Revealed: How to Become a Contractor

Do you have enough knowledge or project experience to become a contractor?

How to become a contractor can be quite daunting. However, with thorough research and having the key contacts in place, this can be achieved with a bit of time and effort.

how to become a contractor

Many moons ago when I was staff, I always dreamed about being a contractor. There I was, doing the exact same work, working for the same manager in the same company…but being paid much less. But it boiled down to much more than money…my driver was being independent and in charge of my own destiny.

Hence, after a lot of soul-searching, I decided to go contracting after 6 years of being permanent. However, armed with the correct knowledge and project experience, you could jump ship earlier. Your gut (and of course past experience) will tell you when the time is right.

Usually, recruitment agencies look for at least 2 years project experience before they’ll even consider you.

How to Become a Contractor – The Canny Contractor Checklist

a. Do Research

1. How is your sector performing?
Test the waters and post your CV to the key recruitment agencies in your field…make your CV available online in Linkedin.

2. Is your particular skill set in demand?
It’s going to vary, project by project. Hence, you need to learn to adapt and take on new challenges in order to build up these skills.

3. Do you require some extra training/courses before you venture out on your own?
To ensure you’re at the cutting edge of contracting, ensure you’re training is up to speed. Going forward, it’s wise to spend a small proportion of your company profits on annual training/ relevant courses within your niche. Be competitive.

4. What sort of rates (or package) can you expect?
Depends on years of experience in your particular field, your skill set, type of role, Industry, and client i.e. lots of variables.
It’s not black and white. Start building up a picture by scanning job adverts and speaking to recruitment agents.

5. What does the future hold for your particular niche?
Is your sector on an uptrend…are there any legislation/ standards that will create more jobs/ demand in the long term?

6. Is your timing correct?
There are busy and quiet periods in your particular industry. For instance, the contract market operates in cycles e.g. New budgets are usually approved in January/ February after a quiet Xmas. Hence, hiring starts around then.

If you can help it, don’t get let go slap bang in the middle of summer. Like I did. It’s not the easiest time to source contract work, strangely enough…generally expect a start no earlier than mid-September. Then again, you might get lucky.

how to become a contractor
Home Office

b. Set Up a Ltd Company (or operate under an Umbrella Company)

After conducting your research, if you feel there are enough demand and longevity for your niche – then set up your business. There are 2 options:

Private Ltd Company:

  • Enjoy status as a shareholder and director
  • Take advantage of tax breaks
  • Have complete control over your financial affairs
  • Be responsible for keeping abreast of current legislation e.g. working outside IR35 guidelines/ dividend tax changes, drafting invoices, logging transactions, filing receipts etc
  • Source a quality accountant that deals with private limited companies, as opposed to large corporations


Umbrella Company:

  • Let the umbrella company take care of legalities and relevant paperwork
  • They will provide an accountant to do your tax returns
  • You become an employee again i.e. eligible for PAYE and NI contributions, hence IR35 is taken care of


In summary, a private limited company is a good long-term option i.e. wanting to work outside of IR35 and more tax efficient (in my opinion). It’s the method I use currently, as I prefer to be in control of my financial affairs. If you’re well established in the UK (or your home country) or you’re thinking of setting up a base long-term in another country, then using a Ltd Company would be the way to go.

An Umbrella Company is a good short-term solution i.e. good for testing the waters before you commit.
For example, I’m in the middle of negotiating a 3-month contract overseas. This particular country has a payroll solution i.e. paying local taxes is mandatory, hence I can’t operate under my own Ltd Company. So, I would use the agencies’ Umbrella Solution in this instance.

c. Find a Contract

1. Shoot the breeze with your fellow colleagues (contractors) at the lunch table or in the pub. Buy them a pint in exchange for contacts/ specialized agencies in your field. That’s how I secured my very first contract overseas.

2. Join some Linkedin Groups, search Linkedin Jobs and post an announcement (that you’re available for hire). Don’t forget about the other big social network, Xing. Also set up your profile on one of major job portals relevant to your niche i.e. CV Library, Glassdoor etc …let them come to you.

I’ve revealed a hidden gem below if you fancied some work from home?

3. Email some colleagues and managers you worked with in the past. I never got a contract directly using this method. However, after emailing one of my former managers, he passed my contact details to another consultancy he has relations with. At least I got an interview.

4. Create an eye-catching one-page website (online business card) using Strikingly. No coding knowledge is required and it extracts the most relevant details from your Linkedin profile. So takes very little effort to build…you can even upload your CV.

