Ten things to do when looking for contractor work

Despite the recession, there is an endless supply of well-paid contract work, and a warm and welcoming community of contractors ready to share their bread and butter with newly-redundant "permies"… well, no actually, there is not.

Despite the recession, there is an endless supply of well-paid contract work, and a warm and welcoming community of contractors ready to share their bread and butter with newly-redundant "permies".

Well, no actually, there is not. There is, however, a widely-shared belief that when times get tough, we can always fall back on contracting.

But if times are tough for those in permanent employment, they are tougher still for contractors, who have borne the brunt of current lay-offs.

Contracting is not a stop-gap. It is a change of career, and one you can only make if you have the right qualities of independence and entrepreneurship, and what can seem to non-contractors like a narrow focus on your own interests.

On the plus side you will be your own boss, and in theory can chose the kind of work you prefer, and take holidays whenever you want - although in the current buyers' market, contractors have to take what work they can get, and long holidays are unlikely to be voluntary.

If you still feel that you have a unique combination of skills and experience that will enable you to compete against an ever-swelling pool of experienced contractors without contracts, here are ten points to help you survive.

1. What opportunities are available for contractors?

During the last industry recession, it is estimated that at least 35% of contractors were out of work. When BT announced 10,000 proposed job cuts recently, it emphasized that the majority (6,000) would be consultants and contractors. BT has said it will retrain and redeploy permanent staff to fill vacancies, rather than hiring contractors.

Employment offers for IT contractors in financial services fell 49% in October compared to September. Even outsourcing and offshoring companies, such as EDS and ATOS Origin, are shedding contractors or freezing new hires. Employers will have their pick of experienced contractors, and successful new contractors will need to offer something special.

2. What can I offer as a contractor?

Demand for all skills is falling, but some skills, and some occupations, are falling faster than others. The latest results by Computer Weekly's partner in compiling skills data, Salary Services Limited (SSL), shows that demand for contractors with SQL Server and Oracle skills fell by around 30% between the second and third quarter of this year. Java by contrast fell just over 11%.

Of course, these figures are lagging indicators in a market that is changing by the week, but they do indicate that if your offering is a couple of years' SQL Server experience with a basic certification such as MCTS, you are going to find it hard to break into contracting. By contrast, demand for SQL Server permies was down just 3.4% between Q2/2008 and Q3/2008. In other words, prospects of work, though still poor, are better in the permanent market.

Keep your eyes on sites such as SSL's and IT Jobs Watch, but bear in mind that the skills to watch may not be in the Top Ten, which partly reflect the inertia of former IT investment. Further down, you may find skills such as Ruby or PHP which are holding their own, or moving rapidly up the ranks relative to more traditional contracting skills.

3. How can I make the most of my CV?

Obvious and hackneyed advice, although this is about more than describing yourself as a dynamic self-starter, and all the other self-promoting phrases that recruiters skim over to get to the meat. Have you worked in the public sector in the recent past, even if not in your most recent job? Make the most of this: the public sector is holding up better than most. Have you experience in project management or security, which you could emphasise? Again, this work is holding up better than most. Have you trained people? Government is bound to invest in training for the unemployed. Think about building on these skills. And do not miss off legacy skills that may help you get maintenance work.

4. Should I think hard about certification?

Contractors curse the need for certification, which simply proves that they have got the basic ability to do the job they are doing anyway. They pay twice over, first through fees, then through paid work lost while attending courses and exams. But survey after survey of employers' requirements has shown that despite making you stand out less from the herd, certification has the edge over mere experience.

So one of the costs of going contracting is keeping your certifications up to date. But be realistic about this. If you are an SQL Server MCTS, you are not necessarily going to improve your prospects by becoming a paper MCITP without the experience that should go with it.

5. What paperwork do I need to prepare?

The preferred option among contractors is to set up a limited company. You can also join an "umbrella" company, which, for a fee, does the administration and issues invoices on your behalf. Or, if you are hopeless at paperwork and do not want the responsibility, you can become an effective employee of an agency, who will stop PAYE for you (but this loses the tax advantages of being your own boss without necessarily giving you the security and other benefits of being an employee).

