Why some IT Contractors are still out of work, by an Agent

Out of Work Contractors

I have been reading some of the comments on your site from IT Contractors any time you publish an article which says that the IT Contract market is improving.

I tried to post a reply in the Comments section to them but it got cut off so I’ve sent it to you direct.

Basically many of them are saying that the IT jobs market is not improving at all. One other reply seemed to suggest that it was inexperienced contractors who are out of work.

However, as an IT Recruiter I can tell you that this is not the case.

New Breed of IT Contractors

Most of the new breed of IT Contractors are working. It stands to reason that they should be.

They have the skills that IT Clients want nowadays and they are not as expensive as the more experienced IT contractors.

And, most of them went contracting recently because their skills were a match for at least one IT client on the market.

More Experienced Contractors

No, it is not those contractors who are out of work.

It is not the more experienced IT Contractors who are not working either, especially at the higher level.

They are being snapped up like hotcakes as companies start new projects that they have shelved for years or major systems changes.

Those Out of work Contractors

The ones who are out of work are those who went contracting in the last boom when the pickings were easy.

You didn’t have to be that good at what you do and you didn’t have to be that good at interviews.

In fact you didn’t have to be very good at impressing management or getting on with the permanent staff either.

Anybody who could do virtually anything was able to grab a contract in those days.

IT Contractors Out of Work

However, when the wheel stopped spinning in the following downturn loads of those IT Contractors were out of work.

Most IT Contractors who were out of work during that and the last downturn are back at work now.

There are still a few who are still out of work and will find it difficult to get back on the gravy train.

Their skills have deteriorated.

There are some genuinely good IT contractors amongst them but as each day goes past they get less saleable.

Unemployable IT Contractors

However, many were just average at their job, others are bad at interviews, and others have bad attitudes.

Even though the market is pretty good nowadays, clients can still afford to be a bit choosy.

No longer will they take someone, even though they weren’t that impressed by them at the interview, just because they are having difficulties finding people with the appropriate skills.

They are prepared to wait a little longer to get a better IT Contractor.

Some of those who went IT Contracting in the last boom and that of the late nineties should never have become IT Contractors.

However, the boom was in full swing and the pickings were easy.

Dead Wood IT Contractors

The shakeout in the market during those downturns was healthy for the industry and some of the dead wood got shaken out.

The decent IT contractors managed to get work when the downturn finished.

I’m afraid that some of those who have not managed to get back to work afterwards, the show is over.

Those out of work IT Contractors need to look at doing something else.

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Contractors Need Agents | Why IT Contractors need agents

Contractors Need Agents

This article on why contractors need agents was taken from the Agency Talk Forum of another website.

Problem with Contractors

The problem with all you contractors is that you spend all your spare time moaning about agents and how they rip you off, when you are in a situation that you are looking for work. Guess what? You call an agent or respond to a job that an agent has posted.

There is a little saying about those people who talk about what they are going to do and those people who do it.

Alas, just like you spend your life in what some people would call cyberspace, you also spend a fair proportion of it in cuckoo land, concocting your tales of victory over the menacing agency and how you “got one over” or screwed the agent whereas contractors need agents.

Big Agency Players

No doubt in the same fantasies you see yourself with a gorgeous women at your feet just peeling grapes and telling you are the most handsome man in the entire world, you then dash off to lunch with her majesty a close personal friend, followed by an afternoon with the Swedish bikini waxing team who will be asking for demonstration your technique on the.

Hardly! Ha ha!

Fact – most of the big agency players will run a managed service for their clients.

Fees will be around 11% for ltd company about 6% for people who work PAYE.

Of this 11% and 6% out of this profit the agency will have to pay for advertising, sales staff, account managers, ops managers/staff, operate a payroll function for the candidate or their limited company, employ administration staff and overall general costs of running a business.

Client Companies

The reason Clients/companies are “outsourcing” their contract IT recruitment function to the likes of Spring and Elan is that it is cheaper for then to go outside than do it themselves.