5. Finally, speak to some recruitment agents in your niche. They will look for previous contracting experience and how many years you have in the industry. This can dictate your hourly rate.  Be sure the recruitment agents give you a fair deal.

e. Business Insurance

This is mandatory for some client sites especially UK clients.
You can get away with it if the hiring agent doesn’t ask, however, it’s always good for peace of mind.

Simply Business is a specialist provider of business insurance and always ensure you receive a unique, tailored solution. They compare a number of high profile insurance companies, so you always get the most competitive quote.

how to become a contractor
Calculating Your Hourly Rate

6. What do you really want out a contract?
Is it the niche experience you’ll gather from the role, the status working for a blue chip client, the hourly rate (package) or an exotic location? Because it’s unlikely you’ll acquire all these key attributes.

Ask yourself this question, as choosing one or two of these will bring focus. And with focus, you can achieve your end goal.

Here Are 6 Reasons Why You Should Become a Contractor

1. Potential to Earn More Cash
On average, making 1-3 times as much as PAYE (this, of course, varies i.e. depending on experience/ industry etc). Scaled higher if you work overseas.
Means you get paid for every hour you do. I notice some clients are proposing day rates now. Watch you don’t get burned with this option. It’s inevitable you’ll work beyond the average 8 hour day, hence you can lose out on overtime. Just depends on the nature of the project.

2. More Independence
There are more options for working from home these days and you can also take advantage of time off at the end of a project.
The client can also expect less from you, compared to a permanent role. Finally, you have more of a say with regards to your future i.e. where you want to go, what sort of company you want to work for….which, of course, leads to more job satisfaction.

3. Gain Experience Quicker
A senior manager (client) once told me, “You’ve gained more experience from 6 months on this project, than some of our staff have gained in the last 2 years”.
It’s true, you can gain massive exposure to new skills and new projects over a short period of time. Ultimately diversifying your skill set and making your CV more desirable.

4. Little Involvement in Office Politics
There’s nothing worse than getting caught up in office gossip and back stabbing. You’re there to get a job done and that’s that.

5. Maintain a Good Work/ Life Balance
If you play your cards right, you will have fewer meetings and work the hours that suit. Choose an unreliable project and it may be the opposite.
Also, take advantage of extended holidays and time off with the family.

6. Opportunity to Retire Earlier
On average, you have the potential to retire in a third of the time as full-time employees. If you follow some of the practices mentioned on this blog, you won’t go too far off the mark. I want to go beyond contracting with this blog…

How to Become a Contractor – What You Also Ought to Know

There are pros and cons to everything in life, but fortunately, the advantages outweigh the disadvantages when it comes to contracting. I’ve listed below some downsides that you’ll have to endure on your contracting journey:

  • Contractors are usually the first to go during budget cuts/ recession. So, be prepared and have a good Emergency fund set up. A worst-case scenario would be the financial crisis of 2008. The longest I’ve had to endure was 5 months during that drought, with some of my contracting friends out for 18 months. On average, it usually takes 2 months to find something. If you are really flexible and not fussed on specifics i.e. location/ role etc, you can find something straight off the bat…in a good economy
  • A change of management can sometimes mean cost cutting and culling contractors, just be aware
  • Although it sounds obvious, always ensure you have a signed contract in place before making a commitment to your new project i.e. before you start booking accommodation etc. Clients can change their mind overnight and agents can source someone cheaper
  • Signing a revised contract for an extension isn’t necessarily set in stone, no matter how established and reliable the client is
  • Always leave on good terms if you can. It’s a small circuit and someone in that company may need to give you a referral one day
  • Be prepared for some downtime between contracts. The perfect opportunity to brush up on your interview skills and your CV.

    Take Away

    It all boils down to experience, education, and training. The more you have (especially the experience), the more leverage you have on your rate (and perks).

    Be flexible, you may not necessarily find a contract ‘around the corner.’ You may have to travel but that isn’t necessarily a bad thing.

    Be competitive, update skills as much as you can…and build up skills, wealth and passive income for a prosperous future.

    Ensure you carry out due diligence on overseas roles. There may be a mandatory local tax to pay. And ensure you review the double tax treaty between your home country and proposed country you will be contracting in. Preferably you don’t want to pay two tax bills.

    The chancellor is slowly changing small business i.e. increase of tax on dividends, a decrease in corporation tax over the coming years. Hence, always keep abreast of the changes via Government websites, the news, and professional contracting websites.

    You won’t have overnight success, but you will succeed slowly. It takes time to build and nurture relationships with agents and clients over time and earn a reputation in the contracting circuit.

    Contracting is a commitment. Stick to it if you want to build real skills and real wealth over a relatively short period of time.

    Now I would like to hear from you.

    What were your biggest takeaways? Would you like to share more tips on how to become a contractor?

    Let us know in the comments…

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