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Your Career  First Time Contracting

Thinking about making that first move into contracting?

It’s much easier than you think.

Our team of experienced contract recruitment consultants can walk you through each stage of the process and we’re always on hand to answer any questions you have.

Why Become a Contractor?

People think about taking that first step into contracting for various reasons:

  • Redundancy
  • At a junction in your career
  • Looking to have more control on the types of projects you undertake
  • Broaden your experience within different environments or cultures
  • Financial benefits of contracting

We take your career seriously, and so we’ll always be honest and upfront about the pros and cons of contracting. It’s not always for everyone, but we’re here to talk you through all the options and find the right path for you. Taking that first step into contracting, especially if you are leaving a permanent position, is always daunting, but once you’ve made that move, you’ll wish you did it years ago.


Increased earnings

Contracting gives you a higher hourly/day rate than an equivalent permanent employee. Your tax status should also enable you to take home more net pay.

Greater variety and interesting assignments

You choose your assignments and clients, so you can choose only to work on projects that interest you.


You can choose when you want to be in contract and when you want to take time out between assignments.

No office politics

You’re there to deliver a specific service or specialist skill, and then you’re out again.

Improved work/life balance

You’re in control of your own destiny - where, when and type of assignments you undertake.


Staying in contract

If you’ve done your research, you’ll know the demand for your services and skillset. While we’ll do everything we can to find you that next contract, you need to be proactive by registering with a number of reputable recruitment agencies and specialist recruiters in your area as well as making use of the job boards and social media.

Downtime between contracts

If you’re not in contract, then you don’t get paid. However, with higher earning potential and keeping your technical skills up-to-date, downtime and loss of earnings can be kept to a minimum.

Training and personal development

As a contractor and not a permanent employee, you’re now responsible for your own training and personal development. You’ll need to personally invest time in yourself to keep your skills current and marketable.

Holidays and sick days

If you’re not working because of holiday or illness, you won’t get paid for those days off. However, given that your earnings will be substantially higher, you’ll find that you can afford to take time off.

A Step-by-step Guide To Becoming a Contractor

Step 1: Do Your Homework

If you’re moving out of a permanent role into contracting, it’s a good idea to research the market first.


How flexible are you? The more you open up about where you’re willing to work, the more opportunities you’ll find on the market.


Look at the job boards. How many new opportunities are being posted each week/month for your skills in the locations you are looking to work? This will give you a good idea of how in demand your skills are.


Talk to us about the current market rates for someone with your skillset and experience to get an idea of how this could affect your financial situation.

Step 2: Choose How To Contract

There are two main models for contracting:

Limited Company

This is where you set up your own Limited Company. There are a number of organisations that offer Limited Company contractor services who can set everything up for you, with nothing payable until you have actually received payment of your first invoice.

Prices vary between companies, but always look to see what is included in the basic monthly fee. With the majority of companies, you can choose the level of service you need and that best suits you.

Alternatively, you may prefer to setup your Limited company yourself. You can do this quite quickly and easily at Companies House.

In addition to setting up your Limited company, you would also need to open up a business bank account, put insurance in place such as Professional Indemnity and Employers Liability, and your accountant would advise you as to whether you should become VAT registered or not.

Umbrella Company

If you don’t want to set up and run your own limited company or are only looking to contract for the short term, then you may decide to choose this model. Essentially, your Umbrella company takes care of all the accountancy, taxation and administration matters for you and pays you a net salary after deducting national insurance contributions and income tax on all your earnings.

It doesn’t cost anything to speak with these companies and they are able to give you advice on the various options available so you can choose what’s right for you. A lot of these sites also have rate calculators, where you can put in your expected day rate and see how much you take home after deductions.

You don’t need to have a Limited Company or Umbrella Company set up prior to looking/securing a contract opportunity. You just need to have an idea of which model is best for you so you can quickly put your plan into action should you be offered a contract.

