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Start-Up Guide :: Risks and rewards of IT contracting

Published on Jan 21, 2009 |

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You need to have a specific set of skills to succeed as a long-term IT contractor.

Alongside strong technical skills, you will need to be able to adjust to new roles quickly, get on well with all sorts of people, and be proactive when times are tough. Having said that, you don't often hear of people who have left contracting because they preferred being 'permies', which shows that many types of people join the contracting world and make a success of it.

Risks

As a contractor, you're responsible for ensuring you are 'in contract' as much as possible during your career. If a role is coming to an end - it is up to you to facilitate a renewal, or have a fresh role lined up. There is plenty of potential help along the way - from your accountant, agents, clients, colleagues and other people you form a bond with along the way. But, fundamentally, you need to be a self-starter to succeed as a contractor.

The main risk, obviously, is that you could find yourself out of contract - particularly when the economic climate is poor (as it is in 2009). Although you could potentially be in contract for 52 weeks per year, many contractors work out their finances based on a 44 week working year to allow for planned breaks, and time spent seeking new roles.

Unless you want to be forced back into the world of permanent employment, you should always try to keep money aside to support you when you're out of contract - possibly the equivalent of 3 to 6 months' income. Make sure you keep your tax liabilities in a separate bank account, as you must always be able to settle these bills, regardless of your contract status.

Rewards

For the vast majority of IT contractors, the rewards from contracting far outweigh the risks you take.

The potential financial rewards reflect the risk contractors take in their business lives. Assuming you've negotiated IR35 successfully, you should be significantly better off that you were in your permanent IT life.

The feeling of freedom is, to many, as important as the potential rise in income you'll see as a contractor. You can take time off between contracts, experience roles in a wide variety of companies, and work with a wide variety of people across client sites (and across continents in some cases).

The Current Climate

This is clearly not the best time to be starting out as an IT contractor. There are weekly reports of across-the-board rate cuts, and the number of contract roles advertised has dropped significantly since mid-2008.

For contractors who've been through previous economic downturns, the advice is always the same: Make sure you have money set aside for bad times, work extra hard to secure contract work, keep in touch with old colleagues, accept contract renewals unless you've got a new role nailed down, and most of all - be prepared to lower your rate expectations for the time being.

IT contractors are typically the first beneficiaries when the economy climbs out of the trough, and despite the difficulties contractors may experience over the next year or so, most would still rather be it the contracting industry than outside it.