Contracting is different from permanent employment. As a contractor you will typically be hired by firms to work on a specific project for durations ranging from weeks to months.
Firms hire contractors because they can hit the ground running, get the job done and then leave. The client-contractor relationship is business-to-business, so the client avoids the employee baggage like payroll, pensions, holidays, sickness, and so on.
Adapting to contracting can be difficult, particularly for contractors who keep the same mindset as a permanent employee. This often results in a misalignment of expectations with reality, causing some go back to permanent employment.
To be a successful contractor requires a change in mindset, which is the purpose of this series of guides. Once you start thinking like a contractor you'll find you slot into the contracting lifestyle much easier, and more importantly will enhance your "contracting skills", which means you'll secure all those lucrative contracts.
- Contractor interviews
- Contractor marketing
- Managing finances
- Negotiating contract rates
- Contractors rights
- Time off
- Working with clients
Contracting mindset tips: contractor interviews are sales meetings - you’re a product
Clients want to hire a contractor who can offer a solution for their requirements & the interview is the sales pitch to sell the client your product.
Contracting mindset tips: Your CV is your marketing brochure and a key sales tool
Clients choose contractors to perform a business service from a pool of many suppliers, so a key marketing tool is a contractor’s CV.
Contracting mindset tips: contractors are not paid the same as employees
Contractors are responsible for paying employment costs and taxes themselves so employee salaries and contractor fees are not directly comparable.
Contracting mindset tips: contractors can claim expenses formerly paid by themselves
Contractors claim expenses out of pre-tax earnings and offset these costs against profits, thus reducing tax. Employees pay out of their own pockets.
Contracting mindset tips: flexible contracting income allows a choice when paying tax
Contractors have a degree of flexible control over how they manage their contracting income and when to pay tax, which employees can’t possibly have.
Contracting mindset tips: negotiation based on margins is futile
Contractors get paid according to the market forces of supply & demand. Negotiations based on margins will fail, because agencies apply market forces.
Contracting mindset tips: Agencies & clients can’t change terms & conditions at will
Contractors have an agreement with their client to supply certain services in exchange for payment, so any changes in terms must be mutually agreed.
Contracting mindset tips: failure to consider the opportunity cost can be expensive
Contractors are often tempted to take contract offers below what they’re worth, but the opportunity cost can end up being more expensive than waiting.
Contracting mindset tips: there are no such things as “contractors’ rights”
Contractors engage with their clients on a business-to-business basis. So, just as with any other business deal, it doesn’t qualify them for “rights”.
Contracting mindset tips: save money for sickness, holidays and time out of contract
Clients only pay contractors when they are delivering a service and, unlike employers, do not include paid sick days and holiday as part of the deal.
Contracting mindset tips: you can only send a sick note to yourself
Contractors who can’t work because they are ill can only send a sick note to one employer, which is their own limited company, not their client.
Contracting mindset tips: clients don’t care about your career, nor should they
Contractors are hired to provide an immediate solution to a client’s problem. Responsibility for career development & training lies with contractors.
Contracting mindset tips: clauses preventing you bypassing agencies are enforceable
Restrictive covenants stopping contractors working direct for clients are enforceable & protect the investment agencies have made brokering the deal.
Contracting mindset tips: If you don’t like it, just quit and move on
Contractors can develop skills allowing them to pick great assignments, enabling them to quit contracts that aren’t challenging or enjoyable.
Contracting mindset tips: deliver what you promise or expect to pay the price
Contractors should always deliver what they’ve committed and contracted to deliver; if they fail to, they should expect to pay the price – literally.
Contracting mindset tips: think in terms of the value you can offer your client
Contractors often sell their technical skills and expertise, yet clients are more interested in the value a contractor can add to their organisation.
Contracting mindset tips: you’re responsible for managing your career, not the client
Contractors are responsible for managing their own careers. Attempts by clients to do so must be resisted or contractors could pay tax as employees.