So, with this in mind, you couldn’t go direct even if you wanted to. Contractors need agents.

Of course there are still clients that don’t operate a managed service which I’m sure you will now say that you work for (through agents) but why the hell do you think these companies utilize the services of an agent in the first place?

Why Contractors Need Agents

I’ll tell you it is because it still works out cheaper than if they did it themselves.

They may only want the team of contractors for 6 months but would have to spend a fortune on resources just to get contractors recruited and paid!

So in both scenarios we have a client coming to an agent, in one the agent providing the whole packaged service-cheaper than what the client could do it for internally and in the second example (bums on seats) it is still cheaper than what the client could do it.

Taking Contractors to Court

Contractors trying to go direct after their contract period are and can very easily be taken to court.

The client does not really want the grief associated with legal action and agrees to pay the bill.

So, rather than go on and on about getting more money from cutting out the agent on extensions and how clever you are and how stupid us agents are, why not really prove just how wonderful you really are and try to get your own job without the services of an agent.

You know contractors need agents.

Try for example IBM, THALES, RBS, NATWEST, VODAFONE and SONY. Then come back on here and tell us all how great you are.

You haven’t a hope in hell going direct. P*ss pot little companies in the armpit of the country really don’t count as claims to fame.

Client Invoices

Chances are that they don’t pay their invoices on time anyway, but mind you, if an agent were to be paying you.

Oh, guess what?

You would get paid week in week out regardless of invoices being paid from the Client.

I look forward to your “tales” of fantastic opportunities that all you contractors have secured without the help of us agents.

Notice that I emphasised the word TALES.

Time to put your money where your mouth is. I wonder if you lot whine, moan and cry about everything in your life. I somehow think that if you were not on here crying then you would be somewhere else doing what you do best – crying.

Then you can admit it – contractors need agents!

Note:- This agent’s views are his own.

Internet Business | Ten Tips for Setting one up

Setting up an Internet Business

Ten Tips for Setting up an IT Internet Business:-

1. It is most important to be first than to have the best product. Don’t be a me-too site. The first one is likely to remain market leader. Look how hard Pepsi have tried to replace Coca Cola. Often people don’t really need more than one.

2. If you do want to get into a market area, don’t go into it trying to be better than the market leader. Go into it trying to be different from the market leader, i.e. filling a slot that the market leader doesn’t occupy. Look at what they don’t do, rather than what they do.

3. Make sure that your product is as good as you can get it before trying to market it. You can make the mistake of concentrating too early on PR and marketing. Good product sells itself as it leads to viral marketing, i.e. word-of-mouth.

4. Try to get as many links with as many top quality sites as you can when setting up an internet business. These are like rods that you leave in the water, hooking the occasional fish that comes by.

5. Belief in yourself and the concept is very important. In most cases, you will not be a money generating site very early on, and may not be able to generate a living wage in the first year. If you’re not convinced about the concept, pack it in early and save yourself a lot of trouble.

6. Determination – If you are convinced that you’re onto a winner, then don’t be put off by what other people say. Your partner will give you problems, as well as your in-laws (if you have any), and possibly friends as well. This is pretty much a certainty. Don’t give up though.

7. Have a Vision – Know how you see the site and business down the line. Close your eyes and imagine it in five or ten years time.

8. Work out how you are going to make money. Some sites become very popular but never make much money. If you want it as a hobby, that’s fine. If you want to make money out of it, and be able to live off it, work out where the income is going to come from and how much. Draw up a turnover and profits prediction, and judge the success of your site on it, on a regular basis. You will, of course, have to make regular changes to it as you get to understand more. If it still looks as if it can make money, keep going. If not, decide if you want to keep it going as a hobby.

9. If you can, keep up the day job until you have some income coming in from your internet business. If it needs your full time effort, you have to factor in that it may take a lot longer to make money than you thought. Most businesses go bust because of cash flow problems, i.e. the business doesn’t grow as fast as you had calculated, and although it is still growing, you have to quit before you can bring it to fruition, as your money has run out. I’ve seen perfectly good businesses collapse because of this.

