The Slow Death of an IT Contracting Career – Beware

IT Contracting Career
IT Contracting Career - how to be successful

IT Contracting Career

I don’t know how far on your IT Contracting Career has been going but you’ll still remember your first contract.

It‘s fantastic, isn‘t it?

That is, the day you get your first contract.

It‘s an amazing amount of money and more than double what you earned before as a permie.

Great Risk in Being an IT Contractor
Great Risk in Being an IT Contractor – none now

You start doing your multiplications to see how long it would take you to become a millionaire and to see how long it would take you to save towards quitting contracting.

IT Contractor Profit

You subtract, of course, what you currently spend and you also multiply your rate by 50 to see how much you will earn annually.

If you were a £35,000 a year permie who had £28,000 after tax and who spent £25,000 a year, you would use that figure to do the subtraction.

If you are earning £400 a day and £2,000 a week that would mean that you earned £100,000 a year once you multiplied by 50.

Subtracting that £25,000 a year that you would spend that means you would have £75,000 left over.

You might also pay around 15% tax on the total which is £15,000 so that brings you down to £60,000 profit a year.

Get Out of IT Contracting

This means that in 17 years you would be a millionaire and could get out of the game completely.

Of course, you would invest some of your money in shares and property. That might bring it down to something like 13 years.

Contractors Retire Early
the best way for Contractors to Retire Early

You are still a young man, or woman, when you go contracting, maybe 25. So, you would be a millionaire and out of the game by the time you are 38.

How Many IT Contractors Got Out?

That‘s what we all thought, isn‘t it?

I wonder how many of we contractors managed it?

I would hazard a guess at less than 1-in-20.

Time Off from IT Contracting Career

What you haven‘t taken into account is that there will be time off between contracts and that downturns will come along when you have no money coming in and you still have all those bills.

Also, if you spent £25,000 out of the £28,000 you got paid, after tax, as a permie, you are not going to continue to spend £25,000 a year if you are bringing in £85,000 a year after tax.

You are going to loosen the purse strings a bit. You’ll get a fancier car and house as well as fancier and more exotic holidays.

Investing in Shares

When you invest in shares and property you are most likely to do it when you have the money.

You tend to have the money when rates are rising during a boom in the economy.

You think that because shares and property have been rising for a while that they are now safe to buy into.

Contractors who make money
Contractors who make money and those who don’t

However, that is the worst time.

All booms end.

Stock Market Losses

So, just when you are out of work and spending any spare cash you have, your shares will be slumping in value and you will be a forced seller, at low prices, in order to feed yourself and your family and to pay your taxes and VAT.

Once your shares are all gone the only asset you have left is your property.

However, if you are a first time contractor you may have bought at the peak of the boom. Not only is the price falling but it is taking ages to sell property in a falling market.

If you have been contracting for a while you may have more equity in your property. However, you are still facing the same problem that the time taken to sell a property has climbed maybe to 6 months or more.

Barclays Bank

Also, as the years go by the difference between what you earn and what you would earn as a permie would have gone down as those who, like you, earned around £35,000 a year would start earning £40,000 then £50,000 then £60,000 a year and beyond.

They would have company cars, good pensions, six weeks holiday and maybe share options eventually. That’s while you are still on the bottom rung of the ladder as a contract developer.

I remember, when I got a contract once, being taken to meet the big, big boss on my first day of the contract.

I was most surprised to be introduced to a girl who was junior to me at Barclays Bank when we both worked there as permies.

IT Contractors and the Stock Market
IT Contractors and the Stock Market – Picking Shares

Contractors with Old Skills

You are also much less likely to be trained as a contractor and to learn new skills.

Many contractors hit one downturn too many.

During downturns, companies hold back on new systems and start them, using completely new skills when the downturn is over.

It is often a new breed of first time contractor who has those skills.

Beached from IT Contractor Market

Many contractors are left floundering on the beach with old skills when a recovery comes and are not able to get work, competing with many other contractors with the old skills over fewer and fewer jobs that use those old skills.

