Title: Pros and Cons of Contracting

Let us not deny it, typically contractors earn more money than permanent staff and while they pay more tax there are many tax breaks which a good accountant will use to reduce some of that. Although IR35 is closing some of these, after tax income is still noticeably higher for contractors.

However there are no benefits: no pension, paid holiday, sick pay, health care, company car, or social club. In reality, you can replace these and still be better off.

If money is all that is important to you, then you are probably already a contractor, so let us assume money is not your only motivation.

Flexibility cuts both ways. As a contractor you are a hired gun, a project that is running late will expect complete commitment from a contractor, although companies are not generally heartless, they will have less time for a contractor who is late or frequently absent than a permie.

On the whole though, flexibility is an advantage. You are paid by the hour, so as long as the work is getting done the company are not usually concerned whether you have 25, 40, or 5 days off. Much depends on the work environment but you may well find you can work a 35 hour week and still be well paid.

As a contractor I budgeted for lots of holiday, I think I had eight weeks last year. This, to me, was one of the biggest advantages.

Theoretically, as a contractor, you have less job security than a permie. As employment law has lessened, this may not be as true as it was. Many contracts include one month "get out clauses" in which case both you and the permie who sits next to you could be gone in 4 weeks.

I once worked at a well-known bank. One Monday morning we where summoned to a surprise meeting at 11am to be told that over the weekend the senior management had instructed the middle management to get rid of anyone who was "below average." While some departments where reduced to a skeleton staff my group lost just one person, a permie. On this occasion the difference between contractor and permanent staff was meaningless^[2]. To me the lesson was that today's management will do what they have to. Conversely, I also worked with a contractor who stayed at the same company for eight years.

Of course, not all companies are like this, many will simply let contractors go but make efforts to find permies alternative positions. If you are the kind of person who worries about this, contracting is not for you.

Within London, the financial sector is the bread and butter of contracting. As a good developer in C++ or Java contracting in London, you will usually be more concerned with fighting off the agents than finding the next contract. While the banks and financial institutes form much of this demand, they are serviced by more software houses and information supplies than you probably imagine.

Add to this that many government projects are London based and international companies cannot be bothered to travel far from Heathrow and you have a contractors delight.

The downside is that this cuts off some types of development. Shrink-wrap software companies are probably under represented in London because they do not need a prime location. (Of course, shrink-wrap companies seem to be more permie based.)

Outside of London, the market is very different. I have worked with many contractors who are based in the North and stay in London four nights a week. I know of people who consider commuting from Nottingham to Birmingham or beyond normal. Contracts are fewer and further between, forced breaks between contracts are more normal - which of course reduces your overall income.

However, the contracts do exist, you just cannot be so choosy. London based contractors are often asked to work elsewhere although I have yet to find anyone that accepts. Some parts of the country have their own specialities, Edinburgh has its own financial sector and even Newcastle-upon-Tyne has one large, very well known, employer of contractors.

It is not unknown for contractors to have managerial responsibility but if you want to climb the management ladder contracting is not the way to do it. Generally, you are hired for technical skills and that is where you stay.

Most people do not want to be a contractor for ever. "I want to grow into a real software house" is the common aim of many. A few cases I know of have tried, none I know of have succeeded.

There comes a point where most people get fed up of moving jobs, not having continuity, worrying about VAT or some such and long for the simplicity of a permanent job. This is where things can get difficult.

Companies have a suspicion of people who want to move from contract to permanent. Stories abound about contractors who become a permie for a year, get training and then go back to contracting. In general I think companies are right to be suspicious, for most people it means a cut in income and less holiday; but given this argument all their employees would become contractors.

There is a more subtle argument at work too: to some degree companies rely on the loyalty (or servitude if you will) of their employees to work Christmas day, maintain awful code, or do a ten week stint in Reykjavik. Can they be sure that someone used to having more control will accept this?

You get to see the entire development cycle as a contractor but not necessarily in the right order. Be prepared to accept that you may never see the final delivery, or see the system go live. Accept that when you join all the UML has been done. If you want to see a project through from conception to delivery contracting is not for you.