10. Use as many good people as you can. Don’t try to be an expert in everything, or to learn every skill. It’s much better to spend some money, when you have it, on a little expertise, e.g. sales, rather than try and learn it all yourself, which takes longer and takes up the cash and time that you have set aside for the project.

If you are settingup an internet business, the more you follow of the above the more your internet business will be successful.

Rich Contracting | Why IT contracting will never make you rich

Rich Contracting

From www.Brainbox.com.au

IT Contracting and consulting are terrible businesses to be in.

If you were ranking the merits of various business enterprises, they would come right near the bottom.

Don’t get me wrong, I’m a contractor myself, but it’s important to realise that this is not a good way to get rich.

Rich Contracting – Why are we in business?

Most contractors are in business with some idea of getting rich contracting.

This doesn’t necessarily mean big houses and flashy cars, instead they want to gain a certain financial independence – a feeling that they are in control of their lives.

People become IT contractors for all sorts of reasons, but many do so with an eye to being in business for themselves.

They see contracting as a stepping stone to starting their own business.

Many contractors dream of setting up consultancies, while many consultants dream of expanding their operations.

If this is your strategy for getting rich, then it’s not a very good one.

Rich Contracting – Why contracting is a bad way to get rich?

There are two main ways to make money from business they are:
• Gaining an income from your business.
• Building your business into an asset which you can eventually sell.
The second method is usually the more lucrative of the two.

Yet, if you are a contractor or own a consultancy, then your business is probably worthless as an asset.

Why?

For the simple reason that it needs you to run it.

You are an intrinsic part of the business. Your skills, reputation and work are the only thing of value.

How can you possibly sell it without you coming as part of the deal?

Simple answer – you can’t.

The worst business to be in is one where you sell your time

Selling your time is a terrible way to get rich.

Sure, you might get a good income, and slowly build up some savings and financial assets.

But really, any business that relies on its owner selling their time is just a job.

You may be earning $500,000 a year; but a big mortgage, BMW and expensive holidays will soon eat that income up.

You’ll get used to a better lifestyle, which means you need more savings to become financially independent.

Saying as Regards Rich Contracting

There’s an old economists’ saying, that for most people is painfully true. Expenditure rises to meet income.

Plus, your scope for growing that income is limited. There’s only a certain amount of work one person can do.

Really, you’re tying yourself to the treadmill for the long-term.

You’re probably thinking that some consultancies do eventually grow into big businesses.

Selling someone else’s time certainly has a lot better prospects than selling your own. In reality though, these consultancies are few and far between.

Most rely on the reputation and skills of their founders, without which they are worthless.

So what’s a good business to be in for Rich Contracting?

The best business to be in is one that you can go on to sell, i.e. one where you start with nothing and build an asset of great value.

You can only sell a business if you can realistically hand it over for someone else to run without any ongoing involvement from you.

So when you’re weighing up any business opportunity, this should be the first thing in your mind: Can I feasibly go on to sell it?

If the answer is ‘No’, then you should think about spending your effort somewhere else.

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When HMRC calls over IR35 here is what they will ask

HMRC calls

HMRC sent 96 questions to an IT contractor, who promptly shut down his company and went permanent.

Here are some of the questions when HMRC calls:-

Limited Company Formed

1. Will you please confirm when the company was formed and the date was it (sic) registered at Companies House

2. How many years have you been contracting since you were last a permanent employee of someone else’s business?

3. Explain the nature of the work of the company and the type of work it specialises in

4. Does the company carry professional indemnity insurance, public liability insurance and employers’ liability insurance. If so will you please let me have copies of the relevant certificates.

