So you have made the decision to move from traditional, permanent employment or part time employment to becoming a contractor or freelancer? When first starting out as a contractor there can be a great deal of uncertainty. Exchequer Solutions are a specialist contractor’s umbrella company and we therefore have a wealth of experience advising clients on this transitional period.
One of the most frequent questions we encounter from new contractors is when they should make this final change from permanent employment to contracting work.
Once you have made the decision to become a contractor you already know it is the right time in your life but many are unsure when to practically terminate their previous employment.
When you are moving from one permanent position to another it is much more straightforward. The type of environment and circumstance will likely be familiar. It is obvious that you tend to only hand in your notice once you have secured your next role.
The nature of contracting work makes this process less apparent and if you are new to the world of contracting this can seem quite daunting. The question we encounter a lot from new contractors is whether they should hand in their notice before or after they secure that initial contract. You may be wondering if it even matters which order you do this in or whether it depends on your individual circumstance.
The problem most contractors discover is that permanent employment positions expect you to serve out a notice period and many contract managers expect you to start straight away.
This means you could hand in your notice before securing your first contract and risk a long period out of work or you could secure your first contract then hand in your notice and have to juggle the work of your regular 9 – 5 and the contract work until your notice period is up. This can work but can also be pressurising and complicated.
As a contractor umbrella company we would advise securing your first contract before quitting your permanent role if feasible.
There are several other Contractor Top Tips we would like to share to help you prepare for starting out as a contractor:
1) Although we would normally advise securing your first contract before quitting your permanent job you will need to assess the situation based on your circumstances. You may have finances in place to cover an indefinite period between quitting the previous role and securing the initial contract or you may feel you can handle balancing the contractor work and still serve your notice period.
2) Before you embark upon your new career in contracting you need to have a clear idea in place of how you will run your new business. Will you Set Up A Limited Company? Our sister company Exchequer Accountancy can assist if you go down this route. Or you can choose a high quality and supportive contractor’s umbrella company like Exchequer Solutions.
3) Once you have made the decision on the direction your contracting career will take you should always ensure you have reviewed your finances carefully. This lets you know what you can achieve. It will reveal if you need to save up in preparation for your contracting career in order to cover periods of no contracts. You also need to put money aside for you tax bills and VAT.
4) Other preparations you should consider before becoming a contractor are professional indemnity insurance and pension planning.
5) Registering with an experienced umbrella company can take a huge weight off your mind as a contractor. We will help make sure you are compliant and understand your rights. Choosing an accountant who specialises in working for contractors can also be a big help with keeping track of your financial situation.
6) Once you have made the leap and are ready to hand in your notice you need to get your name out there so you can begin securing contracts. One avenue is to utilise recruitment agencies. Many of our contractor clients get most of their roles through our recruitment agency clients. Everything will be easier once you secure that first contract and start getting recommended.
7) Our final piece of advice for making this transition to contractor is not to sell yourself short. Many new contractors are unsure what to charge and what their negotiating rates should be. Often they will under value their services so don’t fall into this trap and good luck.
