Starting contracting - steps to become a contractor

Introduction

Having made the decision to go contracting you will now need to do the following:

Quit your current job.
Secure a contract.
Consider the IR35 status of the contract.
Decide on a payment structure.
Choose an accountant or umbrella company for the payroll.
Sign contracts.

Step 1 - Quitting your current Job

The vast majority of contracts (this means 99.9% of them) will require you to interview immediately or within the next couple of days and start within at most the next couple of weeks.

There are some contracts who state they will wait 4 weeks for the right person, but this is only because they are hard to find and have no other choice.

So, you will need to quit your job and start looking for contracts at the most 4 weeks before you are due to become available.

Step 2 - Secure a contract

a most effective form of job search is using internet advertising boards

Career Consultancy Services

You can either go via an agency or direct to the client. Unless you have a good network of contacts it is most probable you will need to use agencies.

Whilst it is worth emailing your CV to everyone on the planet just to get on the agency databases a most effective form of job search is using internet advertising boards, Jobserve being the no1 place to look.

Step 3 - Consider the IR35 status of the contract

You can either do this yourself, or seek expert advice from a qualified lawyer who specialises in employment law.

We discuss the option of seeking advice from HMRC in our article should you send the contract to HMRC?

Some accountants have also learnt the IR35 buzzwords and legal basics of IR35 and offer status reviews. Some larger accountancy firms have qualified in house lawyers who do the reviews. It is worth asking the qualifications of the reviewer.

Step 4 - Decide on a payment structure.

This is either a “one person” limited company, where you are the director and shareholder or an umbrella company solution.

We discuss this fully in our article Limited Company or Umbrella: Deciding on a Payment structure

Step 5 - Choose an accountant or umbrella company

The following articles discuss the details to help you make the right choice:

Choosing an Accountant for your Limited Company
Setting Up a Limited Company

Choosing an Umbrella Company
Joining an Umbrella Scheme

Step 6 – Signing the Contracts

If you decided to go down the limited company route then you will need to:

Send your new limited company details to your agency
Sign the agency contract for the agreed period/hourly rate as company director for your new limited company

If you decided to go down the umbrella route then you will need to:

Sign the umbrella company provider’s contract for services (their terms and conditions)
Advise your umbrella company the details of your agency and contract for services
Advise your agency the details of your chosen umbrella company provider

The umbrella company and agency will then liaise to sign a contract for your services, working through the umbrella company. Some agencies will require you to countersign the contract, following it’s signature by a director of the umbrella company

Updated Wednesday, October 25, 2006, [Originally published Tuesday, May 11, 2004]