5. Have you and your wife, as shareholders of the company, invested any money in the company. If so, will you please let me have full details of those investments

6. Did the company need capital in order to commence trading, and if so explain how the capital was financed

7. Please let me have an explanation of the equipment that was necessary in order to commence trading, together with the cost of this equipment and details of how it was financed

8. What is the current accumulated cost, excluding depreciation, of the company’s fixed assets including office equipment, computers and software

9. What expertise do you possess in the work that the company does. Please explain this expertise and the qualifications and experience that you have within this field.

10. Where did you work before you became a director of the company

11. If the registered office of the company is at your home and where the company trades from explain what facilities are present in order for the work to be completed

Sales & Marketing

12. Does the company advertise and market it’s (sic) services. If so, please let me have copies of adverts

13. Please let me have the details of the names and addresses of each agency that the company is registered with

14. In the last 12 months did the company have any income from non-contracting business. If so what was the nature of the business and what percentage of the total income of the company came from this non-contracting business activities?

15. From the period commencing 6 April 2000 please describe the actual work the company did for each client

16. Were you interviewed on application for any contract? If so, please let me know by whom and what was discussed at the interview. What was said about the nature of the work to be done, and was the subject of the Service Company raised. If so, what was said about it

17. At any interviews, were the responsibilities described to you?

18. Let me have a description of the process of application through to acceptance, together with a copy of any CV submitted

19. What personal references did the company give in respect of you? Do you know whether any of them were taken up by the client companies?

When HMRC Calls

This is just the first 19 of the 96 questions when HMRC calls. When HMRC calls over IR35 you had best be prepared for this avalanche of questions.

You’ll be asked for just about everything when HMRC calls.

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IR35 Tax – What is IR35 and How Does it Affect IT Contractors?

What is the IR35 Tax?

Many of those who are new to IT contracting may wonder what the IR35 tax is and how it will affect them. We explain here.

Previously, most contractors, especially IT contractors, generally used limited companies.

Their income is paid into there and they extract expenses and salary from it before paying both Corporation Tax and personal tax.

Disguiused Employees

Several years ago, the Government decided that some classes of contractor were really not contractors at all.

What they were really looking at were those people who were permanent on the Friday at a company and the next Monday they had become contract staff.

They felt, probably correctly, that these were disguised employees and that this was just a ruse on the part of the company and the new ‘contractor’ to avoid taxation.

New Law for IT Contractors

Therefore they brought in the IR35 tax to put this right.

What would happen in the future, said the Government, is that all those companies who were really small businesses, including IT contractors, would continue to be looked at as small businesses and treated accordingly for taxation purposes.

However, those who were really ‘disguised employees’ according to Government thinking, would be taxed as if they were employees.

They would not be allowed to claim any more than 5% of their income as expenses. Then they would pay tax at the full rate.

Caught in the IR35 Tax Net

However, the new rules caught out more than it was thought that they were intended to catch.

In fact formal Paymaster General, Dawn Primarolo, said as much at a working breakfast with the Professional Contractor Group (PCG, now IPSE).

She said that the law was catching out more than it should have done.

It meant that many contractors were potentially inside the IR35 Tax.

The Professional Contractors Group (now IPSE), indeed, was set up to fight IR35 and to lobby for its abolition.

High Court Case

Nowadays it looks like contractors have gone down one of three routes:-

1) They have simply paid up their full whack of tax
2) They have joined an Umbrella Company which allows them to deduct expenses
3) They have continued to trade as limited companies without paying IR35

The Professional Contractors Group fought a High Court case, funded by contractors, which they lost.

They then lost an appeal, again funded by contractors, at the High Court.

They also lost an appeal against the General Commissioners verdict on an IR35 case at the High Court.

HMRC and IR35 Tax

However, along the way they learned a lot about how the Government and HMRC thought about IR35 and who it would include.

They also learned a lot about how the judiciary and the Special Commissioners and General Commissioners would view who was caught by the IR35 tax and the correct route to take when fighting an IR35 case.

It is this information, gleamed from what might be classed as failures, that has allowed more and more contractors, giving them the information that will help take them outside IR35.

Contractors are far more flexible than HMRC and can change their contracts with agencies and clients to help get their contracts as being classified as being outside IR35.

