Everything you wanted to know about contracting but were too afraid to ask – part one

Contracting has plenty to recommend it. There’s no denying the upside: it’s the chance to work flexibly by changing projects regularly, experience new working environments, and earn more money than you would as a salaried employee. Making the move for the first time can be daunting, so in this post, we walk you through all the various pro’s and cons of working as an IT contractor.

Start with why

Firstly, it’s worth asking yourself why you want to try contracting. Your decision may reflect the stage of your career. A permanent role may be best suited to someone supporting a family or with mortgage repayments requiring a fixed steady income. Contracting offers an opportunity to maximise your earning potential but in a flexible and less predictable capacity.

Check the market

If you’re currently in a permanent role but itching to make a change, it’s worth doing some due diligence about whether the market for your specific skills is as buoyant as the broader IT sector. Check job boards regularly to see how frequently new opportunities matching your skills appear. Speak to industry experts who are in the trenches to get a rounded picture. What kinds of projects are out there, and where are they based? Would you be willing to travel if the right offer came along? Remember that contracting carries risk: if the market deteriorates, non-permanent staff will be the first to be let go.

Earning power

Before making the leap, research the pay scales for roles matching your skills. If you’re moving across from a fulltime permanent position, you should be aiming to earn at least 15 to 20 per cent above your current salary over the course of a year. Remember, there is a cost to giving up potential benefits such as company pension contributions and healthcare plans. A quick way to calculate the desired amount is to multiply the available working days per year by your typical daily rate. Once you subtract weekends, bank holidays and annual leave, you’ll be left with around 235 days.

Read the fine print

There are caveats aplenty here: although IT contracting day rates look good by themselves, you’ll need to pay tax – and as a contractor, that’s up to you. What’s more, a client might not need you every single day. We recently saw an opening for a technical architect, offering what seemed like a superb day rate of €900. On closer inspection of the small print, the contract stipulated just 90 days per year. Anyone in a permanent role earning more than €90,000 with benefits would have been losing money by taking that offer.

Look very closely at the terms and conditions of any agreement: as a contractor, your availability will invariably be linked to a client’s project. You may not be needed every day, and this could limit your ability to look for other work. In other cases, the contract duration might be up for negotiation. Some clients may be willing to commit to a longer arrangement in return for you reducing your daily rate. Certainty counts for a lot as a contractor, so it’s up to you to decide whether it’s worth accepting a lower amount for a three-year deal instead of having to go back out to the market in 12 months’ time.

In the next part of the blog, we’ll cover the different contracting models you will have to pick, along with tips on managing your leave time and ensuring your skills stay current.

If you're thinking of IT Contracting, check out our current vacancies.