Or you can shamble on, picking up odd bits of work until it occurs to you that you need to do something about tax. Now that income tax and VAT are part of the same organisation, they move more quickly - and more harshly - than they used to, and you really do not want to get on the wrong side of the VAT people.

Whatever you decide to do, you should find yourself an accountant. Some will also take care of other aspects of running a contracting business. This will cost you, but if you are lucky with your choice of accountant, it is money well spent, enabling you to concentrate on your work. You will make up the cost by avoiding late tax penalties and appearances in court for failing to file accounts.

Contractor websites offer guides to setting up your business (Contractor UK and PCG), and some will even help you set up your company online.

6. Should I improve my skills portfolio?

You can add value to commodity skills and certification by analysing job ads for the extras employers are looking for. For example, C#, Visual Basic and other .net language developers can teach themselves LINQ, Microsoft's Language-INtegrated Query, using Microsoft's own resources (start at MSDN LINQ: .net Language-Integrated Query and Using LINQ to SQL), or independent online tutorials such as Onedotnetway's linq to SQL tutorial. Similarly, Java professionals can teach themselves Struts or Hibernate from free online resources.

Remember now that even Microsoft has opened up its products to the community, you can contribute by helping with debugging or feature building, or submit applications you have developed. This will provide a shop window for your skills, and something to add to your CV.

7. Do I need to upgrade my skills?

Do not assume you need to offer the most recent version of a product. Plenty of roll-outs that were planned for the next few years have been put on indefinite hold. There are still many installations using earlier versions of Exchange, SQL Server and the Oracle database, among many others.

8. Should I be realistic about skills acquisition?

Back in the 1990s when SAP rose to be the king of contracting skills, many would-be contractors contacted SAP and other "ERP" suppliers and their training partners, hoping to gain a ticket to lucrative work. Usually they were turned down, on the practical grounds that without hands-on experience they would hold back the rest of the class, and on the humane grounds that they would be left out-of-pocket by a five-figure sum, and with a worthless paper qualification.

Trainers facing emptying classrooms might be less scrupulous these days. But even if you manage to acquire one of those big-ticket skills, you will be entering a market oversupplied with experienced practitioners. Incremental, low-overhead skills such as those described above are the ones to go for.

One exception might be for SQL database specialists, who can take advantage of the rivalry between Microsoft, Oracle and IBM to add theoretical knowledge of a second database to their portfolio at relatively low cost, by attending a skills migration course.

9. How do I make the most of your training "budget"?

It is tempting to assume that most of your training costs can be offset against tax on your earnings. In fact, the allowances available to most contractors will barely pay for a couple of days classroom tuition. Online or CD Rom-based training packages from suppliers are much cheaper. Alternatively, look for free tutorials. Those posted by open source and other communities have been peer-reviewed and are constantly modified and improved.

Local authorities offer adult education in IT skills at a fraction of the cost of commercial training. If you are unemployed, you should be able to get a discount or help with fees.

Organisations such as the Professional Contractors Group and Contractor UK offer discounts on training in exchange for a fixed annual fee.

Training tends to focus on a narrow set of skills, which may not get you work now, and may not equip you for the changed working world that will follow the recession. Consider going for a broader-based qualification which will equip you with a more generic set of skills and offer other opportunities for personal and professional development. You can for example take an MSC in Computer Science (if your first degree was in another subject) part-time, at a cost of around £2500 a year for two years, attending classes at times that suit working people.

10. What is a realistic earning potential?

According to IT Jobs Watch, the average salary for a permanent Java developer recruited in the last five months was £46,861, whereas the average daily rate for a Java contractor was £429. Over a 48 week year, the contractor would make more than twice as much as the permie. Except that the contractor is unlikely to get 48 weeks of work, and as recession bites, the gaps between contracts are getting longer.

In a recent survey of their priorities, contractors opted for length of contract over higher rates. And it is now common practice for clients to renegotiate rates in mid-contract. In recent examples, those who took a 25% cut were offered renewals, while those who refused were out at the end of their current contracts.

Read more on IT jobs and recruitment