This also means that you have to be able to live with the mistakes of others. On the upside, as you will see more mistakes you know more of what to avoid when the time comes!

If you live in Manchester you may find that the Monday's 7.30am to Euston and Friday's 5pm to Piccadilly may present you with more experience of Richard Branson's trains than you want. Be prepared for a longer commute wherever you live.

Equally, when someone has to go to New York for a week the contractors are usually bottom of the list - the more travel is seen as perk the less likely you are to go.

One of the most common reasons that people give for being a contractor is to get away from office politics. In my experience this is wrong. More often than not, you are dragged into office politics regardless of status. In fact, it is often worse, because you are "just a contractor."

In the worst case, contractors are the cause of office politics. Some will argue that there should not be any contractors, some will envy your income and others will expect contractors to do the dirty work and leave the new, fun, stuff to the permies.

With the loss of continuity comes the loss of reputation. At each company you must prove yourself. To some people this is not important. But if you want people to accept you as a skilled developer you have to expect to prove yourself in every new contract.

Even once you have proved yourself in a job you may find that your voice counts for less. This may be because the office politics does not allow contractors much of a say, or it may be that you have joined the project too late to advocate some point or even just because you do not know who is the right person to speak to (or they do not know you are the person to ask.)

Generally, once you have proved yourself to your fellow developers this becomes less of an issue.

The days when contractors needed three year's accounts are gone, but do not expect to get the cheapest deal in town either. When I bought my flat my building society did not want to know, but my (more expensive) bank was quite happy with one year's accounts.

If you are planning to buy a property in the near future you may well find it easier to wait until you have bought before you quit permanent employment.

Most contracts are paid hourly. Although some companies prefer a "professional daily rate" most contractors regard this as being asked to work more hours for less money.

This can give you a feeling of a labourer or you can see it as a very honest way of getting paid. Either way it has very real effect: if you work 10 hour days you see more money in the bank, if you are sick, or take a week's holiday you get nothing. (I heard my first case of a developer being paid "cash in hand" this week, the days of deposits for parts and "oo, it is going to cost you" cannot be far off.)

Although I have worked with many contractors who have stayed at the same place for several years and seen permies come and go, on the whole contractors change jobs (or clients) more often. Over time you will probably come into contact with a greater variety of coding styles and development practices than you would at one company. It is almost respectable to move every year.

This has its down side, if you have more than a couple of 3 month contracts on your CV people will start to ask why you do not get extended on contracts.

It is a bit myth that contractors have freedom to choose what they do. You can only do what is available, if you want to program BeOS, you are going to have a hard time finding a contract. It is also easy to get pigeon holed and only get offered contracts similar to those you have done before - if your last two contracts were for Access you may have trouble getting a C++ contract next.

Having said this you are responsible for what you do, you cannot blame agents for everything, if you sit in an Access contract for 18 months is it a surprise that people do not want your C++ skills?

Pigeon holing is not all negative: 18 months developing an Equities Trading system make you a lot more marketable in the financial world.

Do not expect companies to send you on courses and pay you while you attend either. Luckily you are empowered here so if you want to get into Java you can book yourself on the course - although you are the one paying and you loose the income you could have earned, and you may have to take a rate cut in the next contract to actually use Java but it is your decision.

The fact that most of you reading this are ACCU members means that you have already taken some responsibility for your own skills. If you already keep abreast of technologies and techniques yourself you may well find that contracting offers you the freedom to go on more courses, spend more time at conferences and hence provides you with more opportunities.

If you are the kind of person who forgets to pay bills and live on an overdraft then contracting is probably a bad move for you. Once free of the monthly cheque (most contractors work on a quarterly period) and faced with VAT returns you may find it is all too much: I know people who have got into financial trouble, their income increases but their spending increases more, then they are faced with a tax bill.

On the other hand if you are disciplined about keeping an eye on your personal finances you probably will not find a company too much trouble to run. And of course there is always an accountant to help.

Your responsibility extends further as you will want to think about pension and, depending on your priorities, BUPA, cars, and so on. In a permanent job, someone else organises these things.