What to Think About Before Switching to Contracting
You have a great chance to take charge of your career through contracting, and for some people, it will be the best choice they ever make.
However, don’t allow yourself to be fooled into believing the grass is always greener on the contracting side because quitting a permanent position is risky.
In this article, we’ll take a look at the things you should take into consideration if you’re thinking about switching from permanent employment to contracting.
- Do you possess the proper mindset?
Before making the move, you should reflect on whether contracting will be suitable for your personality and life situation. The key is to switch for the right reasons. Do you wish to become a contractor to gain experience in a different industry, advance your knowledge and abilities, or strike a better work-life balance?
The type of individual who is best suited to contracting is someone who enjoys completing tasks and looking forward to the next challenge. No matter how long your contract is supposed to run, if you have the appropriate mindset for contracting, you’ll always want to provide the greatest service to the client and ensure you become an indispensable team member.
Insurance for contractors is an essential investment to ensure that you’re protected against any potential liabilities or losses that may occur on the job. As an independent contractor, you’re responsible for your own insurance coverage, which can include general liability, professional liability, workers’ compensation, and commercial auto insurance.
- What are the ramifications financially?
The amount of money you will earn from contracting will largely depend on the nature of the project and the market demands at that time. The way in which contracting will financially impact you will depend on your lifestyle. The majority of employers will provide a gratuity completion bonus that may be incorporated into the wage package, while some may offer a boost on basic pay to shift into contract employment.
Depending on the position, candidates may require a considerable pay rise to help cover additional expenses and make the transfer worthwhile. For example, in the IT industry, contractors should strive to make at least twice as much as a permanent wage. You should also bare in mind that some contracting positions will require you to work away from home. As such, you’ll need to earn enough to cover travel expenses and any gaps in employment. You may also need to cover agency fees and be aware that you may have a lapse between when you do the work and are actually paid.
- How will the modification impact your way of life?
People looking to switch to contracting from permanent employment frequently overlook work/life balance considerations because they concentrate too much on the financial aspect of the role and too little on the practicalities and the impact it will have at home. Make sure you consider how working as a contractor will impact your family. This is particularly important if you have children.
Depending on the work situation, you may find yourself facing a complete lifestyle change. Some contractual positions may need you to live away from home, in which case you must consider the financial expense as well as the effect on your family life. For instance, the cost of living five days a week in Newcastle versus London is quite different, and if you have kids, you’ll probably only see them on weekends.
- Are you going to incorporate as a limited business or an umbrella company?
When you work as a contractor, you’ll lose any benefits you used to receive as a permanent employee. One method contractors can seek assistance in solving all of these problems is by using an umbrella firm. Although clearly all of this comes at a cost, and the umbrella firm might take as much as 15% of your salary through their fees, you pay them to handle things like tax, pension payments, and holiday entitlement.
Setting established as a limited company is the other choice available to contractors. Contractors may need to hire an accountant to help with the business end of things. While setting up as a limited company helps you to make more money, you will have more paperwork to manage because you’ll be responsible for managing things like your own pension plan and submitting your own tax returns.
- How do benefit packages change as a result of contracting?
Before changing jobs, make sure you are fully aware of what benefits you will and will not receive. Benefits that may on offer include medical insurance, annual leave, and a “completion of contract” bonus. As contracting grows in popularity, benefits have caught up to or surpassed those provided for permanent employees. This makes the decision to transition into a contract position more tempting for permanent employees.
- Do you possess both the technical know-how and the crucial soft skills?
When a contractor’s contract expires, on average, 70% of them will be given consideration for a permanent position within the business. This is frequently due to the soft skills contractors have, as these are the abilities that really set them apart from the competition. It is important to have an optimistic outlook and a willingness to learn among other soft skill characteristics for individuals searching for contracting positions.
Technology and industry have changed dramatically over the past few decades. For instance, IT professionals have progressed from discreetly observing proceedings from the back of the room to steering entire organizations through digital revolutions.
This implies that they now need to be able to communicate with the business, comprehend their needs, and transform the technical components into a usable area. Program managers, business analysts, CIOs, and CTOs can now successfully connect with various stakeholders across the organization because IT is no longer a driving force apart from the business. It’s difficult to understate how crucial soft skills have become.