Every kid with even a spark of imagination has dreamed of being Clint Eastwood in the classic Western “High Plains Drifter”. Eastwood’s character The Stranger has an almost perfect freedom moving from gunfight to shoot ’em up across the American West.

Nothing he encounters is a problem, he’s effortlessly cool as a gunslinger: he’s quicker on the draw than everyone else and knows whatever happens he’s going to survive the movie and ride out of town as the first credits roll. Many workers in permanent IT  jobs see contracting as offering a similar freedom. There’s a general perception that the IT contractor can decide where he works and when he works. And for a lot of workers choosing this route that just might be true. According to research carried out by Contracting PLUS and Computer Scope  in 2013, 36% of respondents in permanent IT roles were considering a move to contracting.

“It is interesting that 36% of those surveyed who are in permanent positions are currently considering a move to contracting.”

Yvonne Brick, client solutions consultant, Contracting PLUS

Firms employing contractors will pay higher daily rates than they will for permanent staff  because they make savings by not paying for holidays and sick days. Contractors pay for their own sick days and take holidays on their own time. At this point it is important to point out that if you go out on your own as a contractor you are on your own.

This also includes having complete responsibility for your tax affairs. You’ll have to negotiate the different tax categories for the self employed and investigate whether it’s better to register as a sole trader or limited company. As well it’s your responsibility to ensure all tax returns are correct and filed before the appropriate deadline including corporation tax, VAT if applicable, payroll taxes and end of year returns.

Additionally, you’ll have to manage your cash-flow to ensure you have enough to cover the retrospectively applied tax bill, which in turn means accurately projecting all incoming and outgoing cash and budgeting accordingly. Revenue have an open audit initiative in relation to contractors, so travel and other expenses need to be carefully considered, and in many cases Revenue will never allow travel from home to a client site unless you have multiple clients in multiple locations at the same time and thus qualify as an “itinerant worker”.

In fact being a contractor is just like running a small business. So suddenly the contractor is more like Albert Arkwright from Open All Hours than the High Plains Drifter.

Albert-Arkwright-Open-All-Hours

So Why Choose IT Contracting?

The truth of course, lies somewhere in between. The main advantage in contracting obviously is the better rates of pay it offers. In the Contracting Plus and Computer Scope survey the most popular reason given by current IT contractors for having taken up contract work originally was the higher rate. The percentage of respondents who gave this as their primary motivation was over 60%.

In the same report respondents who were working in permanent IT roles also gave Rate of Pay as a popular reason that would encourage them to become contractors, as the graphic below shows. Contracting-in-Ireland-Contracting-Plus-Survey
But to hit those big numbers you’ll need 10 years previous experience and must demonstrate that the skills you’re selling in the contractor market are very strong. If you can meet these requirements and impress the hiring manager you’ll have a powerful say on your pay and work schedule.

So if you are a strong player in your market contracting can offer you a lot. You can get experience in a wider variety of technologies in more operations and industries which can make you much more marketable when searching for new contracting roles or a permanent position. But as a caveat to this, because of the short duration of the contracts the variety of your experience might lack depth.

Additionally, with greater mobility in different industries and companies you’re making new contacts and if cultivated in the right way they can act as your champions helping you sell yourself into their firm. But again remember you are ultimately on your own and you don’t get sick or holiday pay. And if the period in between contracts turns out to be longer than anticipated the option of welfare support is severely limited for the self employed – if it’s on offer at all.

Contracting in Ireland can give advantages to workers who have commitments allowing them to spend more time with their family. And people without any family commitments can find the opportunity to mix both work and travel very attractive if they are offered a contract abroad.

But if you do get the offer of a foreign contract the perennial question of paying taxes will reoccur. In this situation a contractor working in another country while legally resident in Ireland will need to get advice on how this changes tax liabilities in Ireland, and indeed whether any foreign tax exposures have arisen. You might not be aware of any changes in your tax status while working abroad but it might become painfully evident once you return to Ireland.

If you are making a long-term move into IT contracting it would almost certainly be necessary to retain an accountant. Before the great recession many IT professionals became contractors because of the higher income it offered and as the IT sector heats up this again could be a big draw for many people. But at the same time lots of firms are recognising the savings they can make by hiring contractors. This means that a lot of workers in the industry might not have any choice in becoming contractors, their employer might make that choice for them. If you are looking at contracting in Ireland, or indeed looking for contractors for your organisation, let us help you.