What are the benefits and pitfalls of IT contracting?

While we should all be acutely aware that the benefits and pitfalls of IT contracting could change this Wednesday under the chancellor’s Spring Budget 2024, there’s some age-old benefits and pitfalls of tech freelancing which all Free-Work readers should know, writes Adrian Smith, a senior director of operations at Randstad Digital.

No two IT assignments are identical

First off, let’s state the obvious -- different jobs come with different benefits, and the temporary technology space is no different. 

Not only can IT contracts vary quite dramatically in their perceived ‘cons,’ the ‘pros’ will depend on what's right for you. 

On a tech job search? Your rivals aren’t mucking around…

Before we delve any further, be aware that the search for a new job is an exciting time and techies take it more seriously than most. 

In fact, Randstad’s latest Work Monitor survey shows 69 per cent of people working in IT services in the UK think that work is an “important part of their life” -- far higher than average.   

Continuing this positive vibe, let’s start with:

Four benefits of IT contracting as a tech freelancer

1. (Unparalleled) Flexibility!

In contrast to techies who work permanently for just one employer, contractors enjoy flexibility in their work schedules.

Generally speaking, even full-timers who are hybrid workers can only dream of such flexibility, because freelance computer consultants simply choose projects and contracts that suit their skillset and lifestyle.

Are you undecided about perm or contract but skilled in IT? Well, if you have other personal/professional commitments and need to manage your schedule in your own way, the freelance, contract and temporary world can provide that flex.

Historically, and particularly today in 2024 on outside IR35 roles, IT contractors have autonomy in their work, making decisions about their day-to-day tasks, their projects and work environment. And it’s even eminently possible to improve your work-life balance by choosing when you’ll work.

2. Your bottom line won’t get any better!

The money can be especially good if you freelance in IT or computing.

Contracting in the UK tech sector very often offers higher daily rates compared to permanent salaries, providing you the chance to increase your income.

And if you structure yourself correctly, there are tax advantages, too -- such as being able to claim business expenses.

3. Perfect if you’re a philomath!

A less obvious but still nonetheless tangible benefit of IT contracting is that it allows individuals to continually learn, update their skills, and develop knowledge -- often by working on cutting-edge projects, for different organisations, in different environments, with different people.

This is tremendously helpful because staying relevant in the rapidly evolving IT industry is key. Even at their early career stage, contractors have the opportunity to work on a diverse range of projects, gaining exposure to different industries and technologies.

This lends itself to building a wide network of professional contacts within different organisations, potentially opening doors to future opportunities.

 4. Excellent if you like to experiment!

At the start of your tech career, you can try different roles in different settings as a contractor without having to commit to one for more than a short time, typically three months.

Aside from building your experience, ‘try-before-you-buy’ can be particularly useful if you're unsure of which skills path you want to go down as a technologist.

You want to make the right choice and find a role that's not only a good fit for your skills, but also one that fits your personality!

After all, while there’s no question that there are huge ‘pros’ to IT contracting (the above four merely scratch the surface!), there can be some downsides, too. 

Four IT contracting pitfalls

As veteran technology consultants who freelance will tell you, IT contracting is not all plain sailing!

1. Goodbye ‘job security’, Hello potential ‘volatility’!

Not everyone who enjoys working in IT is going to thrive in a contracting environment.

Freelance contracting work can be unpredictable, with periods between contracts where there’s no income coming in.

So contractors don’t have the same job security as permanent employees. If a project you were expecting to work on gets canned…well, that’s it!

2. No boosters from the end-user!

Related to no work equating to no income, newcomers to freelance IT contracting have reported missing the benefits that permanent employment comes with as standard.

For example, as an independent contractor (when contracting through your own limited company), you aren’t going to get any pension contributions, nor will you receive paid holiday – something you may have taken for granted as an employer’s employee.

Similarly, some permanent positions also pay bonuses; bonuses which temporary talent -- no matter how talented -- aren’t entitled to. 

But it’s not just an employer's financial perks you’ll go without as an independent IT contractor!

You won’t be able to utilise your organisation’s back-office -- something else it’s tricky not to take granted if you were previously 9-to-5.

The upshot? It’s you and you alone who will be responsible for managing admin. Similarly, invoicing for your services, taking care of your taxes and meeting HMRC liabilities, while ensuring legal compliance, all falls to you.

3. You’ve got to confront IR35!

Key to compliance as a contractor is IR35, in force since 2000 and needing to be navigated by you where your end-user is a ‘small company.’

If your customer is instead a mid-sized or large organisation in the private sector, or if your customer is a public sector organisation, a reformed version of IR35 -- the Off-Payroll Working Rules -- will instead be applied to your assignment by the end-user. The role will be outside IR35 (not caught by the OPW rules) or worse for take-home pay, inside IR35 (i.e. caught by the OPW rules).    

4. There’s no regular skills upgrade, and no ‘work your way up’!

Your contact with the client’s HR team as an IT freelancer will often be minimal, as opposed to if you’re full-timer where the team will often link you up with training and development opportunities. If you want to learn on someone else’s tab, IT contracting isn’t for you. 

Also, contractors may find it challenging to achieve long-term career progression, compared with permanent roles within an organisation. Like your skills, no-one will be mapping out your career progression. There’s no appraisal process for either professional development or career progression, so you’re on your own.

Of course, some IT contractors go into temporary work as a techie specifically so they can avoid HR, appraisals, office politics and the like!

Now you know IT contracting pitfalls v perks, mull the 2024 freelance tech market

At present, there’s probably another consideration, though, if you’re pitting a full-time tech career against a self-employed, freelance IT career.

And it’s this -- while the financial rewards for tech contracting in a talent shortage can be excellent, there is also the threat of oversupply in some IT sectors.

While the UK technology industry is short on cyber security and AI talent, other tech specialisms are somewhat saturated.

The IT contracts market is not a constant stream of lucrative opportunities, and the tide of supply and demand comes in, and goes out. That can mean increased competition and less attractive day rates if you find yourself in a specialism with too many other competing contractors.

Lastly, connect with a freelance technology veteran…

As I see it, there are pros and cons as an IT contractor. And it’s not just me -- offer to buy them a coffee, and people who have been contracting for some time will likely be happy to share with you more of the ‘hidden’ advantages and drawbacks of freelancing as a technologist! 

Within those, there may be a single ‘push’ or a ‘pull’ factor of IT contracting that might not be so obvious to people working in permanent tech roles, but for you -- could be the obvious clincher. If you want to chat ‘tech contracting or not?’ -- in person, please get in touch.