How Many Years Experience Before Contracting?

The contracting sector is evolving at a tremendous rate as more people realize the benefits of versatile working. With the demand of a contingent workforce tremendously increasing, there has never been a better time to become a contractor. But the question on how much experience is needed to become a contractor is something that almost everyone has asked during their initial stages of contracting.

It is apparently considered that an experience of 3 years is suitable in order to become a contractor. Some people say any earlier is risky to become a contractor. But this much information is not enough. In this article, we will consider the most important questions related to contracting and will explain them in a detailed manner.

How to find contracts?

You must have a targeted approach in order to successfully get a contract. A killer’ contractor CV is probably the most integral step towards finding a good job. Make sure you CV has information relevant to the contract job being applied for. Make your CV short as well as focused and tailored. An estimated 80% contract jobs are given through agencies, so you must market yourself on the job board using specific agencies. Being noticed and standing out is very important if you want a good job.

Follow the contract job applications and chase clients. Experienced contractors believe that if you have landed an interview, you often end up getting the job. That is why during initial negotiations, you should focus on getting the interview and not bargain over rates. For clearing the interview, you should make sure you are prepared, proactive and understand the issue. Be confident, understand the job and try to close the deal. Having reassured the client at interview, follow up with the agency and there! You got a new contract!

Do I Require a limited company to contract?

Earlier, it used to take weeks to set up a payment mechanism but now it can be done in less than 24 hours by using company facilities and business accounts. The best payment structure depends on your IR35 status. A limited company might not be the best choice for you in case you are inside (caught) by IR35.

If you want to contract for a longer term, then a limiting company will provide you tax advantages and flexibility. On the other hand, you should use a PAYE umbrella company , if you plan to contract for a shorter time. A limited company provides maximum benefits if you have significant benefits that you need to claim. You should not be opting for these companies in case you do not incur and need to claim many contracting expenses.

Is it better to work as a permanent job first?

One among the main factors that makes permanent jobs better than contract jobs is the fact that they provide stability. It is apparently considered that an individual should have at least 3 years of experience before becoming a contractor.

But there is not hard and fast rule. I personally knew a guy who decided to become a contractor with just 4 months of experience. Permanent jobs come along with numerous benefits. Initially, gaining some experience in a permanent job can make you feel more confident and strengthen your move towards being a successful contractor.

Do I get paid with company dividends as a contractor?

If you are a limited company contractor, you are likely to decide how or when you pay yourself. If your contract work is not caught by the IR35, most of the limited company contractors obtain income in the form of dividends. Dividends are beneficial because they are not subject to National Insurance Contributions (NIC) which allows them to save money.

But there are certain things that you need to keep in mind. Dividends can only be paid from company benefits. Also, declaring dividends without sufficient profits is illegal. Corporation tax keeps more dividend information within each threshold. It is important to keep the S447 in mind. According to the tax law section 447, employment related securities tend to target employers using contrived schemes to avoid taxes by paying dividends, rather than paying salary.

Do I pay less tax while serving as a contractor?


There are numerous ways through which you can save money by having a  tax efficient setup. Unlike Umbrella Company, a limited company allows effective tax planning through a combination of salary and dividends. You can also claim your business-costs in terms of expenses in order to receive tax relief. In order to save tax, you need to understand IR35. If the contract is caught inside IR35, you can still effectively complete your contract. However, note that there will not be any entitlement as a contractors operating outside the IR35. Understanding how to structure your business is just as important as understanding how much to charge your clients.

It is advisable that you keep up with all government schemes as this might enable you to operate tax-efficiently. You might think that hiring an accountant is something that is not required and can be avoided. But an accountant actually helps in saving your money as well as time and stress. Furthermore, you should avoid any kind of penalties and you should take a share of the profit of your company and keep it as pension.

Pros and Cons of IT contracting

The upsides to being an IT contractor can be mesmerising, being your own boss is something most people sitting in a cubicle wish for everyday.

Being in charge of my own finances rather than remaining subject to a corporation’s view on their employees as production robots with fixed salaries gave me the independence and liberty to not be part of the never ending concrete jungle.

It can be frightening but moving away from the well known path into IT contracting once done, makes you question why you never did before.

IT contracting is not for everyone though and needs firm resolve and conviction to make it work. Like everything else, it comes with the good, the bad and the ugly. Here are 5 pros and cons of IT contracting to help you make your decision.

The Pros Of IT Contracting

pros and cons of IT contracting
  • Financial Benefits: A very compelling factor in regard to contracting is more money. A lot of contractors are paid more than double the amount a full time employee is paid for the same project.

    Your skills and the industry you are in will play a role in how good a pay you can ask for. The main reason why your pay increases is because you offer your employer flexibility and are taking on short term contracts. Most contractors are paid by the day and can ask for additional pay for extra hours put in.

  • All rounded experience building: Working for a range of different companies and range of different bosses can give you the ability to learn a little something from each one.

    You can develop the skills you already have and obtain new ones by the minute. Each manager will want work done differently and have a different approach to the job. This teaches you how to cater to different types of people. It allows you to advance your career by exposing yourself to multiple different types of processes.

  • Build Your Network: One of the main benefits associated with contracting is you get to build multiple relationships across several companies at the same time. If you can give excellent work to an employer, even on a short term basis, they will keep you in mind and also be a great review to add to your shelf of achievements.

    This helps you uncover a range of opportunities with other companies and clients and also maybe discover permanent positions you could apply for to gain additional job security.

The cons of IT contracting

  • Job security: Job security can be hard when it comes to contracting because of the short-term factor of all your contracts. You need to have found a new contract before the one you are on has ended. This can prove disheartening if you have to deal with a time period where you have no work. During this time period, you start to consider the negatives of the job and have to focus on moving forward rather than getting disheartened.

  • Business Expenses: When you work for a corporation or for someone else, they are paying for the office, the electricity and everything else. When you are IT contracting these expenses become yours to bear and you have to start being your own stingy boss.

  • Benefit Plans: One reason why a lot of employees stay employees is for the package deal you get when signing a contract.

    You do not want to give up your healthcare that comes with your salary. You would have to pay an additional amount for health insurance if you work separately.

    A lot of people I have met along the way have health insurance added to their spouse’s through their position in a company.

  • Pension: Normally an employer would pay if you are ill or give you a pension by deducting a certain amount from your salary regularly. As a contractor you need to take control of all these aspects yourself and put aside enough money for the years that will follow. This needs to be done on a regular basis with no excuses.


Personally, looking back, contracting has been the best decision I made, giving me all the perks a job could never offer and that I was looking for.

The downsides take time to deal with and understand, but once you do it is smooth sailing. Understanding health insurance and putting your money aside are important steps to the learning process.

Negotiating with potential managers is also a learning curve that needs to be tackled with. After you get yourself sorted and settled, the perks out weight the tons by quite a bit. 

I personally feel that becoming a successful contractor requires a lot of patience and credibility. It is true that permanent jobs are more secure and stable, but the job of a contractor makes you feel free, wanting to explore. These are some of the key points that I felt like sharing with my voracious readers. As an author, it is a 'must’ for me to deliver the best of knowledge so that my readers can extract maximum information from my articles.

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