The monotony of many jobs can make you feel like you are on a never-ending wash-rinse-repeat cycle. This is why many techies are jumping at the chance to venture onto the alternative path of becoming an IT contractor. According to a NPR/Marist poll, an astounding 1 in 5 jobs in America is held by a worker under contract. Even more surprising is that, within a decade, NPR predicts that half of the American workforce may be comprised entirely of contractors and freelancers. However, this may not be so shocking when you consider all the alluring benefits that IT contracting offers: independence, job variability, earning potential and skills development.
Life as an IT contractor can certainly be extremely rewarding in a multitude of different ways. It may not be for everyone but, for those brave enough to ditch their permanent work security blanket, the vast majority never turn back. Here are a few nitty-gritty points and tips to consider to help you transition into a contractor role.
Are you really cut out for this?
First and foremost, take a breath and ask yourself: “Is contracting right for me?” To be a successful contractor, you have to take risks and initiative. The comforts of your nine-to-five job such as a consistent salary, benefits, and many other perks are not automatically guaranteed in the world of contracting, creating a bit of uncertainty.
However, the grass is not always greener on the other side, and contracting provides extensive benefits such as the ability to significantly increase your income, choose the type of work that you want to take on, explore differing environments and, most importantly, have an immense amount of control over your life and destiny. While taking the plunge may be a bit intimidating, it can pay off in ways that you may not be able to imagine.
Talking dollars and sense – not cents
Most American workers are not waking up at the crack of dawn and trudging to work out of the sheer love of their job; they go for one single, glorious reason: the paycheck. It does not matter what class you fall within; money is the foundation of our society. It not just about getting the latest and greatest; rather, money is how we provide for our families and establish our standard of living.
Given that we all love having the luxury of budgeting and planning our lives, one of the largest concerns you may have about moving to an IT consulting position is how much you can earn? A permanent position affords a consistent, predicable paycheck but, on average, contractors earn more than employees. According to a Dice Salary Survey, the average salary for a full-time worker is $93,013. Meanwhile, contractors working for a staffing agency make on average a cool $98,079.
Even more appealing, many employers have exclusivity clauses that stop employees from picking up side gigs, but tech contractors may not have the same limitations. Consequently, an IT contractor can work for numerous employers, substantially increasing income potential to a limitless level.
Research is key
It is important to assess the demand for your skillset and the rate that you can command. The good news is that the technological field is booming, and the US economy has a mass shortage of workers. According to the US Department of Labor, 7.4 million unfilled positions existed in April of 2019, but there were significantly less people looking for work. Each month the gap between available jobs and job seekers continues to grow, resulting in a huge labor force shortage.
There has been an ever-increasing shortage within the tech industry that shows no sign of slowing down. According to a Monster survey, demand for IT workers may be at the highest level in over 11 years. However, while tech employers are starving for talent, not all positions are created equal. Positions such as project managers, business analysts and cloud and security programmers are in high demand. You will want to know if your career field falls within the mix of desirable positions, increasing your employment prospects and rates. A good place to begin an assessment of your tech specialty is to use an IT Contract Rate Checker and to peruse available jobs on websites such as Monster or Indeed.
To secure contracts, you need an up-to-date CV. Recruiters are primarily concerned with your current skillset, experience and certifications. Keep this information at the top of your resume, as people tend to be more engaged when they begin reading a document. Additionally, be concise because hirers are searching for specific skills for a project. Keep additional information to a minimum and tailor your document to each role that you apply for.
There are many avenues available for finding work such as contract job boards, recommendations from friends or colleagues, transferring from permanent to contract status at your current position, online sites such as freelancer.com or agencies. However, roughly 20% percent of contractors work directly for end clients, but the overwhelming majority, 80%, find work through agencies. Given these figures, letting a staffing agency do the leg work may be a great option if you are looking to concentrate on your job performance instead of searching for positions.
Watching out for IR35 pitfalls
In 2000, the government implemented IR35 rules to stop individuals who were trying to capitalize on tax benefits through so-called “disguised employment.” For example, a permanent employee would pretend to leave their position and return within a few days claiming to be a limited liability company contractor, reaping significant tax benefits. However, the worker in fact would still be performing the job under the full control of the client in an employed manner. If caught, the financial ramifications can be significant, making it important to brush up on how IR35 impacts contractors.
Taxes can be taxing
Unless you are an accountant or are anticipating a massive refund, you are probably not looking forward to tax season. Being an IT contractor has some tax perks, but it can complicate your filings, depending on how you proceed.
If you choose to work for a staffing agency, your income will be processed in the same manner as in your permanent position. You will submit a timesheet to the agency, who will, in turn, invoice the end-client. Once payment is received, you will be given the net income, after income tax deductions and pre-agreed fees have been assessed.
In the case of limited company contractors, you will be responsible for taking care of your own tax payments and filings. While it is a good idea to enlist an accountant to save time and frustration, it is equally as important to personally understand the filing mechanics. Itcontracting.com and the IRS’s websiteare great starting points to get up to speed.
While there may be a few unfamiliar waters to navigate along the way, IT contracting can be a highly rewarding career choice. As a contractor, you control your earning potential and, ultimately, your future. There simply is nothing better!