What is a contractor: what they do and how to become one
Updated 25 September 2023
A man in an orange vest and hard hat and a man in a button up shirt and tie stand by a list with the title "How to become a contractor" and these items:
- Analyse the market
- Search for opportunities
- Consider leaving your permanent role
- Set up your contracting business
Contractors are professionals who provide services to clients for a set period or for the duration of a project. Different types of contractors have their own unique benefits and terms of employment. Understanding what each type of contractor does can assist you in determining the right type of contractor position for you. In this article, we find out exactly what a contractor is, explain what different types of contractors do and discover how you can become a contractor.
What is a contractor?
To answer the question, 'What is a contractor?', it's important to look at the type of industries contractors work in. Contractors work across many different industries, from large companies to small start-ups, but the term usually refers to people working in construction, engineering or technology. Companies hire contractors to perform specific tasks. Generally, contractors are experts in a certain skill and businesses hire them for projects that require their specialist services.
Within the industry, you can work as a general contractor, subcontractor or independent contractor. Like business owners, contractors are essentially managers and work for themselves. They may also work as part of a team during a busy period, on a construction site, for example. Contractors tend to earn more than general builders because they look for their own customers.
What is a general contractor?
General contractors oversee a commercial or residential construction project. A general contractor is the manager for the project and oversees a group of subcontractors. Also known as the main contractor, the general contractor's responsibilities may include:
managing the day-to-day tasks on a building site
negotiating deals with clients
applying for building permits
communicating between different traders and suppliers
hiring subcontractors for specialist parts of the project
filling in the documentation for bids and proposals
providing an estimate of a project's costs for all aspects of work
ensuring the site follows health and safety requirements
keeping a record of cash flow and project budgets
managing quality assurance and checking the timings of the construction
What are subcontractors?
A subcontractor refers to a type of contractor who has a speciality within the construction trade. They take on a contract from the main contractor for work that exceeds the skill level of the main contractor.
Subcontractors may work for themselves or an umbrella agency; either way, they provide services to a business. Because subcontractors have expertise beyond that of a general contractor, they help reduce project risks. Their quality of work reflects not only on themselves but also on the contractor who hired them. The general contractor may hire a subcontractor for the following types of work:
Why do businesses use contractors?
Many businesses use contractors for specific projects or roles rather than hiring permanent employees because it can save money. This is especially true for one-off projects. Even though contractors can be more expensive per hour or day than permanent employees, this still saves a business money in the long term because they avoid the costs that come with employing someone, such as national insurance, pension contributions and holiday pay.
By using contractors, businesses can make use of the specialist knowledge different tradespeople bring. The business is free to hire the most appropriate contractor that has the skills they require to complete the job. This can result in greater efficiency and more profit for the company.
Related: 14 self-employed jobs in the UK
What's the difference between contractors and employees?
The main difference between working as an employee and working as a contractor is that contractors can choose to accept or turn down work. Once they accept a contract, they're obliged to complete it to the best of their abilities. If the client has another project to work on, they're free to either accept the additional work or decline it and move on to work elsewhere.
Another main difference is that contractors set the pay and conditions for the contract. They provide an estimate of how much the work is going to cost and the company then decides whether to accept the contractor or look for someone else. Contractors are in charge of organising their tasks and setting their own working hours and working conditions. Many businesses use contractors for the following type of work:
safety and security
IT maintenance and support
public relations and marketing
What are the benefits of working as a contractor?
Working as an independent contractor can bring a lot of freedom. Since you're essentially self-employed, you're free to work the hours you want to work and can fit your work around your personal life. You can choose how much time you'd like to take off in between different contracts and projects. You're also free to pick the projects you want to work on and choose the type of organisations and companies you want to work for. This allows you to build up your skills and experience.
As a contractor, you're also likely to earn more than you would as an employee and you have the potential to ask for a better hourly rate as you build up your contacts and your experience. Here are some more benefits of working as a contractor:
more variety and the opportunity to work on many different projects
the opportunity to broaden your contacts and to develop a network of potential companies looking for your skills
a chance to learn from other co-workers on different projects
How to become a contractor
Deciding to work as a contractor has a lot of advantages. Here are some steps you may want to follow to help you on your way:
1. Analyse the market
Before launching yourself as a contractor, it's a good idea to find out if there's enough demand for the skills you can provide. If you're interested in offering your services as a building contractor, think which organisations and companies may want to use your service. If you're offering your skills as an IT contractor, it's worth assessing whether your skills are the most up to date that they can be.
Look at the demands of the industry. As a potential IT contractor, for example, perhaps you may want to develop your skills in cybersecurity or software robot development. If you believe you can expand your professional skills further, it may be a good idea to spend a couple of years working on your specialism for an employer before launching yourself as a contractor.
2. Search for opportunities
The next step is to look for opportunities. You may consider signing up with recruitment agencies and looking at online job boards for companies and organisations that require your services. Many recruitment agencies specialise in specific industries and sectors and registering with one of these may help you to fast-track your search.
Another way to find opportunities is to join a network where you can find the type of companies that you want to work for. By keeping in touch with former managers and colleagues, you can build your own network of people who may be able to pass your name onto someone that requires your services.
3. Consider leaving your permanent role
Clients often look for contractors who are available immediately, so it's worth considering leaving your permanent role before applying for work. This may not be necessary if you're highly skilled since some clients can negotiate the start date to coincide with when you're free. The contractor industry is competitive, with lots of people willing to move quickly for the best opportunities.
It can also be helpful to check the websites of companies you think are a good fit for you. They may have an opening that you can apply for as a contractor. Often the easiest way to find new contract work is by looking online.
4. Set up your company
Once you secure your first contract job, it's time to decide how you're going to manage the business. The most popular way to set up a contracting business is through one of the following options:
Limited company: Setting up as a limited company means you have control over your finances. In effect, you're the director and shareholder, which means this is a tax-efficient way to run the business, though it involves some paperwork and legal requirements.
Umbrella company: If you choose to work under an umbrella company or agency, they take care of the invoicing and paperwork. It means that you're more like an employee, and as such, you pay national insurance contributions and tax through the umbrella company.
Explore more articles
- 8 free freelance services sites (With tips for using)
- What does an office administrator do? (With salary)
- How To Become a Paramedic (with duties and skills)
- How to be your own boss (with 8 steps to take)
- How To Become a Maths Teacher
- What is a content marketing role? (Plus tasks and careers)
- Account manager career path: a guide with roles and skills
- How To Become an Air Traffic Controller
- What is it like to be a flight attendant? (With salary info)
- A list of 19 well paying jobs for journalism students
- What does a magazine journalist do? (Plus salary and skills)
- 10 jobs you can pursue with computer degrees (Salary info)