You’ve made the all-important career changing decision to step down from permanent work, and dip your toes into the uncharted waters of contracting, but what now? It’s time to hand in your notice; a love it or hate it moment. You may have envisaged yourself jumping with joy, or crumbling with upset, but from this moment on, you’ll be joining 4.8 million self-employed workers, including freelancers, who prefer a non-traditional way of working.
Drawing on our experience, we formed a quick checklist which points out how you can transition smoothly from your permanent job to contracting:
1.Work your notice period or jump ship?
As a first-time contractor, you’ll need evidence to support your track record, this means that you may require references, a portfolio, as well as a winning CV. The precautionary option is to work your notice period as a reputable reference can reflect positively on your character and work ethic.
If you’ve secured a contract that’s due to begin soon, it may be worth negotiating your notice period with your current employer. This could dock your holiday pay if there’s any left over, but if you think that the contract is worth it, then you already have your answer.
2.Beat the office politics
If you’re an upstanding member of the workforce, or a veteran employee, jumping into contracting may spark office politics. As a contractor, you’ll be working on one contract to another which will mean that office politics will be no more.
The next step discusses how to add a layer of financial security to your career.
3. Are you War Chest ready?
A war chest is a large sum of money that works as a ‘reserve fund’ in times of financial difficulty. As a limited company contractor, you won’t be eligible for sick pay, holiday pay and maternity/paternity pay, so that’s when your war chest can function as a safety cushion. As a first-time contractor, your working status could be unpredictable at first, so it’s all the more important to form your war chest.
For information on why you should set aside a reserve fund, and how much you should set aside, read our blog on ‘Why every Contractor needs a War Chest.’
4. Choose a platform
As a contractor or freelancer, you will typically operate through your own limited company or by employing the services of an umbrella company. If you are looking to contract for a public-sector body, your decision may be mitigated by the IR35 reform 2017.
If you decide to operate though a limited company, as a director, the operational duties will lie with you. If you decide to operate through an umbrella company, they will essentially become your employer. If you’re unsure about what platform is the most financially efficient for you; Limited or Umbrella, seek advice from a specialist accountant.
5. Get your finances into order
If you run your contract through an umbrella company, you will be paid through their payroll service. As a limited company contractor, you will be responsible for your own accounts. If you select the services of a specialist contractor accountant.
At Gorilla Accounting, we offer an all-inclusive accountancy package at a competitive price of just £85 per month plus vat. If you would like to find out more about our service, email info@gorillaaccounting.com or call 0330 0240406.
