will work directly for a client, and not via a recruitment agency.

You may not have as much choice over the location of your first contract, so you must be flexible as far as possible. If you are based in South London, you may need to travel to Brighton, or North London, for example. Again, the role may not be an exact match to your skillset, but this is the nature of contracting - the more experience you have as a contractor, the fussier you can be.

Don't be afraid to push for the rate you want. Although there are market-driven guidelines to average rates per skill area, clients will pay up for the right person. For a guide to market rates, try Contractor UK's Market Reports.

If you find work through an agency, find out what commission they charge (typically 20% or thereabouts). If the client won't pay any more for your services, maybe the agency should give up some of their commission!

Most contracts are 6 months in duration. Of course, there are some shorter term roles available, but few will be for longer than 12 months. Most contractors will also have had a series of renewals during their careers, so you may find yourself at the same location for several years if this suits.

Your Contract

Once you have secured your first contract role, agreed a rate and a start date, a contract needs to be signed between your Invoicing Company and the Recruitment Agency (or between your Invoicing Company and the Client if you are going direct).

The vast majority of agencies, if not all, require you to invoice using a limited liability company. This can be done from your own limited company (often referred to as a Personal Service Company) or from a managed company (often referred to as an Umbrella Company). Some agencies allow you to become "PAYE" through their own payroll service, although this is the least tax beneficial option available to a contractor.

With IR35 now law, it is essential at this stage to run your contract via an expert who can assess the effect of IR35 on your business.

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