How To Start Making Money as a Tech Contractor
The quickest way to make serious money in the web/mobile industry is contracting.
Contracting is becoming a temporary staff member for a company to do a particular piece of work. Generally you are an expert in an area they need help in and they pay a good rate for you to solve their problems.
Sound like freelancing? Contracting is a variant on freelancing, in that you are usually…
- Working on site for them (although remote work is becoming more common)
- Working solely for one client at a time
- Working through a recruitment agency that pay you rather than being paid by the client
Finding contract work
When you first set out as a new contractor, the most common way of finding work is through a recruitment agency. Your first task when approaching recruiters is to write an up-to-date CV with your relevant tech skills and education for the sort of work you want to do.
Use big job boards like Indeed, Jobserve and Jobsite to search for work that matches your skills, or go direct to the websites of the recruitment agencies themselves. A good IT recruiter in Brighton is Skillsearch. Search regularly until you find a vacancy that fits with your skills and apply for it through the form on the page. The sites also offer jobs by email which will send you new vacancies matching your search as they are posted.
Or even easier, take your up-to-date CV and register yourself with the big job boards mentioned above. Choose to make your CV public and it will become available to hundreds of recruiters. They will then contact you direct about contracts they have which your skills match. If you only have time to get on one job board, do Indeed as they have become the 800lb gorilla of the industry.
Requirements for contract work
To work through a recruitment agency, you will need a Limited company or Limited Liability Partnership. Most common is a Limited (Ltd) company.
There are services called “Umbrella Companies” which will allow you to set up a company temporarily and will handle all the paperwork for the company. I used one of these when I was first contracting as I knew I only wanted to do it for a limited time. Honestly, they are almost as much faff as having a Limited company so if you are going to contract for more than 2-3 months, I recommend setting up a Limited company rather than using an Umbrella.
You can use an accountant to set up a Limited company for you, or a service like Go Limited, offered by Crunch, an online accountancy service. If you need to set up a Limited company because you don’t have one, you’ll also need a business bank account to go with it, you cannot run a Ltd company from your normal current account.
How a contract works with a recruitment agency
The client who needs the work done hires a recruitment agency to find people to fill that temporary position. The recruitment agency then finds a person, you, who has the right skills to fulfil the work. The recruitment agency will pay the person an agreed hourly or daily rate, they will charge the client more than this, usually between 10-30% more than the person doing the work gets paid, depending on what they have negotiated with the client and the worker.
Usually, you will not know how much the recruitment company is making on top of the rate you have agreed with them.
The client and recruitment agency will have a business contract that controls their relationship. The contractor and the recruitment agency will have another business contract that controls their relationship. Read the one between you and the recruiter before you agree to it.
Generally the contract will not allow the end client and the contractor to talk about who is being charged what. Obviously this does not stop it happening in some cases, at which point you can work out what the recruitment agency is making from the deal.
Some contractors get grumpy with the amount the recruitment agencies make. To them I say: You try cutting a deal with a company, especially a large multinational company, to go in and do a piece of work for them, then you can make that extra money. It’s not impossible, more experienced contractors often work direct for clients without a recruitment agency in the middle. They usually have, like successful standard freelancers, put effort in to building up a good network of contacts, and/or have skills that are particularly in demand so have been approached direct by the client.
While the contract is running
Commonly, you will be working in the office of the company you are contracted to. This may mean a lot of travel, or staying somewhere local to the work. If you stay in a B&B or hotel of some kind, remember to keep your receipts for it and pay for it out of your business bank account as it is an expense. Also you can pay a small amount out of the company for your food as “subsistence,” ask your accountant what a reasonable amount for this is as it changes over time.
You will usually need to fill in a timesheet of some kind to show the recruitment agency how many hours/days you’ve worked in the contract. These are collated once a week, but filling them in daily if they are available is always a good habit as if you miss logging your time, you will have to jump through some hoops to get paid for the time you were working and didn’t put on your timesheet.
The recruitment agency will be presenting these timesheets to their contact at the client, who then checks and agrees what hours were worked. The recruitment company will invoice the client for the work done by the contractor(s) working on the project. They will also pay you, the contractor, for the hours you have worked at the rate they agreed with you.
When entering in to a contract, it is worth checking how often you will get paid and how soon after the timesheets are submitted. When I first went contracting, I didn’t realise I should have been paid weekly and was expecting it to be monthly, so it was five weeks until I queried why I hadn’t been paid and they found a problem with my details that had help up payment.
It is very common for the initial contract you have agreed to be extended. People are terrible at estimating projects so often need workers for longer than they thought, or they use an initial piece of work to judge which contractors they would like to retain for other work.
If the client would like to extend the contract, they will either tell you direct or tell the recruitment agency who will tell you. If you agree to work for them for longer, make sure the recruitment agency knows this – it can be as simple as emailing your contact within the agency. They will need to know the contract is going on for longer to set up the paperwork between their company and the client, so they can bill them and pay you for the extra time.
Potential problem: IR35
The UK government have some legislation called IR35 which tries to stop companies hiring contractors who are then treated as full time employees, without all the associated costs and support (National Insurance payments, holiday, redundancy payments, etc.)
To ensure it does not look like you are being treated as an employee, make sure you are signing a contract that does not fall foul of the IR35 legislation. If you’re signing with a recruitment agency, ask them about this, and if you are worried about it, find a solicitor who can review your contract before you sign it – if you know any freelancers or contractors, ask them who they use to check a contract, or ask your accountant if they know someone who can help.
Learn more about IR35 on IPSE, an organisation set up to help contractors who are worried about IR35.
Getting the next project
If your skills are in demand, you will find recruiters will continue to contact you while you are working in your contract. This can feel annoying, but is very useful. Reply and say you’re in a contract right now, and tell them when you’ll probably become available. You want work offers to be coming in when you are near the end of your contract so you can line up the next piece of work.
No one getting in touch? Hit the job boards again and start looking. The next contract should be a simple application away.
Don’t forget to update your CV to show the contract you have been working on, and re-register it with the big job boards so they have the latest version. Recruiters will like to see someone who has successfully completed a contract – it gives them confidence you know what it is like to work as a contractor, that you’re reliable and safe to hire for their own clients.