> You should have savings to cover at least 4 months of
> your usual expenses. You will spend some money
> establishing a company. It may take several weeks to
> find your first contract.
If you wanted to be extra safe, sure. I made the switch when I was heavily in debt, and it helped me get out of debt, so YMMV.
> A service like www.formationsfactory.co.uk will make the
> incorporation process easy.
Actually it's super easy online using the UK government sites now. I set up a company (again) about ~14 months ago, and it took about an hour of filling in .gov.uk forms online. I would recommend just doing it yourself.
Setting up a bank account is pretty easy too, and I'm not sure why you'd use a third party for it. 15 minutes of filling out HSBC forms did it for me.
> Finding your first client might be hard.
Sure. Most permanent jobs have a 4 week notice period, and you can find contractor roles happy for you to start in 4 weeks. Line one up before you quit, and there's no 2-3 week mad rushing around trying to find a contract.
If you're just getting in to it, start with a recruiter. They'll eat in to your contract rate, for sure, but they'll also have a far better visibility of the market than you, they'll get better feedback from clients than you, and they'll help chase your invoices and so on. I worked as a contractor for a long time and never had a bad experience with a recruiter, where the OP seems to have had a dreadful time...
> rates
Go look on jobsite. For Central London, a developer should be asking for £300-£600/pd depending on seniority and what they're doing.
> IR35
In addition to IR35, they're about to massively change how dividend tax works. You might be better off looking at an umbrella company like Giant, who'll save you a lot of accounting hassles...
When I arrived in London (as a foreigner fresh off the boat) I had about 4 weeks worth of money. I couch surfed and worked the recruiters endlessly and landed a job in 10 days. It wasn't the greatest job but it was a start - a 3 month contract building a new system. It's amazing how motivated you can be when you see your bank accounts date with destiny. After the contract was signed I used the remainder of my cash and got a 'bedsit' - a tiny room - and asked for my first weeks pay to be paid on Friday afternoon. Within a month I had a place to rent, a social scene and was busy working on getting the next job.
So if you don't have any dependents I think you can take the high risk plunge and go for it. Certainly the best decision I ever made in my entire life - and by that I mean life changing in a way that I cannot even imagine how my life would have been had I stayed on my prior path.
Kind of - it wasn't booming when I first started, that was later on.
I had a friend who made the decision to do the same thing, but arrived in October 2001. After three months of job searching and finding nothing, he spent all of his cash and then some, and had to return broke and dejected.
The only thing I'd expand on is that there is a big difference between permy recruiters and contract recruiters. The best contract recruiters know that they will have roles to fill in 6 months time, so they're going to want to keep you on their 'roster'. The best contractors know that contract recruiter help you make more money.
Agree entirely. All my contracts come through recruiters, and I've never had a problem with them, once you get a good rapport going with a decent contract recruiter they'll do all the hard work for you.
Recruiters are annoying but some companies will only hire contractors through recruiters so it's worth spending a little time dealing with them (but don't hesitate to stop talking to any that isn't professional, there are plenty others).
For the rate it depends on the language and the industry as well, java in finance is always going to be higher than python in a startup but if it's below 300/350 you can walk away.
I stopped being a contractor last year, i'll have to check those dividend tax changes
Really? In experienced level dev jobs? Most of the people I know are on two months notice. Three months, which is what I'm tied to, doesn't seem uncommon for senior devs/DBAs/similar.
It's also worth noting that (at least in the UK) such notice periods are not legally binding.
You can only be forced to give a notice period up to your payroll pay frequency. So for example, if you get paid monthly then you cannot be sued for failing to give > 1 month's notice!
... But of course, most people will still honour their company's "3 month notice" (or whatever) period out of good faith, as it's generally a good idea not to burn bridges.
I wasn't aware of this. Do you happen to know which law/act/whatever covers it? Would have come in handy a few weeks ago when I was trying to negotiate my way out of a 3 month notice period.
Are you sure about that? There is a statutory notice period of one or two weeks depending on how long your employment has been, but this appears to be trumped by contractual agreements:
The statuary period sets the minimum that an employee and an employer must give. Unless otherwise agreed this is the only value to care about. A longer notice period can be arranged via contract. A shorter period can not be agreed (well it can, anything can be agreed really, but it will not be legally enforceable).
IIRC the statutory rules are as follows:
* After one month of employment the minimum period is one week
* After two year's of employment the minimum period becomes two weeks
* Each year after the first two one further week is added, up to a maximum of twelve (so because of how long I've been here the three months dictated by my current contract is pretty much aligned with the statutory minimum notice period).
While there is some room for ignoring a contract with unfair terms, unless the notice requirements set out in what you have signed are rather egregious you will be expected to honour them unless you successfully negotiate otherwise at the time. People can and sometimes do ignore this though because the costs and time involved in taking you to court for breach of contract are high enough that it just isn't worthwhile to most employers, but this is a risky stance to take as you could create a reputation for yourself that travels around your industry fairly quickly and may stick around for some time (and, of course, such action is morally wrong: if you signed a reasonable contract in good faith you should stick to it just as you would expect the other party to). If your contract (that part or all of it) can be declared void because it is not enforceable (you can't sign away the statutory minimum) this becomes moot. It can also become a moot point due to some other significant breach by either party then (well by the letter of the law it doesn't, but "you could take me to court but you don't really want the whole truth being a matter of public record do you?" can be a powerful argument in dissuading the other party from taking action).