Inside IR35 and Outside IR35

In fact that is a very important point to make. Contractors are not inside or outside the IR35 tax. It is contracts that are in or out.

It could be that a contractor has three contracts in a row, where the first is outside, the second is inside, and the third is outside again.

The Professional Contractors Group continues to lobby for the abolition of IR35 or at least for more classifications of contractors to be outside of the IR35 tax.

Contractor Umbrella Companies

They are having more and more success. Fewer and fewer contractors are now paying the tax, either by putting themselves inside Umbrella companies, or by staying as limited companies and changing both their contracts and working conditions so that they are outside of IR35 and don’t have to pay tax as ‘disguised employees’.

It is important to note that these so-called ‘disguised employees’ get none of the benefits of being an employee but are only considered as employees for taxation purposes.

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Permie Interview | Ten Things to Remember when Going for one

Permie Interview

Many IT contractors say that they cannot get permie jobs as potential employers think that they will go back IT contracting again. Here are some things to say, at a permie interview, to allay suspicions (even if the suspicions are justified).

1. Tell them that you are tired of the uncertainty of IT contracting, that you are tired of the travelling or living away from home.

2. Tell them that you are tired of the upswings and downswings of the contracting profession.

3. Tell them that it is no longer worthwhile because of IR35.

4. Tell them that it is about time that you looked at a career, as you are never going to progress any further as a contractor, and that in the long run you would be better off rising up the tree with potential salary rises, car, health benefits, and share options.

5. Tell them that it is very difficult to get a mortgage as an IT contractor as it is not steady income, and you don’t want the worry of having to pay the mortgage when there is no income.

6. Tell them that your partner is tired of having you around the house moping when you are out of work, and that your relationship suffers because of it.

7. Tell them that your children (if you have any) have taken up your partner’s refrain about getting a proper job.

8. Tell them that because of the number of periods spent between contracts it doesn’t make financial sense.

9. Tell them that you are tired of moving around from job to job, and making new friends and relationships at each different place, only to lose them when you leave.

Permie Interview Thoughts

In fact, with all these good reasons, it might be an idea to turn permanent anyway, except for the fact that you tried it before, hated it, and are temperamentally unsuited to it.

The 10th ‘tell’ that you will of course remember to say, at a permie interview, is that you have no intention of going contract again when the market picks up.

Say that you have had it up to the teeth with contracting. I’ll leave it to you to decide if you are telling the truth or not when you say it.

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When IT agency does not pay, act extremely quickly

Agency Does Not Pay

This article, on when an agency does not pay, was posted as Comments after an article.

Small Claims Court

Why leave it so long? If the sum owed, when the agency does not pay, is up to £5K you can use the Small Claims Court which requires no solicitor.

1. Invoke the Late Payments of Commercial Debts Act. On each invoice always put the outstanding amount. So if the new invoice is for £1100 and they owe you £1000 then the invoice is for £2100.

Mark it as outstanding. Do not forget the interest.

2. Tell the client

3. Once it looks like the bill may get to 5K.

a) Send the agency a letter telling them they have 7 days to pay up.

b) After that period send in the court papers and the fee.

c) Assuming you win. Go back to the agency and tell them you will instigate winding up if the amount owing is not paid.

d) Do not bluff. If the agency does not pay, then start the winding up proceedings.

Keep Client Informed When Agency Does Not Pay

At all times keep the client informed.

If you get to the point of having to bring in administrators, when the agency does not pay you, it is always better to be first in the queue.

As unsecured creditors we are at the bottom of the pile, so get the claim in early.

ITContractor.com Comment

We knew one contractor, when Chamberlain Scott went bust, who was owed £48,000 by the agency. There were several others in the 5 figures bracket.

IT Contractors tend to want to believe the agency when they tell them some cock and bull story about why they haven’t been paid.

As soon as the agency are in default by not paying the contractor within the period specified in the contract, the IT Contractor should act – or he, or she, will be tossing good money after bad.

