For the right person working as a contractor will bring considerable rewards, not just financially but also in terms of freedom, satisfaction, achievement and self - fulfillment. In industry and commerce there are more opportunities than ever before, with an increasing trend towards external contractors.
However, there are several points that you should consider before starting out and this fact sheet is designed to help you assess the likely rewards, and risks, of contracting.

To some people technical contractors come a close second to lottery winners in status, earning lots of money, having complete control over their life and taking expensive holidays whenever and wherever they like. The reality is slightly more down to earth, although with some careful planning, it could be you!
Many people are now employed on fixed contracts to bring specific skills to a company or site that are not available in-house, or that are needed on a short term or project only basis.

Many contractors will work for an agency. The agency will have a database of existing clients, therefore when registering your details with them all consideration will be given to your suitability against current vacancies. They are also likely to specifically market your skills to their client base. On most occasions an indication can be given of the hourly rate obtainable for each potential contractor.

It will be your decision as to which work you take and where.

Whilst some of these contracts are advertised in the national press and the trade media, many will be unadvertised and are only available to you by registering with an agency.

In most cases, when you agree on an assignment the agency will sign a contract with the client and you will sign a contract with the agency. There is normally provision within the contract for a notice period and the average contract length is between three months and a year. Contracts longer than twelve months are likely to have a review date built in to account for inflationary increases.

You can either work directly for an agency as an employee or through a Limited Company. If working for an agency, they will be responsible for deducting PAYE Income Tax (alongside any other relevant deductions) and National Insurance contributions. You perform the work required under the contract and the agency will pay you for the hours you undertake on receipt of a timesheet signed by the client. If you work directly for a client, payment terms will be stipulated in the contract.

You may wish to have your own Limited Company, of which you will be a director and shareholder, or be employed by an "Umbrella" Limited Company (run usually by an agency or accountant) where you are an employee and shareholder. In both cases payments are made to the company and not directly to you.

What are the usual benefits of running your own company or working through an Umbrella arrangement?

• A net increase in take home pay
• Expenses can be claimed that are otherwise not allowed
• Limitation of personal liability

Money paid to the company is generally given to you in three ways:

• Salary (usually small)
• Dividends
• Reimbursement of business expenses

Dividends are not usually paid as frequently as a normal salary (sometimes only twice a year, depending on your tax advice) and so cash management becomes very important.

As the tax implications can be a potential minefield we recommend that you take professional advice from a legitimate organisation, suggestions of such organisations can be made either by ourselves or other fellow contractors. Many of these firms specialise in giving advice to contractors.

If you wish to take pot luck, the contracting media also carries a whole host of advertisements for professional services!

Other negative factors are:

• Lack of paid holiday (dependant on employment status)
• You have to provide for your own pension and ensure against sickness.
• You have to pay for your own training and purchase your own vehicle.

Without doubt many people benefit from working in an environment they have more control over, and with outsourcing and downsizing, many contractors feel they actually have more security than those in permanent positions.

If you feel that you would like to benefit from the following rewards and are not put off by the risks, then contracting is for you!

Rewards		Risks
Freedom Choice of work No office politics High status with employer Easy to move- no benefit/pension "handcuffs" Financial advantages Rate you are paid (quite often more than double the equivalent amount you would receive from a permanent role) Tax you pay Pay review "built in" Paid overtime Easy to work overseas Gain excellent experience		Insecurity Occasional jealousy from permanent staff No fringe benefits Paperwork Tight deadlines