In London, I'm currently on a 2 month notice, however that has always seemed unusual to agents and people I interviewed with. Also, that's a fixed period for senior and junior position - in other companies I worked for, there was always a special clause like "4 weeks + 1 week/year after the Xth year, capped at Y weeks"
That must be very dependent on your company sector and market. Also, notice is generally reciprocal, so a bigger one is generally considered a benefit - as practically, the company has to pay you when they terminate you, but you can almost always negotiate a much shorter notice when you resign.
At my current company in Germany, notice period is 3 months from the end of the quarter. That effectively means it's 3 to 6 months, depending on the day you quit.
It might be on the longer side, but it's not unusual for Germany for full time professional position.
On the other hand, it works both ways, so it's not that bad as it sounds at first.
I have a 12-week notice period (UK government), as do most of my friends (mostly finance). We'd all started on 4 weeks as junior developers, but it had been increased with promotions.
"Actually it's now super easy online using HMRC's site now” - You probably have Companies House in mind. HMRC deals with things like VAT and PAYE registrations. Companies House can be used for company incorporations. Furthermore, you can only use Model Articles on Companies House website. This means that you cannot set up multiple share classes during company incorporation (e.g. voting shares, profit sharing shares).
> This means that you cannot set up multiple share classes during company incorporation
You actually can - you have to select from a pre-given list of share classes, though, but I did a priority-and-ordinary shares setup thing online via companieshouse - unless that's not what you meant?
>> Sure. Most permanent jobs have a 4 week notice period, and you can find contractor roles happy for you to start in 4 weeks. Line one up before you quit, and there's no 2-3 week mad rushing around trying to find a contract.
One other thing to bear in mind - if you apply for a job in Banking the credit history, criminal records, references etc check will take 2-3 weeks anyway.
> For Central London, a developer should be asking for £300-£600/pd depending on seniority and what they're doing.
That seems pretty low to me. Here in the Netherlands contract developers get about the same, between £400-£600/pd (actually between 70~90 euro/hour) but cost of living is way lower than in central London.
Most contracts are at large enterprise size companies, like isp's, banking, government. Those companies don't do direct business with contractors but post their contracts through brokers, here some large ones:
I'm in the Midlands and have no trouble finding work around the mid-high end of that range. Perhaps the streets of London aren't paved with gold after all. ;)
Not much more to say. Companies in the Netherlands are advertising roles and contracts here in London. I have friends working in agencies in the Netherlands and they have a hard time sourcing developers locally.
Amazing that 15 years ago I was making more than 400 pd (contract was actually 45 ph, and you could push overtime if you wanted) and I was pretty junior at the time. And I was only paying 130 pw rent in Zone 2.
Ah, boom times. Don't you just love 'em, and miss 'em when they're gone?
edit : original post had a calculation mistake in it.
Is there a good summary you would recommend for accountancy-challenged developers? Should we get any leftovers in business bank account out through more dividends now and accrue higher personal income tax or wait and see?
There isn't much you can do really. The overall increase in annual tax is not going to be that big. If my calculations are correct, if you want to pay yourself ~100k per year you'll end up paying 2-3% more tax.
I have a popular one, and they are rubbish. I'm on my first contract and I have no idea what I'm doing tax-wise. After £10.6k in salary they say one could take £28.5k in dividends before higher tax kicks in. So what do people do with the rest? Accept hight tax or leave it in business bank account and wait for next tax year?
Not all accountants know a lot about tax. Tax lawyers will be better at reducing your tax rate, though they can be expensive (and unnecessary for basic stuff).
The general 'rule' is you tend to only take out as much as you need. It's usually smart to always use the lower rate tax bands and then decide what to do with the excess that is left in the company.
However, since they're increasing the tax rate, now might be good time to take out a higher dividend, since you'll pay more to take it out next year. If (tax now < tax later) -> take it out. :-) Unless you're wealthy enough to never have to declare dividends again, you'll want to take out more this year.
Also, don't forget to expense as much as you legally can. That's all tax deductible BEFORE corporate tax.
What can you do with the rest?
a. Invest it (compound interest: shares/bonds/property/etc)
b. Give yourself a loan from the company. You'll have to pay interest, but it's a relatively low rate (3.25% p/a I believe).
Wealthy people tend to be (relatively) poor in their personal name, but own a lot of stuff through companies - e.g. planes, boats, property.
Imagine you can sell small business accountancy services for £300 a year; and you can hire an accountant for £40,000 salary for a 2,000 hour year. Add on an extra £10,000 for tax, insurance, office space, parking, advertising, and things like that.
If you do an average of 6 hours of work for each client each year, your accountant can serve 333 customers and bring in £100000 a year, making £50,000 in profit.
On the other hand if you automate heavily and get rid of all the customers who have complex needs or who are calling you a lot, so you do an average of 15 minutes work for each client each year, the same accountant can serve 8,000 customers and bring in £2,400,000 a year making £2,350,000 in profit.
