Beginners Guide to IT Contracting

This guide is based on many years of experience working as a contractor. The guide's purpose is to give you practical guidance and a snapshot of contracting work specifics. It does not cover financial, tax, business, and limited or umbrella contracting aspects. There are plenty of websites where you can find all the information you need. 

If you are considering making a change from a full-time job to contracting work you may find this useful. If you are a recruiter dealing with or managing contractors you may find some observations interesting.

Who am I to tell you this?

I have 14 years of IT work experience under my belt, and the last six years I have worked short- to medium-term contracts in Australia, the UK and Qatar for various organizations—large and small, private and public. My specialty is eLearning and that may include instructional design, visual design, web and multimedia development and so on. I've tried to keep this guide neutral, but of course I can only talk about my specific professional field and the places I've lived and worked.

Part I

Contracting vs permanent job

So you’re ready to quit your job and leave your psycho boss and whining colleagues to become your own boss? Congratulations! The decision is actually hard to make and if you've jumped the ship or are just considering it, you’re halfway there. Personally, my contracting experience has been positive. It took a while to get to the point where I can come in the middle of the project, work my way through and successfully complete it. Let's not forget that having fun and making lasting professional connections is also very important. 

This does not come straight away. At the beginning I was more stressed and worried. Sometimes it seemed that I was spending more time talking and negotiating rather than actually doing a job I was contracted to do. When I was working full-time there was no need to face clients, search for compromises and deal with financial aspects—life was pretty simple. Contracting gives you more freedom, but this freedom comes with more responsibility. When you stuff up, it means you stuffed it up. You cannot hide behind your boss, your managers or blame your colleagues. And you have to learn to admit to it, fix it or leave it. 

Some believe that contractors earn millions, work less, spend most their time on the beach and retire in their 30s. Maybe there are people like that, but I haven't met them. The majority of contractors earn good money leading normal life styles, supporting their families and paying off their mortgages. So why would you quit full-time and do short-term gigs with no health benefits, paid holidays or sick leave? 

Personally, I did it because I had outgrown my full-time position and realised that I could do a lot more and do it differently. I continue to do it because it suits my lifestyle. I support my family and I also want to be with my family—that means spending more time at home than in the office. Some people like to be told what to do, do one thing, finish at 5.30 PM, go home and forget it. If you are this person, contracting may not suit you.

Ultimately both permanent full-time and contracting work has pluses and minuses. To paraphrase N. Chomsky, if you are working to earn a wage, you can be classified as a wage labourer. You must think of your time—which is your life—as a thing that you own. And your time is not your property while you're at work.

Because I can choose when and where to work, when I take holidays and which contract to take in which country, it feels like I am more in control and making my own decisions.

Why do they need contractors?

The simple answer—they’re needed to solve a problem.

The problem could be related to staffing, a project, timing, resources, budget, technical issues, etc. Depending on your experience, contract work is mostly suited for people with advanced skills in their field. Why? Because they are hired as experts to solve some sort of problem. They need it fast and they need it yesterday. And they are prepared to part with a substantial sum of money to achieve a certain goal/result.

Evaluating your experience and understanding and defining your skillset is quite hard to do. I'm not talking about bullet-listing all the stuff you've done in your CV. At the beginning, you may feel that you know and can or want do everything and anything. To get a challenging contract that expands your skills and experience is actually pretty hard. Basically, no one wants to pay for you to learn on the job. There are other jobs for that.

Depending on your experience, contract work is mostly suited for people with advanced or specific skills in their field. Why? Because employers expect you to start working on the project immediately, hit the ground running and show progress right away. You are not there to learn how to do the job and they are not going to show you how it's done.

To put it another way, everyone can take pictures but not everyone is a professional photographer. Yes, you know how to write, but are you a technical writer? Sure, you are a .NET guru, but can you really manage the project? Sure, you are easy-going and funny, but does that mean you are good at dealing with clients? To avoid nasty surprises there are key questions you will need to ask to clarify the requirements and ensure you are well-equipped for the project. We will cover these later.

Mandatory and complementary skills scenario: IT contract job description stipulated that you need to be an expert in doing tasks 1 and 2 (70%) as well as have some knowledge or skills in performing tasks 3 or 4 (30%). If you have some knowledge/experience to do tasks 3 and 4, you may get through the interview and even get the contract, but you may be in for a shock to find out the first 3 weeks, or even the bulk of the contract, you will be required to do tasks 3 and 4.

Tip: Be truthful and know your strengths. Understand which skills are mandatory and which skills are complementary. Ask questions and be truthful in your answers of your capabilities. Don't try to bluff your way through the interview.

Contract types and considerations

There are a variety of contract types out there for you to choose. Most contract work is done onsite, but some can be home based. There are part-time and full-time contracts. Some contracts are short-term, full-time, salary-paid work; for example, a contract including 6 to 9 months maternity coverage. These are generally not well paying compared to the usual daily/hourly contract rates. However, if you admire the company or if they offer challenging work and an opportunity to advance your knowledge and skills, it is worth considering. 

Every contract and every organisation is different, and to explain the contract style of work I tend to classify them into three major types:

Filler. When someone goes on holiday or maternity leave, you are in to fill someone else's shoes. Sometimes this means that the work has to be done" the same way they were doing it".

Assistant (a cog in a wheel). You may be working on a large-scale project surrounded by many contractors just like you. Generally, you will be given one or two specific tasks that are assigned to you by your Project Manager.

Expert/Consultant. You are relied upon as an expert or part of a small expert team in the company or department. You can have lots of freedom and input and steer the ship in the direction you choose.

Each type has pros and cons, but remember they all require YOUR expertise. Most contract work is very dynamic and 'fillers' can easily transform into 'experts' while it is possible for 'experts' to become 'assistants'.

They all have good and not so good angles - but remember - they all require YOUR expertise. Also most contract work is very dynamic and 'fillers' can easily transform to 'experts' while it is possible for 'experts' to become 'assistants'.

Other important factors to consider are:

How much are you worth?

We live in an economic system based on wage labour. One the most important aspect of contracting is the daily rate it offers. Generally, a higher rate indicates the complexity of the project or a skill shortage. The rate can also define you as an expert in your field. Don't be modest thinking that this is too much but don't be too choosy either, as a lower rate sometimes gives you more options. Would you take a 4-week contract paying £450 daily or a 3-month contract paying £200 daily? It is your choice and you will have to weigh all the options. You can find IT-contract market rates online to keep track of the contractor markets ups and downs.

Contract Duration

Generally contract duration can be classified as short- (1 to 3 months), medium- (3 to 6 months) and long-term (6 to 12 months). Some contracts start as short-term but could go on long-term, renewed on a monthly basis. It is important to understand what you are signing up for and how long the contract is so you can plan ahead. Duration is an important factor in determining two things. First is the obvious—the time you will be engaged as a contractor. The second is more complex—the time the company assumes it needs to complete a project. It may also indicate the company's budget or how serious they are about the project. In other words, is the problem a big one or a small one?

Location and accommodation

It is also important to be realistic about the area where you will be based. At the beginning it may seem fine to travel daily to another city, state or even country. After a month you may feel very differently about it. Consider the time in transit and expenses. For example, living in a major city and travelling 40 km daily by train will take around 4 hours and some considerable travel expenses. Is it worth it? Suddenly the daily rate does not seem as attractive as it was at the beginning.

Sometimes the solution is getting a local hotel room or short-term apartment. These are refundable tax expenses—talk to your accountant or umbrella adviser. Other options are sharing or private-room lease arrangements. Again, consider all options, do some number crunching and ask around.