How to Work as an IT Contractor

What Is IT Contracting?

Information technology contracting is when an IT specialist works as their own company to provide their skills to clients on a business-to-business contract basis. IT contract work generally covers a fixed term. A contract may cover a specific period such as 6 months or be for the duration of a specific project.

So how does contracting work? The IT contractor may work directly for the end client or find assignments through agencies as an IT subcontractor. Contractors will work for a specified IT contracting rate during the term of the contract. In many cases, contracts have an option for renewal so the IT specialist may remain at the same company for an extended period. Unlike regular employees, IT contractors for hire don’t receive benefits from the company they are working for and are responsible for their taxes.

Key Insights and Statistics on IT Contracting

IT contracting is a dynamic and essential part of the global workforce, with trends and numbers that highlight its impact and evolution. Here are some key facts and stats to provide a comprehensive view of IT contracting:

• A booming global market. The global IT outsourcing market, a significant part of IT contracting, is expected to reach $541.10 billion in revenue in 2024, with a projected annual growth rate of 8.48%, reaching $812.70 billion by 2029.
• Flexible workforce trends. In the United States, independent workers – which include freelancers, temporary, and gig workers – constitute about 36% of the employed population, indicating a substantial shift towards contract-based roles.
• Competitive compensation. IT contractors enjoy lucrative opportunities, with average salaries ranging significantly. For instance, in the United Kingdom, IT contractors earn an average of £69,135 annually.
• Global IT services market growth. The global IT services market is projected to reach $1.2 trillion by 2025, highlighting the expanding opportunities for IT contractors worldwide.

These insights underscore the critical role of IT contracting in addressing specialized needs, contributing to economic growth, and offering lucrative opportunities in the evolving global market.

Working as an IT Contractor: Benefits and Challenges

Working as an IT contractor has a lot of advantages. Some of the benefits of being an IT contractor include: 

• Bigger income: information technology contractors can earn substantially more than the IT worker salary for regular permanent employees. While it varies depending on the area the pay for contractors is almost always a good deal more than regular employees pay.
• More control: working as a contract employee gives you more freedom. You can set your own schedule, take time off when you want and select the clients you want to work for.
• Gain different skills: working as a contractor allows you to pick up new skills quickly which in turn will create a bigger demand for your services.
• Variety: you can take on different types of projects and work in different industries as a contractor.
• Additional opportunities: working as a contractor can lead to other opportunities and potential ventures.

There are also some downsides when working as a software engineer contractor:

• No benefits: benefits that full-time employees receive such as health insurance, paid vacation, paid sick days and more aren’t available for contractors.
• Less security: contractors only have a job for the duration of the contract. Once a job is completed they have to get out and find more work if they want an income.
• Fluctuating income: a contractor may go through periods where they have a high income, while a few months later it can drop to almost nothing. This can be stressful if you have a mortgage, car payment and other financial obligations.
• Company outsider: contractors are often overlooked when it comes to company meetings and strategy discussions. It is easy to feel segregated from regular full-time employees.

Enhancing Remote Work for IT Contractors: Practical Tips for Success

Here are a few tips on how to improve remote work for IT contractors.

• Develop a network. Have you ever asked yourself why is it so hard to find a good contractor position for IT specialists? Depending on job boards and freelancing sites probably won’t find the best work. Develop a network of contacts and relationships in the industry. A lot of the best work for many contractors comes through referrals. Work on making new contacts and keeping up with your existing ones. Over time this will lead to more and better contracts.
• Communicate. Good communication is a key to managing virtual teams, both for IT contractors and their clients. In contract situations, it’s easy to get overlooked and not receive updates and other relevant information you need to move ahead with projects. A lot of communication issues boil down to slow responses or no response to requests for feedback, approval or resources you need to progress. Consider including a clause in your contract that the client will respond to requests within a certain amount of time. Also make sure you have more than one contact at the company in the event your main contact is avoiding you.
• Don’t misrepresent your capabilities. You must be honest about your skills and qualifications. If a contract you are really interested in calls for skills you don’t possess it can be tempting to do some quick studying using online sources and represent yourself as a specialist in an area you aren’t that familiar with. Doing so is a good way to fail the project, lose the contract and damage your reputation. Job descriptions include qualifications and requirements because they are necessary for the project. Be honest with clients about your qualifications to avoid a lot of headaches down the road. You should always be able to deliver on what you say you can do.
• Clarify all the details. Make sure to get all the important details of the job in writing including total compensation, duration of the project and how many hours per week will be needed. You need all the details of the job in order to provide an accurate estimate. Knowing all the details going in well help avoid issues later.
• Get a signed contract. A signed contract that contains details of financial compensation, length of the contract, your primary duties and what is expected is essential before taking on a job. Having the details in an email or memo isn’t enough. You need a signed contract for your protection and to avoid misunderstandings.

Choosing Between Being an Employee and an Independent IT Contractor

The following table is a side-by-side comparison of working as an IT contractor to working as a regular employee.

	IT Independent Contractor	IT Employee
Rates	As an independent contractor, you have the opportunity to earn significantly more than regular employees	Although a regular IT employee can earn a good salary, a contractor will usually earn more
When paid	IT contractors are only paid for the work they do	A regular employee will receive the same salary even during slower periods when they aren’t putting in as much work
Taxes	Contractors are responsible for paying their own taxes and taxes will be higher than for regular employees. However, contractors can deduct expenses to reduce their tax rates	Employers deduct taxes directly from employees paychecks so they don’t have to worry about a big tax bill at the end of the year
Benefits	In many cases, contractors receive no benefits from companies they work for and when they do they are generally less than a regular employee will receive	Regular employees receive benefits such as health insurance, paid vacation, paid sick days, savings plans and more that bolsters their overall pay package
Job security level	There is generally less security as a contractor. You have to be constantly on the lookout for your next job	A regular employee usually has better job security
Flexibility and freedom	IT contractors have more flexibility and freedom than regular employees. They are their own boss and can choose who they work for, where they work and when they work	Regular IT employees will work the schedule set by the company. Vacations and days off must be approved by their employer
Job opportunities	An independent contractor has more opportunities to take different types of projects and pick up new skills	Employees work on the projects they are assigned. However, employers are often willing to pay the expense of training for new skills

So, is being a contractor worth it? Being an IT contractor has some definite advantages as does working as a regular employee. It boils down to the mindset of the individual and what their priorities are. If having the additional freedom being a contractor brings outweighs the security that comes with a permanent position it will likely be worth it to you.

IT Contracting FAQ

Consider all the benefits of working remotely as an IT contractor to determine if it is the right career path for you!