I know how I'd run my accountancy business, if I had one!
I just take what I want and pay higher tax as necessary. You still end up paying less than the average worker anyway since there are no NICs on the higher level of dividends. Other than that, I reinvest it into the business, but I can't be arsed with pensions.
In the 14 months you've had the company registered, have you had any dealing with Inland Revenue inquiring about your accounts or coming to check up on you? I'm asking because at my current work they were always coming to check since the business got its funding. There was no wrong doing of course, but it did waste a lot of everybody's time.
I've had ltd companies in various forms for ~ 10 years. No check-up yet, other than my most recent VAT registration, and even that was simply them asking me to send a few documents. I have no idea if that's typical, but I always buy tax investigation insurance.
In the past I've worked under Giant and Parasol. I used Giant back in 2008 when I wasn't sure if I was staying in contracting for forever. All umbrellas are much of a muchness; there's a legal limit on how much tax efficiency they can help you with, so you'll take home the same with whoever you choose. In the long term a limited company is definitely the way to go.
They're just a middle-man who invoices on your behalf and pays you based on that. Using someone like Giant you're ceding a lot of the financial (tax) advantages of contracting though, since you pay tax as a PAYE employee.
Obviously it depends on how much you earn and pay yourself, but I think for most people they'll still be better off as a limited. Next year's changes only add up to about 2-3% increase in tax for someone taking minimal salary and the rest as dividends.
As others have noted, the 4 months of living expenses requirement can be quite excessive. I've seen similar advice in the past and can't help but recall my personal anecdote of starting a company with barely enough money for one month of expenses. What is far more vital to one's success as a solo contractor is not having savings, but having guaranteed future revenue generation – clients with signed contracts.
As the author notes, the legal business entity and business infrastructure should be set up in advance. This enables one to acquire clients and do business before putting in a two-week notice at your full time job. I no longer operate my company, but had I abided by the 4 month of living expenses rule I would have never gotten off the ground. Within 4 months I was earning slightly more than double my previous salary. Don't shackle yourself to rigid startup rules. If you have clients and believe in what you're offering, go do it.
Generally a client can end your contract pretty much at any time without recourse. If you're client doesn't have mutability of obligation clause, that allows this irregardless of notice period, you probably fall under ir35.
So this advice is based on that, but obviously if you're good and marketable, you'll probably be OK. I myself really became a contractor after a relationship breakup when I was in about over £3000 O/D, a mortgage to pay and about £4300 credit limit.
Discussed this with agent, they agreed to pay me the day they were paid and I drove 400 miles for a contract which wasn't actually signed by the client yet. Luckily, they were happy to see me on the Monday, and I got paid at about £4200 into that limit.
This was 2 years ago. Now I probably earn 5+ times my highest perm salary, so in my case the gamble was super worth it, but if you're not somewhat charismatic and decent at your job with a marketable skill, it could go the other way.
* I planned to exit the company months in advance.
* Signed two clients
* I was a director of a small development team. I architected much of the company's critical infrastructure (most importantly, credit card/payment processing) and knew that I could leverage my knowledge to negotiate an advisory contract.
* Put in my notice
* Signed ex employer as my third client with weekly payment and a two month minimum. They obviously could have broken the minimum agreement, but kept me on until I severed the contract several months later. Weekly payment was key.
A little strategy can go a long way, but obviously it could have turned out much differently for me. And as noted, this is purely anecdotal. While four months buffer is generally wise, it is not de facto necessary.
Signed contracts are not guaranteed future revenue generation! An accountant would not for example allow you to recognise it as revenue in your accounts. Clients can go bankrupt, they can be slow to pay, they can not pay, etc etc.
Calculating how much capital you need to have in reserve before you go contract can be done using a couple of basic probability/finance measures. Look at reasonable worst cases (client bankruptcy, tax investigation, unexpected dismissal) and make sure that you have the current assets to survive them!
But you're doing this as an employee right? (Right!?) I hope everyone on this forum is going to be ok if they are made redundant tomorrow.
The whole point of this is that you need to be able to survive a setback. You should not be living at a 10% chance of missing rent each month! You can count on that probability eventually happening over a long enough period.
Contrary to the advice, you do not need an accountant, especially if you are able to ignore another part of the advice and not register for VAT (if your turnover is below the registration threshold of £82,000) which simplifies the accounting greatly. Your duties are then mainly as follows:
Use HMRC PAYE Tools to report each salary payment you make, and pay any National Insurance if applicable (which it won't be if you keep you salary below £671 a month).
Use the same tool to report any expense payments each May (form P11D).
Use Companies House WebFiling to submit your annual return (a short submission confirming some details about your company's directors and shareholdings etc.) each company year end.
Use HRMC's Online services to submit your corporation tax and accounts nine months after each year end. I pay £45 each year for collection of Excel templates from http://www.diyaccounting.co.uk/ to record my accounts which produces a mockup of the HMRC web form with the fields filled in.
Pay yourself a dividend one or twice a year and find a Word template to print out a record of the payment and the board meeting you had to decide on it.
Finally, use HMRC Online Self Assessment to submit your personal tax return each January, which you may already be doing anyway.