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Want to earn big money IT contracting?

Big Money from IT Contracting

There are some contractors that are saddled with old skills. So what are the skills to have that will have you working constantly for the next few years earning big money?

We’re not too long out of a very bad downturn.

There was a lot of fear about as some people were predicting that it was all over for the economy and IT contracting in the UK.

However, the downturn is now over.

Not everyone is back in work but more and more are getting off the bench each day.

However, there will be a future downturn at some point and many of those with less needed skills will be dumped again.

Niche Areas

Niche areas are very good if you want to earn big money from IT Contracting. If you have knowledge of a tool that isn’t used in many places you will be ‘quids in’ – although, unless you are very lucky, you may not be at home much.

Make sure that it is a tool that is on the up and up, though, and that is likely to catch on.

That way, for the foreseeable future, there will be more companies taking it up all the time – which will put a squeeze on the labour market, pushing the price up and up.

Big Money from New Tools

If you can get into a new tool right at the start and the tool takes off you could have a few years that will set you up for life.

If you get a few good years of earning big money from using one of these niche tools then you could make your pile.

I remember one guy I worked with. While the rest of us had run-of-the-mill skills he was able to earn big money because of his knowledge of a niche tool that they used.

It seems that they could not afford his fee. It was during a downturn but he was able to stand out for more money.

Part Time IT Contractor

As they could not afford the big money he was demanding they came to a compromise.

He would just work three days a week.

He still earned more than the rest of us did – whilst having 4 days a week off.

Although he had to work away from home, like the rest of us, it wasn’t too much of an inconvenience as he was only 2 nights away from home unlike 4 nights away for the rest of us.

How we wished we had his experience.

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Unscrupulous IT agents – Twice I Got Shafted by Them

Unscrupulous IT Agents

This article on unscrupulous IT agents was posted as comments after one of our articles. We felt it warranted a wider audience.

IT Contractors Perception

Forgive me but none of this really helps improve the IT contractors perception of IT agents.

The problem here is lack of respect (by both parties).

Take two things which have happened to me in the past and which cost me money.

First Instance of Unscrupulous IT Agents

The first IT agent had me in an interview. That’s a day effort for me, by the way, researching the company, making sure I’m up to speed on the technologies involved and going to the interview.

Now you agents expect us IT contractors to uphold our end when we agree to do work for you at a client.

The client offered the contract.

Then a day later I get a call to reduce the rate. I was not happy but did knock 5% off.

Then I got a call back. It was not enough.

IT Contractor in London

So I brought it down to my break even point but expected 6 months not the original 3. Again the agent accepted this.

The next day a call from the agent – the client has found someone even cheaper.

I suspect this is a lie, the figure they quoted was well below what is a livable wage in London and this was for an IT contractor.

In this instance the agent should have been upfront with the client (that in your words he is working for) as to the costs involved, and certainly when accepting services from his supplier (the IT contractor).

The price we give as contractors is the price of the service you are buying. If we contractors jacked up the price on you then you would be up in arms.

Second Instance of Unscrupulous IT Agents

The second instance of unscrupulous IT agents involved an agent with whom I accepted an IT contract.

I was asked to start on the Tuesday.

I accepted.

Literally minutes later I was offered a second contract. Having accepted the first I turned it down.

Monday Evening at 5pm I got a call saying the client was not going to sign off on the budget!

IT Contract

Yet again, the agent got my assurance that I would do the work before he got it from the client.

If an agent has work then they should ask the IT contractor to agree-  and not until then.

Be up front with your client. Tell them what the costs are.

Also a number of your fellow agents seem to be somewhat lacking in technical know how.

How on earth can you sell something to a client without understanding it! I’ve had agents ask me to explain the technology they want me to work on and actually admit ignorance.

IT Contractor Comment on Unscrupulous IT Agents

Out of curiosity, what would readers in his position?

If you had accepted a contract and then minutes later were offered a better one what would you do?