Contracting

This article is a basic FAQ about contract work.

Whats the difference between working as a contract and a standard (PAYE) employee?
What are the risks involved in contract work / Is contracting for me?
I want to get into contracting. What type of company do I need to set up?
What do I do about tax?

Whats the difference between working as a contract and a standard (PAYE) employee?

The Pros:

More money then an employee doing the same job as a PAYE worker.
Flexibility to change jobs quickly.
Ability to move between different types of work, and constantly learn new things..

The Cons

No Health insurance, pension, etc unless you get it yourself.
The expectation that you can "hit the ground running", you're hired to be more productive then an unexperienced worker, and you'd better deliver.
Occasionally there can be periods of unemployment in between contracts.
Occasionally, resentment from full time employees. "Contractor scum. Getting paid twice as much for the same job I do..."

Contract work is for you if:

You are good with people. Contracting is more about being able to sell yourself then a standard job.
You know your stuff, and can communicate it effectively.
You work well under pressure.
You can pick up new concepts and ways of working quickly.

Contract work is not for you if:

You have no savings, or are bad with money. You will be paid more, but the risk is that your contract may not be renewed. You need to be able to budget.
You are risk averse. There is an amount of gambling on getting a contract extension, or a new contract. If this will completely stress you out, or you have a huge mortgage to pay then it may be better to stick to a stable job.
You're a "clockwatcher". Contractors are expected to earn their keep. If you hang around waiting for the day to end you probably won't last long.

There are three main types of setups:

Umbrella Company

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