Looking at all this now it seems like a lot, but it's not as bad it sounds. I suppose you've got to have something of an interest in learning how a business is run to justify it. On the other hand you can save your company a tidy sum, plus as a company director you're legally responsible for the accuracy of the various submissions anyway, whether an accountant does it all for you or not, so you may as well have a sound understanding of it all I say. Also, I don't know whether this is the really the case or not but I've a theory that the more you run your operation like a proper business the less likely you're going to come a cropper of an IR45 disguised employment judgement, which could be severely financially damaging.
Running your own operation like this will put you in a better position for trying out any side projects I believe, and of course it will all stand you in good stead when you finally hit on the world changing idea you've been waiting for and your one man band blossoms into a large corporation (although do then get some accountants - but at least you'll have some idea what they're up to).
Even VAT is fairly straightforward if you sign up for the VAT Flat Rate Scheme (assuming you're eligible). You'd probably need to pay for something like FreeAgent to help you with your VAT filings, but amount of money the Flat Rate Scheme would save you would easily pay for the cost of the bookkeeping application.
You should be aware that there is no obligation for limited companies to have a business bank account. However, it is usually a good idea to have one.
Furthermore, you don't need to be a UK resident to open a business bank account but most banks will not deal with you due to higher costs and fraud concerns.
P.S. your company does not require a UK-based bank account. You can open a business bank account in your country in the name of your LTD company in the UK. You will need to have your company documents (Certificate of Incorporation and Memorandum & Articles of Association) apostilled.
Also the advice about marketing yourself is crap. Recruiters are the #1 way of landing contracts. They're finders and you're paying a finders fee for that service. They have the big guys with oodles of cash to get hold of.
If you can't get a gig through a recruiter then you either don't have skills that are in demand or don't come across as someone who they'd want to sell.
If you don't go through the recruiters, you end up being left with the cheap arse companies that won't pay up anyway. If you're sneaky about it, you and the recruiter can get the client to pay the finder's fee.
Once you're in the system, build up a network of contacts and then move through that rather than using the recruiters. I'm doing that at the moment and ended up taking a perm position that was better paid than the contract rates were (without all the hassle of IR35, rolling a Ltd etc)
> If you don't go through the recruiters, you end up being left with the cheap arse companies that won't pay up anyway.
I've never used a recruiter, the companies I work for paid pretty good and I had one unpaid bill in a couple of decades.
Building your own network and getting rid of recruiters as your main source of income is very important to new contract programmers.
For one they take a cut and for another they will sell those parties where they can take the largest cut first.
I'm not saying they don't have a function but recruiters goals and the recruited goals are not 100% aligned and you should be very much aware of that when using one.
One way to side-step recruiters is to build up (large) number of contacts with people in the industry who may get to know someone that needs your particular skillset.
The more peculiar your skills the harder it will be for recruiters to place you and so more of the acquisition part will have to be done by yourself.
Think of using recruiters as 'outsourcing acquisition', it has all the upsides and the downsides associated with all other forms of outsourcing.
Another danger with outsourcing your acquisition to recruiters is that you are handing the keys to one of the most important parts of your business to another party, who can then either cut you off at will, replace you and retain their contact with the company you were placed in and so on.
The sales department (which you've essentially outsourced) is a very important (if not the most important) element in any company, even a small one.
You may be able to make your life a little easier by not doing that work, especially if you're an introvert but in the longer term you're setting yourself up in a very dangerous position.
So, use recruiters if you have to but be wary and make sure you have alternative channels to being hired under your own control. Never let a single recruiter get you all of your jobs or even a majority of your jobs.
I did find that you can play recruiters off against each other quite easily to negotiate a higher rate. Also when you sign, you sign with the company not the recruiter and have a solid contract in place. Never work for sharecropper recruiters like some of the bigger ones.
If they want to get rid of you after 2 weeks, make sure there's an exit fee. That is usually 100% for me if under 6 months of contract left. I did 2 weeks at a company on a 3 monther at £550 a day and completed the work but was paid for the 3 months.
The particular sector I worked in was finance and that is still heavily recruiter driven unfortunately.
This echoes my thoughts and experience, all the while I was contracting I could easily find new work through word of mouth. The few recruiters I talked to seemed happy to waste my time (and their own).
In practice, it's they who find you. Just change the address on your linked in profile to "London" and see the emails coming in. If they don't come, your CV is probably not a good fit to the current needs of available contracts (due not enough experience in technologies that are currently hot).
Look for smaller companies and individual recruiters first. If they get you an interview in under 48 hours for a non shonky outfit and are willing to discuss your terms rather than enforcing theirs then you're probably ok. The big ones are shit. Requires phoning around for a couple of days.
> You can open a business bank account in your country in the name of your LTD company in the UK. You will need to have your company documents (Certificate of Incorporation and Memorandum & Articles of Association) apostilled.
I'm wondering if opening an LTD is even really needed in this case, what about people that already have a company or similar(sole trader) for this purpose in their own country? Have someone had any experience with this approach? Or has any idea about how it could be perceived?
