Today’s post is the second in a five-part series explaining the different paths programmers can take to make money from programming. In today’s post, I’ll be talking about contracting.
Why Become A Contractor?
Contracting is one of the natural next progression routes for some developers. Contracting can offer a higher salary than you could hope to get in a normal salaried job, but it has a lot of hidden costs involved.
Contracting, in some regards, is quite similar to a normal day job. You still apply for contract roles in the same way, you still need to turn up at an office and you still have to work on what the company needs you to. The big difference between contracting and a career, is that when you work as a contractor, you will only work for companies for a short period of time. Most IT contracts are usually between 3 months to 12 months, with a few being less, or, more. As a contractor, expect to have to look for a new job a lot more frequently than you ever would with a career. If you hate job interviews, then contracting might not be the right route for you.
Working as a contractor is definitely not suited towards everyone and this is mainly due to the extra risk associated with contracting. As a contractor, you have fewer guarantees compared to working for someone else. After your contract is over, how long will it take you to find a new contract? Days, weeks or months? What happens if you get sick? What happens if someone doesn’t pay you? These are all questions every contractor will likely face at some stage in their career. This perceived risk of contracting will put a lot of people off and understandably so. When someone has a mortgage to pay, or a family to provide for, how much risk are you prepared to take?
Asides, from finding new work, contracting also has a few other pitfalls. In a normal career, an employer will need to give you several written warnings before they can terminate your position (provided you have passed a probation period). When you work as a contractor, your contract can be terminated anytime, usually with only a week’s notice period. Unlike a normal career, employers don’t need a good reason to get rid of you. If they decide they don’t need you for whatever reasons, personal, or business reasons, then you can find yourself, unexpectedly, looking for work.
Is It All Doom And Gloom?
I wanted to start off outlining the bad stuff about contracting, as I think a lot of people think contracting is a magic silver bullet that guarantees you end up with a higher salary. A lot of the risks that I’ve written about contracting are all true, however, the longer you contract for, the risks generally flip and contracting becomes a safer career choice.
Firstly, as mentioned at the start of this article, contracting pays more money. If a contract paid the same amount as a salaried position but with more risks, no one would do it. Companies will always need developers to come in on very short notice to help a project out the door. As there is more risk, contracting can pay a lot more money, in some instances 3 times the amount you would get in a normal salary and this is the main factor that drives most developers to turn to contracting.
Asides from potentially doubling your salary, contracting comes with a lot more responsibility. When you contract you get to pick what projects you work on. The normal reason a company hires a contractor is that they have a business changing project, starting imminently, that needs to be out the door ASAP. New projects will always tend to use the latest technologies. This means every few months you get to choose what sort of contracts you work on, what sectors, what technologies etc.. I personally love this constant pressure to learn new things, pivotal career choices and negotiate for better perks and salaries. This lifestyle choice, however, is a double edged sword, some people reading this will hate interviewing, negotiating or even having to learn new technologies ever year, some people will love the challenge.
At the time of writing, I’ve been contracting for over 3 years and at this point in my life, I can’t see myself ever going back to work for an employer. The contracting market is a lot like the stock market. Certain skills will get better day rates, certain skills will be more in demand, some will fizzle out. The time of year can also affect your pay and the likelihood of getting a new gig in December and January, is a lot harder than to find a contract in May.
The Beginning Is The Toughest Time
When you first start contracting, if you don’t have a lot of savings, you will struggle. A standard contracting clause is to receive payment 30 days after you invoice. if you invoice once a month, you may go 2 full months without a single pay-check. My advice to anyone reading this and thinking of becoming contractor, is to have 6 months of savings in the bank before you consider looking for a contract.
That financial float is the biggest problem for most people starting off on this path. Getting financially stable is easier said than done. If you can get one year’s worth of full-time contract work and you’re sensible with your money, you should end up with a nest egg that will get you through the hard times. As soon as you hit that nest egg, your life becomes easier. An example: you start contracting and the day rate for the contract is double your old salary, you only need to work 6 months a year to get the same salary. If you can spend the same amount you would have in your salary and get to a financial position where you have enough money saved up to not worry if you have a few months off, then there really is no major downside of contracting. The worst that will happen is a few months of kicking it back at home and then you end up going back to a normal salaried career.
With a career in contracting you will have a lot more trade-offs. Firstly, as a contractor, you will need to be self-employed. This means learning about business and how to set-up a limited company (or use an umbrella company) filling in tax returns (hiring an accountant), invoicing and potential debt collecting on late invoices and a whole other bunch of non-fun tasks. These are really great life skills for anyone to posses, but, again if the thought of doing these things doesn’t excite you, then this is probably the wrong career path for you.
Some people might hate this extra responsibility, but, other people (myself included) prefer it. As a business, you get certain tax breaks so you end up paying less tax than you would in a 9-5 job. On the other side of the spectrum, when you contract you will only get paid for the days you work. You will not get any holiday pay or sick pay. Every time you take 2 weeks off in the summer you won’t get paid as much.
Should I Consider Contracting?
Contracting as a career is definitely more of a controversial career path. From my own experience, I would never go back, but, when I started off I didn’t have a mortgage, I didn’t have kids or any major reasons preventing me from taking a bit of risk in my life.
I personally think that if you can consistently contract for 1-2 years, then contracting is a lot more of a safer career path. You get paid a higher salary and you are more guaranteed to keep your skills up to date so you won’t become obsolete anytime soon.
If you are reading this and thinking about contracting and wondering where do you start, asides from reading the advice on this site, you can get started by looking on the normal job boards. Any of the big job places will usually offer permanent and contract roles.