IMPORTANT: it’s Harvey Nash’s company policy that we do not enter into any contracts with offshore limited companies (own or Umbrella).

Step 3: Accepting a Contract

What do you do once you’ve been offered a contract?

  • Don’t panic. Using Step 2, go ahead and setup your Limited Company or contact the Umbrella Company that you have chosen to go through.
  • Let your Harvey Nash Consultant know which vehicle you are going through. They’ll let you know what information we require and what you need to do next.
    • If you’re going through a Limited Company, we only need your Company registration number and copy of your Certificate of Incorporation to get your contracts drawn up. Business bank account details and VAT registration (should you decide to become VAT registered) can all follow at a later date.
    • If you’re going through an Umbrella Company, they’ll get in touch directly with us to transfer all the relevant details over.
  • Once we have your Limited or Umbrella Company details, satisfactory references, etc. on file, we’ll raise your contract for signature and return.

Step 4: Making the Transition

During your transition, your Harvey Nash consultant will be with you every step of the way, from resigning from your current position to actively securing new contracts for you.

What you need to do

If you’re currently permanent, the first thing you’ll need to do is hand in your notice (see our ‘Tips for Changing Jobs’ guide).

What we’ll do

  • Undertake any relevant vetting for the specific client (references, criminal background check, etc.)
  • Keep In touch throughout the period from accepting the contract/resigning to starting your contract
  • Provide you with first day details
  • Call you on your 1st day, 1st week and 1st month to make sure you’re settling in well and address any queries you may have
  • Meet with you on-site and, where possible, provide feedback from the client you’re working for
  • Make sure your initial timesheets are all recorded correctly and approved in time for your first payment (and every other payment after that)
  • Keep regular contact throughout your contract and actively work to extend your contract and secure future assignments for you

Important Legislation

IR35 IR35 legislation is used to determine whether you are considered a ‘deemed employee’ for tax purposes. Your IR35 status for each contract will either be ‘inside IR35’ or ‘outside IR35’ and depends on your contract and working arrangements with each of your clients.

If you are inside (caught by IR35) then you are forced to take all your income as salary only.

If you are outside (not caught by IR35) then you will be able to take advantage of a salary plus dividends route, reducing the amount of tax and NI you pay from your gross earnings.

Please see the link for further information on the Regulations

Harvey Nash strongly advise that if you are planning on providing services via your own limited company you consult with an independent advisor as to your IR35 status. It’s our understanding that the contract wording only forms part of the IR35 assessment and other circumstances must also be taken into consideration.


The Managed Service Company Legislation was introduced in 2007. This effectively put an end to 'composite umbrella companies'. Composite schemes were effective for contractors outside the IR35 legislation that didn’t want to go down the route of setting up their own Limited Company, allowing all income to be taken as a combination of salary and dividends. Now, however, the only viable umbrella option is the PAYE Umbrella, where all income is subject to deduction of full PAYE and NIC’s at UK rates on the entire contract income with the exception of any HMRC allowable expenses.

All contractors, whether Limited Company or Umbrella Company, are required to complete a short MSC questionnaire to make sure the company they are operating through is not a managed service company and that they are operating within HMRC guidelines.

Please see the link for further information on the Regulations

The Conduct of Employment Agencies and Employment Businesses Regulations (EAA regulations) came into force in 2003. Originally, these regulations were brought in to give temporary workers additional employment rights and were extended to Limited company contractors in 2003. However they aren’t really relevant for professional contractors, and as such you’ll be asked whether you wish to opt out of such regulations when you go forward for a contract position.

An additional information sheet is available from Harvey Nash, which your Consultant will forward to you. Please see the link for further information on the Regulations:

The Agency Worker Regulations (AWR) brings the European Agency Workers’ Directive into UK law. They entitle certain temporary agency workers to equal treatment (with regard to pay and working conditions) as someone recruited directly by the client to do the same job.

For additional information on AWR please visit