I can speak only for Singapore, but banks here require very high deposits and minimum required balance if you are not a Singaporean company (at least when I asked, it was ~$50,000 - still better than UBS in Switzerland who wanted CHF 100,000 four years ago).
We're one half UK resident, one half not, and the UK bank put up the fraud check, which required about 30 pages of paperwork including three different proofs of ID copied and authenticated by a notary public (cost me $30). They were and are ultra slow and do not accept any form of internet communication - only snail mail, phone and in-person counter service.
I don't why people find it so hard to setup ltd and + bank accounts. I know 18 yo who do this for there small business. It isn't hard. Accountant will sort most of it.
The previous discussion - https://news.ycombinator.com/item?id=9726182 - should be read alongside this page. It had a number of glaring errors, including some very bad advice about tax.
But my biggest question is where do you find a client ?
Is there a website (like a jobs website) for contract work, besides elance and the like ?
Yeah, I can google it, but it's usually just a waste of time.
Is there any serious place where an experienced developer can meet serious clients ?
I mean clients willing to pay for quality work so I can make a living similar to a corporate job ?
As a very young programmer looking to make some money along his studies in the UK, I want to know where I can find clients, or even start a portfolio that's more than a few open source projects on GitHub.
I posted an offer to HN to build their app for £100. Monetary value is obviously very little, but it's a token gesture that technically gives you freelance experience.
It was great to build my portfolio up; I'd recommend it if possible. It's much easier to land gigs with a freelance portfolio.
Meeting clients is more about freelancing, and some of the meetup groups are useful for networking there.
For contracting I'd say the majority of people use jobserve. They advertise fixed term mostly fulltime contracts, usually 3-6months initial contract, and usually with at least 1 or 2 renewals expected if your work is ok.
I do not know anyone who started as a contractor. Everyone I know (myself included) moved to contracting after maturing for several years in the industry, building up a reputation and a network of contacts.
There are such a thing as junior contractors, they tend not to get amazing rates, but they'll still be doing a lot better than what they would on 13k a year, and they can quickly negotiate better rates.
I was perm for like 5-6 years, I think building your skills in perm roles is how it should be, but I'd probably have a lot more money if I'd just became a contractor.
Contracting in a UK sense is really very different from consulting or freelancing. It's essentially just a 9-5 short-term job, usually on-site, with more money and some extra accountancy perks.
I see more things in common than differences between those and I know people in the UK that use contract work to supplement their income when their consulting/freelancing gigs are not plentiful enough.
One important thing to note is that your accountant gets a kickback from setting up a bank account. You should instead aim to search for the best bank account you can find with the best deal and the faster payments service; my bank account with Cater Allen still does not support this for example.
I'd also highly highly recommend freeagent which is so good it makes you wonder what your accountant does. It has been right where my accountant has often been wrong!! Here's a referral link:
Freeagent looks interesting. What's their customer support like? My accountant is about 90 GBP per month but I get extremely prompt responses from them on technical issues so I'm inclined to think they're worth it.
Freeagent have always responded pretty immediately but it's best to get an accountant [1] that supports Freeagent and you are then effectively paying for support. They use Get Satisfaction which is community and vendor run support [2].
It makes the accountants life a lot easier too (they get a slightly restricted login).
My accountant is the same, and gives me a discounted version of FreeAgent. These days I have considerably more complicated needs than I used to doing simply contracting, but I'd probably still use FA + the accountant anyway. I pair it with ReceiptBank, with which there is an acceptable (but not great) integration.
Excellent article. I was a contractor in the UK for ten years and this hits all the most important points. Thanks for posting.
Once you have a 6m+ contract under your belt, look at recruiters again. As distasteful as they are (and they are), 90%+ of the most valuable contracts go through them. I would love for these parasitic fucks to be disintermediated, but if that was going to happen it would have happened by now, so live with it.
Your problem with recruiters is that you are having 'friendly conversations' with them. This identifies you as a mark whom the recruiter can place into a £400/day contact and pay you £200. This happens ALL THE TIME and is the bread and butter of many recruiters.
The thing to remember about recruiters is that they have no clue about the industry they're recruiting for. If they did, they would be working in it, not recruiting for it. So, the only real clue they have of how good you are is how good you SAY you are.
So do not be friendly to recruiters - treat them was what they are - odious middlemen who need you. As you say, not signing anything with them is good. Another good strategy is to contemptuously dismiss the first contract a recruiter mentions. "This small-time crap? Sorry, I though you guys were top-drawer."
Recruitment is HELLISHLY competitive and the churn is savage. Recruiters are sharks, and they think like sharks. But they NEED you. They will absolutely fight over you if they think you are worth fighting over.
Don't bother until you have a contract under your belt. But once you have, start treating recruiters badly and see what happens. :)
My experience (and that of many coworkers I've had) - unless you've really pissed in the pool, there is an unending supply of good contracts in London.
Anyone know what the market's like for embedded s/w development these days? ~ 15 years ago (ouch) recall we were using a lot of contractors for protracted periods & had to keep them sweet for fear they might just skip off to another job.
Didn't make the transition then. Always wondered ..
Embedded contracting in the UK is dead atm.
I found that in the field, most contract vacancies from agents are fake. As for the few hw startups, they're mostly unfunded.
