The leap from employment to contracting
Swapping from salaried employment to contracting may seem like a big leap, but for many it’s a change from which they’d never go back.
For those who’ve always been salaried workers, the leap to becoming a contractor can seem an enormous one indeed.
It’s an understandable feeling – teetering on the edge of the employment cliff, looking into the great sea of freelancing can seem like a downwards plummet.
The truth is far less dramatic – and, in our experience, the risk is really something that is perceived rather than real.
True, it is a step into the unknown. But it’s really just the fact that it’s unknown, a new experience, that causes the trepidation – otherwise, why would so many other people do it?
It’s having the confidence to take that first step which is often the single biggest hurdle in becoming a contractor. Perhaps it’s for this reason that many people put off the idea until the idea is thrust upon them. Many have made the move to contracting because they’d been made redundant. This often isn’t a reflection on their skills – companies tend to shed the most expensive people, but, ironically, these workers are usually the most experienced, skilled and mature. In short, they’re good at their job, reliable and really know their industry inside out – just the kind of people other companies are hiring as contractors.
In fact, becoming a contractor can make far more sense for senior, experienced people – it’s potentially more rewarding and usually far easier to land a contract than a permanent role.
Of course, not everyone who becomes a contractor is pushed into it. Many do it for the money, the freedom, the lifestyle (which can involve living and working overseas) or the fact that it gives them greater control over their own destiny.
Not only does the natural self-doubt of the lifelong employee hold people back from contracting, so does the influence of their spouse. This is totally understandable – the two people are a unit and the decision affects both. Neither relishes the idea of a move that unseats the security of both – and apprehension at the prospect of change is neither unusual nor trivial. The only real way to address these doubts is through discussion and gathering more information.
It’s interesting that although many choose contracting, even those who feel pressed into it and fearful of it quickly say that they wished they’d made the change far sooner.
Early practical tasks for contractors can seem monumental and daunting – simply because they’re outside of the employee experience. For example, organising and understanding tax, setting up your own company, finding an accountant – this is all uncharted territory. The reality is that these are neither complex nor time-consuming. Often, the whole lot can be sorted very quickly and, once in place, the job’s done.
While the remuneration gap between contractors and the employed is narrowing, it’s still typically more rewarding to be a contractor – especially if you have an in-demand skill, a second language or are willing to work overseas. For example, in the Netherlands there is a 30% tax rule for the first 10 years working there (essentially taking 30% from your gross income before paying tax) which, when coupled with mortgage relief and tax relief, can result in 65%-70% take-home pay.
It’s not all about the money, though. Security is often a perceived risk with contracting – though, as we said, it’s more of a perceived risk than a real one. As secure as an employed role might seem, it’s no more secure than a contract. Employees can be dismissed with similar notice periods, after all.
When looking to secure great people, it’s not unusual for companies to offer longer contracts – perhaps a year; on top of this, there might be an end-of-contract bonus, to encourage the contractor to work the full term. How’s that for a combination of security and reward?
The big worry for new contractors is often not the first contract – it’s the second. Having landed a contract, the prospect of what happens at the end of it can become a gnawing doubt. But, like the initial leap, this worry is usually unfounded. We found that around 70% of contracts are renewed – and good contractors are seldom out of work for long.
It’s once contractors have secured a contract extension or second contract that worries start to go away. The contractor feels more secure, simply because the psychological barrier of moving from one contract to another has proved to have little substance.
It’s not really the change that’s the issue when someone moves into contracting – it’s simply that those first steps are ones of exploration. But it’s amazing how quickly people adapt and embrace what can be a more fulfilling and rewarding way of managing their career.