Switching from full time to contractor – 5 ways to make the transition

So, you’ve decided to take the leap and become a contractor. Making a career change is very exciting but the process can be daunting. Moving away from the certainty of a permanent contract is a big step but the rewards of becoming an independent contractor are very real. Here’s our guide to transitioning out of permanent employment and into your new contracting career.  

1. Don’t just rage quit

Once you’ve decided to strike out and pursue contract jobs,  it can be very tempting to quit your current job in a dramatic fashion.

Even if you do have fantasies of tearing up your employment contract, giving your boss what for and setting fire to the bins, it’s probably best you orchestrate your exit in as dignified a way as possible. An employer that remembers you fondly is a potential client down the line.

2. Be cautious about transitioning from company employee to company freelancer

On the other end of the spectrum, if you like your permanent work, it’s important not to cling to it once you’ve decided to leave.

If you’re leaving a permanent job for a contract position, but don’t have anything concrete in place yet,  it wouldn’t be unusual for someone in your position to start doing freelance work where they’re most comfortable: at their former workplace.

If you have a good relationship with your current employer, it’s all too easy to fall into old, comfortable rhythms. If you find that you’re self employed but working for one company you’ve got all of the precarity and responsibility of contracting but without any of the benefits of permanent employment.

While there’s nothing to stop you from keeping in contact with your former work and even taking them on as a client at some point, it’s important both from a taxation perspective and for establishing your contracting career that you strike out on your own.

If you decide to start a limited company and you only have one client, for whom you work full time, HMRC will take a dim view of your business practices, especially if you want to avoid IR35 legislation. Even if your contractor salary is higher than a permanent equivalent, if you’re caught under IR35, you could end up paying as much tax as a permanent employee. You can take a look at our contractor vs permanent calculator to get an idea of what you should be earning.

Even if contractor tax laws weren’t a concern, working for your previous employer can potentially hinder you finding new clients. It’s all too easy to get comfortable and choose the path of least resistance – but variety and breaking out of your comfort zone are some of the chief perks of being a contractor. Why would you give them up right at the beginning of your career?

3. Work with your current employer

Instead of slipping into the same role you had before, you can work with your current employer to ease your transition into contracting in a way that works for both of you.

If it’s possible, you may want to implement a phased exit from your current position. This means that you give yourself and your employer time to adjust to your departure by working only part-time hours during your final weeks on the job. It also enables you to do a smooth handover whilst still giving appropropriate headspace to the challenges that lie ahead.

It’s also important that you look at your original contract and make sure you honour all the stipulations about notice periods. Particular to your interests too are any stipulations which prohibit you from soliciting your previous employer’s clients. You don’t want to start your contracting career embroiled in a messy (and expensive) legal dispute.

4. Make a contractor CV

Before you leave your current job, you need to get yourself in the best position to seek work. Creating a killer CV is a high priority as often this is what convinces clients to hire you. Often, assignment turnaround times are very fast, so if you don’t impress straight away, you could lose out on a gig.

A contractor CV is a different animal to the CV you might produce when seeking a permanent position. Where a job-seeking CV is focused, succinct and talks about who you are, a contractor CV is more of an exhaustive run-down of everything that you can do.

Clients not looking for a long-term prospect, they’re seeking solutions to their problems. It’s your job to demonstrate that you can come in, get the job done and get out again. Include everything you’ve ever done, even if it feels irrelevant or obsolete – let the client be the judge of the services they need from you!

5. Decide what kind of contractor you want to be

One of the biggest decisions you’ll have to make when you’re going from employee to contractor is whether you’re going to start a limited company or work under an umbrella company. There are pros and cons to both approaches, but some new contractors find the transition to their new life is eased somewhat by an umbrella company taking care of their tax and payroll issues while they find their feet. It’s up to you and how confident you feel.

However you decide to pursue your contracting career, you’re making a bold step in making your working life work for you. There’s a world of flexibility and freedom out there and you’ve got the courage to embrace it. Congratulations and good luck!