Despite me not generally being a fan of agencies, they do have there advantages. So long as they're reputable, one big advantage which not many people take into account is that a good one is giving you free invoice factoring and debt collection. This means you would normally get paid on-time even if the client hasn't paid the invoice yet. This is a pretty major thing for those starting out, particularly if you are touting for small clients, who may run into cash flow issues, or very large clients who mostly take forever to pay invoices.
Chasing clients for money is, particularly when starting out, something that you feel hesitant to do in case you adversely affect your relationship with the client, as you don't think you have much leverage and are risking a good contract. It's a confidence thing though, these days I'd have no problem putting my foot down and walking away from a non-paying customer's contract.
Of course, all you're really doing is moving the risk of non-payment on to the agency but, so far having worked with about 8 agencies, I've not had any trouble being paid on-time in 12 years. Working directly I've run into non-payment issues several times with non-payment periods upto almost a year (though I'd long moved on to another contract). But then I've got a friend who's been ripped-off by a recruitment agency, having folded with a couple of months pay due. So you do still need to chase them too and ensure you maintain an adequate pot of savings for breaks between contracts and covering non-payment issues.
Having been in the position of working directly for clients and being owed large amounts of money for long periods of time, I'd recommend finding a reputable (sic) recruitment agent until you are up and running for a good few months or even a couple of years. That all said, you do have to put up with the barrage of appalling sales pitches for unsuitable positions and a lack of technical knowledge while dealing with most of them.
The IR35 related laws in the UK make independent contracting much easier and therefore more common there than in Australia. As I understand it, many UK contractors would be considered employees under Australian law.
Having run my business in Australia and then the UK, I asked the founder of Crunch in the UK (Accounting support for contractors) if he planned to expand to Australia because I loved their service. While open to it at some point, iirc he said there just wasn't the volume of potential clients down under to justify the legislation and recruitment investment.
Adding my two cents. I have been a contractor for almost 3 years now. My personal opinion:
- Contracting pays a lot more than a perm role.
- You do not deal with politics, which is a major plus for me.
- You do not hear about you not getting your promised y% bonus because company did not do x% business.
- You are not worried about 'changing the world', the way you would in a startup.
- working 4-6 years your asses off at a startup may be equivalent to working as a contractor for that time. That is a big may be, your skills, confidence, market everything plays a big role.
- Always get a good accountant, go for ltd company, enroll your wife and PAY YOUR TAXES!
- I started when i had about a month's savings, and it worked out well.
- Day rates depend on your skill set. 350 is the minimum i guess for any role, max is your imagination! 800? 1000? but getting 500-550 should be the target at least.
- Getting a contract is tricky: use linkedin, recruiters, friends and whatever else. All are necessary. I would not worry too much about a recruiter getting a cut as long as i get what i had asked for.
- Get a contract before quitting your perm role. Mostly companies looking for a contractor wait for 2 weeks, if you are good and your skills are in demand they would wait for 3-4 weeks.
- Always plan your vacation at times when everyone else is on holiday. December/January and April are good times.
- HMRC website is good enough to register a company, 15 pounds and 20-30 mins.
- Getting 450 a day is always better than siting idle waiting for that 550-600 a day contract.
- There is lot of competition, be prepared for that.
- Prepared for some level of stress (specially when you are out of work), it is still worth it.
- Do not worry too much about your utilization in a contract, it is the client's worry. You are paid for your skills and not your time. Do put reasonable time, but that is not the criteria you were hired with.
- 'Doing/Completing my time' is a BS. I have had several contracts and none of the clients ever had problems with my timings. And i am particularly bad at working normal hours. Sometimes i get at work at 10 and leave at 5. At times i work whole nights.
- Recruiters are lairs, don't give too much info. Ask for a job spec and day rate before giving any info. I would help you, after you get me a contract!
- Send your CV to all who asks for it. Keeps you in the market.
- You will not necessarily get a higher day rate if you went directly with a client. Your day rate depends on your skills and negotiating skills only. If you do not ask for a good day rate, chances are, you wont get it.
- Sometimes, leave it on Luck. We can be the smartest asses on the planet, but at times need luck.
- don't trust agents
- don't trust agents
One more thing:
- don't trust agents
If you find a half-honest one work with them as much as you can. They'll still try and screw you over but they might decide to be straight once in a while.
I don't blame them in a way - the competition is fierce and matching client and contractor for happy outcomes is hard. But too many of them are willing to try and renegotiate your rate down after an offer is made - 'they like you, but not at your original rate' - 99/100 this is a ruse to keep some pounds in their pocket. Learn to be firm with agents.
Find out who makes the decisions on hiring and who has budget within a company and get to know them personally. They're the ones signing your pay.
I contracted for nearly 10 years in a variety of places. It's a great life but you do have to keep an eye on your career as your skill set might start to get old, and it's hard to move onto the next thing because you don't get the chance to practice it. But I have friends who have been doing it for 20 years now, and they have made a great life out of it.
I always used agents over 3.5 years and never had any problems.
They are sales people though, and obviously there are bad ones. However they are providing a service to you, (and their client), often contractors that go direct are on a worse rate, get paid a lot less frequently (3 months after each month, vs weekly in some cases) and have to deal with tedious internal HR processes.