Then you have no money and you are into your forties and fifties and are not able to get any contract work.

Your last chance is to go permie again. However, many employers are suspicious of a ex-contract developers in their forties and fifties.

Even if you do manage to get a permie job it may be at not much more than the £35,000 a year that you used to get. So, you have wasted all those years not building your career.

Of course, your IT Contracting career doesn‘t have to be like this but it does happen to many contractors.

Be warned!

Don’t expect your IT Contracting Career to last forever.

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    1. Sounds exactly like my IT contracting career sadly! So many people think IT contracting is easy its not few earn big money anymore most of us end up going perm again (if anyone will have us) or changing careers as many ex-contractors end up on the jobs scrapheap too young & poor to retire yet not cheap enough to be given another chance as a permie!

    2. Training now that is imteresting- why do contractors not learn new skills.
      Because we have to pay for training – thats why! However it is a necessary investment to keep your skills up to date. After all that is what you are selling EXPERTISE. If you cannpt offer this them you have no asset to sell.
      I work with sql server so should know about new features such as mempry tables tabular bi etc! Otherwise why would anyone hire me at a premium. You cannot offer the same as permies you have to be better.

    3. Did a permit write this? I’ve been contracting since i was 30 and I’ve never looked back. I went contracting because I didn’t want to be forced to climb a ladder I had no interest in. I also did it because I wanted to remain technical and part of that has been retraining myself. If you don’t do this then you only have yourselves to blame. What I love most about contracting is the freedom it gives me and the ability to take extended periods off when I want. It’s not for everyone as you need to be self motivated. Some people feel happier in a permanent job and there’s no shame in that. Would I go back to my old permie life? Not a chance! Contracting allowed me to learn to fly, contracting let me and my partner travel the world, and contracting is why I drive a very nice car and ride a very nice bike. All you’ve listed here are all the negatives. I’m sure some have faced this, but is it the norm? Not a chance!

    4. yep had a stroke and nearly 3 years later fully recovered and not long ago got my license back,nobody wants to know as i am now 55 ,full time or contract,my age and illness has cost me dear but as i am still alive what the hell maybe time to look at something else as i have nothing to loose.

    5. What a thoroughly negative article!

      I may be wrong, but it feels like there’s an agenda and/or a sense of bitterness to this piece that things didn’t turn out as planned.

      In fact, the attitude is typical of the way permies view contractors – high earners who are getting away with it.

      In fact, I don’t think it’s fair to compare with permies. What you’re doing as a contractor, when all is said and done, is running a business – and in doing so, you accept all of the risk that accompanies all of the great aspects (freedom over tax arrangements, arranging your own time off and working hours, choosing what training to invest the company money in etc. etc.)

    6. The worst are the downturns, the 2002-2004 was pretty bad I had top notch skills but i felt it hard.. Indeed the risk is to get beached out of the market, with old skills
      Some companies i know let off all contractor/consultants during a downturn, replaced by permies
      Also IT is not anymore what it was. pre-2000 it was golden. I worked also with some contractors from when IT was in its infancy. I have got lots of interesting stories from it contracting infancy
      If you invest wisely you can manage it. buy to let was a good plan in the past
      Training is not an issue as you can pay yourself for it and it is treated as an expense
      another risk of contracting is health or old age

    7. Dreadful article, couple of things

      Who works 50 weeks of the year? Contractors need holidays and don’t get paid for bank, holidays sick and Christmas more like 47 if you’re lucky.

      Contractors have lean periods factor that over a 5 ears and average becomes 42 weeks a year if your lucky. I’ve had three months looking for work.

      Contractors don’t get pension, minimum 4% employer contribution let’s knock off another 2 weeks.

      So 40 weeks on average over 5 years.

      So looks like £2000 x 40 weeks which is £80K.

      For that you work like a dog, you work hard and long hours, no training, uncertainty, stress.


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