Understand the implications

Contracting provides people with the flexibility to work hours or seasons that might be more appropriate for their circumstances. However, it’s important to acknowledge that contracting comes with a reduction in job security.

You will need to be willing to look for new work regularly so you’ll have to be willing to network. You need to make sure there is a demand for the skills you provide so doing some research beforehand is critical to ensure that you will have an active client base to target.

Get comfortable with finance

Often people who contract do so through their own business (but not always). If this becomes the case for you, you need to be willing to understand your business's finance so that you can ensure successful financial outcomes.

Even if you don’t contract through your own business and take on fixed-term contracts or other PAYE/NIC arrangements, you will need to assess the details regularly to ensure you are managing finances appropriately including paying the appropriate tax for your given situation.

If you do set up your own company, you will have to set up a company bank account and manage your companies tax affairs.

Tax and IR35

IR35 is legislation that ensures that the benefits and tax system used by genuine contractors is not abused by anyone who could be considered a permanent employee when engaged with an end client. HMRC has a detailed set of standards that determine whether a contractor could be considered an employee. These must be considered whenever taking on a contract and should be discussed with an accountant or lawyer.

HMRC has evolved the IR35 legislation for the Private sector, on 6th April 2021 (they were already operating in the Public sector). This makes the determination of IR35 status the responsibility of the end client (in most circumstances) and places liability for failure to determine this with them (in many circumstances).

In some circumstances, when working with "small" companies, the IR35 status determination may remain with the contractor, so it’s important to get this right and again this should be discussed with a specialist accountant.

Setting up your business

The two main ways contractors operate are either through their own limited company or through an umbrella company.

With umbrella companies, you will be paid a salary on a weekly or monthly basis and they manage most of the admin incl. PAYE, and NIC payments where these are required.

Alternatively, you can start your own limited company which can result in greater financial gains due to efficiencies but is also a greater risk so consultation with strong accountants in this space is essential.

All those considering contracting should discuss with independent advisers. We are happy to recommend Richman & Co, who can both advise on the right medium for you based on your aspirations and if necessary can set up the new business for you.

Insure yourself and your business

It’s important to set up your business (if that’s how you operate) expecting it to succeed but planning for the worst. Like any professional services company, it’s important to take out professional indemnity insurance in case a client claims negligence or sub-standards in the delivery of your work. Other insurance policies commonly taken out by contractors through their business include:

• Public liability insurance - to protect against claims from members of the public who may be injured or have their property damaged as a result of your work

• Medical and life insurance - you will no longer receive benefits as a contractor so it is common for contractors to take out medical and/or life insurance privately.

• Income protection insurance - not required but protects you and/or your family should you fall into long-term sickness and no longer be able to run your business.

All insurance options should be discussed and reviewed with an independent qualified insurance broker but Launch Lab requires any contractor that it works with to have both Professional Indemnity and Public Liability and Employers Liability Insurance.

Sell, sell, sell

You must be willing to get out there and sell your services to ensure that you secure contracts. As such ensuring that you have the right marketing tools in place and are willing to network will be key.

There are of course specialist agencies who can find you work but use your network and LinkedIn and of course Launch Labs to look for future roles.