Some times after you get used to the industry you have enough contacts to go direct, but initially an agent can really help you out.
Good list, but as a contractor in the US, the one thing that sticks out that I don't agree with (necessarily) is:
-Getting 450 a day is always better than siting idle waiting for that 550-600 a day contract.
I'm fine with making a tradeoff like that for very short term work, but I don't want to commit myself to long- or medium-term work at any sort of significant discount.
If I'm confident I can get that 550 eventually, it easily pays for those days I spend on the beach.
yes, do not take a 1-2 year contract on a low rate. But mathematically:
Lets say:
Desired rate: 150
Available rate: 100
Sit idle for desired rate: 30 days
(20 working days in a month)
let's say a contract is 2 months long.
with 100 day rate yo get: 100 x 40 = 4000
with 150 day rate you get: 150 x 20 = 3000 (well if you get 200 a day, you still make the same amount of money as you would working on 100 for 2 months instead of 1)
Unless you get a significantly long contract on your desired rate. And also, that long contract gets till the end. Most likely it will, but life is bitch. You never know what would happen, it is about risk assessment.
I don't get your math entirely...if a contract is two months long, wouldn't it be 150x40 or 6000? Sure, I had to tighten my belt during month one, but at the end of month 3 I've got 6k and the person who took the 100 day rate has 4k + whatever they can make in a third month. If they extend another month at the same rate, we both have 6k at the end of month 3, except I only did 2/3 the work.
There are significant tax savings, and theoretically limited liability. The significant tax savings will change next tax year with changes in dividend taxes and NIC contributions. No-one is really sure of the actual impact at this point.
The rates for dividend payments are set but because of the triple changes of the budget - dividends, employment allowance and travel/subsistence expenses, it could affect some contractors a lot worse than others. Though it's mostly those who rack up large commuting/accommodation expenses chasing high paid work in London while not living anywhere near there. The travel/subsistence rules haven't been set yet but it's likely HMRC will crack down on them quite hard.
In addition to the benefits you get as the contractor, agencies also don't want to hire sole traders as it could be argued they are actually employees. This would mean it's the agency's responsibility to withhold taxes, and the contractor would have rights to things like holiday and sick pay.
I would say the biggest advantage of a Ltd company is that company owners aren't required to pay their company’s debts beyond the value of their shares. Also, it offers a very tax-efficient methods to take money of the company. This is why you probably need to go to a company formation agent. They will be able to advise you on this matter. Try sending an email to these guys - https://www.formationsfactory.co.uk
This depends on a country (sure, I understand the original post is about UK)
Say, in Russia one'd generally would want to go sole trader route and not an Ltd one. Less initial paperwork, a bit more relaxed tax/accounting rules (with same rates), and significantly simpler to put earned money into your wallet.
You can go the "Self Employed" route in the UK just easily, it's a simple online registration and you get a VAT number and a tax code, but you really don't want to do that.
If you are self employed there is no liability protection that separates you from the business this means that for the business to go bankrupt you have to also go bankrupt, and worse creditors can go after your own and familial assets to clear debt that was incurred by your business.
Now in some rare cases when there was gross and often criminal misconduct the liability protection can be lifted on a business which means it's stakeholders can be found liable for damage but that's quite rare.
I moved from web dev perm jobs in the west mids, down to London and started contracting around 6 years ago. It's singlehandedly the best decision I ever made, tripling my salary. And bar a few of months after I went to Asia for a year (paid for by contracting), I've never had much trouble landing a new contract.
You can easily earn over 100k if you're any good in your field.
I was thinking about writing a post about the ins and outs of the London contract market.
Compared to full-time positions of equivalent scope, what skill level and experience is needed to work as a contractor? How do the working conditions differ?
In my experience, sometimes they wanted more skill and experience for a permanent role than they did for a contractor. I worked as a contractor and had to fill headcount, and the process was different for a contractor and a permanent. Contractors are much simpler to get rid of if they don't turn out, so hiring decisions were made faster. Permanent people being hired had to be of a higher standard.
This doesn't mean that you can get away with being a junior in a senior role, but it might mean there is more of a focus on technical skills rather than university qualifications, that type of thing.
There are some crap contractors floating about the system and some crap permanent employees. And vice versa.
The working conditions are almost identical, except that in a downturn the contractors will be first out the door. They also get to avoid 'company building' meetings and crap like that.
My experience is specific to banking, but interms of working conditions they are more or less identical, apart from the odd "contractor furlough" when contractors are forced to take unpaid leave (normally around the Christmas perioid).
There are legal firms in the city who will review your contract for IR35 compliance. If you don't know what you're looking for I highly recommend using them. Do not be afraid of amending a contract and pushing back on the client.
Being IR35 compliant is one of the biggest benefits of being a contractor(at least that was true before they changed the dividends rule), so it's important to get this right.
Seriously in the current market you don't need to be a very confident programmer to be contractor in the UK. Quit your stressful jobs and get into contracting NOW. Money is 3x better. Hours are better, employers are more flexible with contractors believe it or not. And when shit hits fans, just bail and go find another contract.
Easier said than done and a bit short-sighted. I would argue that over the long run, the stress of having to track down and find new projects while maintaining a steady stream of income produces much higher stress levels than a 9-5 job. Some people can deal with that, others not so much. You will also have periods where you are flush with cash and periods where you may go months on end without income. Again, some people can handle this, others not so much. Are your hours really better when you factor in all of the business administration and marketing of yourself that you will need to do? Probably not. So, are you really ready? That's a much deeper question and not so easily answered.
Apologies for the ignorance.....As a barbaric American, Don't you still have to pay taxes if you are a US citizen unless you renounce it? Or does incorporation create a shelter (much like most US companies are doing)?
Some relatives of mine took contracts in Canada and ended up having to pay triple taxes (two in Canada, one in USA)
Yes, that's true. Americans can be taxed for income earned outside the country.
I'm not an expert on this subject, but I don't think that income earned by an incorporation would be taxed if it's incorporated outside the United States. However, the incorporation would have to pay its employee, and that employee's income would be subject to taxation if the employee is a US citizen.
It's not quite as bad as it sounds though. The first $93000 of income earned abroad is not subject to taxation. Many countries (such as Canada and Germany) have reciprocal income tax treaties with the United States that keep citizens from being double-taxed. A US citizen in Germany, for example, wouldn't have to pay any US income tax on income earned in Germany as long as that income was subjected to German income taxes.
Other income such as stock dividends and capital gains is another matter. I'm not entirely certain if that is double taxed or not.
As a US citizen you should be filing US taxes regardless; Whether or not you owe anything to the IRS depends on a lot of factors, talk to a specialist if you have anything complicated going on. Short story is you have a foreign income exclusion of about $100k. Incorporation wont shelter you from income, and as far as I can see most of the legal "sheltering" approaches don't really work unless you're talking quite a bit of money.
To your other paragraph: your relatives shouldn't have paid any extra tax multiply. You can end up filing 4 forms, US federal, US state, Canadian federal, Canadian province, but there is a pretty comprehensive tax treaty so you end up paying in one place and claiming a credit in the other. Overall it's often nearly a wash, and whether or not you pay a bit more or less will depend on where your tax residency is and where your income is generated.
I think regardless of the tax benefits discussed in this thread, even with an equal playing field you will earn significantly more than your permie peers.
You can get 50k if you're lucky in London, but you can earn 500 a day as a contractor.
500 * 230 conservative work days per year = 115,000 NET
230 work days aren't "conservative", that's 4.5 days/week. Given the legal minimum of 28 days holiday per year for permanent employees (28 includes bank holidays, often you'll find vacation quoted as 20 days which doesn't include the bank holidays), that's close to 100% "found work" rate.
Ten weeks holiday and still earning over 100k contracting a year at £500 a day. Obviously not everyone has a contract all the time but from my friends that do contract they almost always are working (and they are outside the market hungry center that is London)
Speaking about holidays, what's the employers' attitude towards days off say on a 3 or 6 months contract? Can you take a week or two off during a 3 month contract or you are generally expected to work the full contract time?
Clients can't prevent you from taking time off, you have a complete freedom to choose how much you work in theory. Having said that taking a week or more off during a 3 month contract will no be expected by most of the clients. Taking a day or two off is usually not a problem. It really depends on the client.
What's the situation in Dublin? From what i can see, just bunch of recruiters hiring for a few companies; any info which one is approachable directly? Im in .net
Can anybody rate the Headhunter family? They are aggressive and expensive. GB does'nt really suit as far as big companies are concerned because IBM experience is required which is lacking in GB Portfolios. Good luck to the Indians - I think they have got it right excluding German language.
I've found their webapp to be pretty good, but trying to get actual financial advice was a struggle since you have to go through your account manager rather than talk directly to a real accountant.
What does everyone do with the cash in their ltd company? My acct advises leaving the cash in the company but HMRC seem arsey about investing directly rather than moving it into an ISA which obviously then incurs an income tax hit.
Generally you would start a Business Account, Barclays are good. You then pay yourself from your company but at a much lower rate than your company gets paid say an annual salary of £10,000. This will cause money to build up in your company account which you pay to yourself as dividends which are more tax efficient to get your money out. This is why most contractor use an accountant to manage the payroll etc
Setting up a bank account is pretty easy too, and I'm not sure why you'd use a third party for it. 15 minutes of filling out HSBC forms did it for me.
Sure. Most permanent jobs have a 4 week notice period, and you can find contractor roles happy for you to start in 4 weeks. Line one up before you quit, and there's no 2-3 week mad rushing around trying to find a contract.If you're just getting in to it, start with a recruiter. They'll eat in to your contract rate, for sure, but they'll also have a far better visibility of the market than you, they'll get better feedback from clients than you, and they'll help chase your invoices and so on. I worked as a contractor for a long time and never had a bad experience with a recruiter, where the OP seems to have had a dreadful time...
Go look on jobsite. For Central London, a developer should be asking for £300-£600/pd depending on seniority and what they're doing. In addition to IR35, they're about to massively change how dividend tax works. You might be better off looking at an umbrella company like Giant, who'll save you a lot of accounting hassles...