"So you want to go freelance..." - a beginners guide to freelancing(mocko.org.uk)
mocko.org.uk
"So you want to go freelance..." - a beginners guide to freelancing
http://mocko.org.uk/b/2010/10/11/so-you-want-to-go-freelance/
9 comments
Having freelanced in London, I can say, if anything, the author is understating just how bad agents are there.
Everything is rosy when times are good. When work is plentiful and qualified workers are in short supply agents are your friends. But having lived through the IT recession in the early 2000s in the UK, I can tell you that there's a whole other side to that coin.
In 2003 the unemployment rate amongst self-identified contractors was 39%. THIRTY NINE PERCENT. And that didn't include those that had left the industry, taken permanent jobs or retrained (many as plumbers for some reason).
In this environment the agents are the worst enemies of both the contractors and the companies.
Some things worth knowing:
- When a job is officially posted, many companies will have PSLs (preferred supplier lists). These are 5 or so agents who they will source all their contractors from. For this reason alone you need to spread yourself around a few. Deutsche Bank's set of 5 might be completely different to, say, CSFB;
- Often the PSLs will be able to submit a quota of CVs, often 2. 2 x 5 = 10 CVs to review. This has some unfortunate side effects, namely you have no idea if you've actually been submitted for a job or not. Let me explain:
- When you respond to an ad, the agent will typically filter you through some basic questions (of which he or she typically has no clue regarding the correctness of your answers but, hey, if you sound confident you must be right). After that they will say they will submit you. They may even be telling the truth at that point. Or they might be lying. If they say they won't put you forward you'll go through someone else and how embarrassing would that be if they turned you down and you got the job through someone else? Better to sideline you in favour of a candidate that looks better on paper;
- Even if they intend to put you up, a better candidate may come in before the submission deadline. Will they tell you they're no longer submitting you? Not at all. They'll simply quiet drop you, effectively sidelining you;
- If companies get the same CV from multiple sources that will often kill your application as the company doesn't want the fight with the various agents as to who is entitled to the commission;
- Before a hiring manager or line manager even sees your CV it has to make it through HR (in large companies). HR has no idea what your technical CV means. They simply scan it for known keywords and acronyms. The result? You have to fill your CV with acronyms to pass this filter.
Example: I once told an agent I had 5 years of Java experience. He said (literally) "that's great but do you have any J2SE experience?" I'M NOT MAKING THIS UP.
- When times are lean (and even when they're not) recruiters will proactively recruit for managers they know. To do this they will tell the prospective candidate the position is live. 90% of the time this is a waste of your time.
Many (but not all) companies use job reference numbers for live positions. You need to learn which companies do and which don't. You can ask for this. If the agent is cagey about giving this information or they say the company doesn't use this when you know they do, just hang up. They're wasting your time.
But some positions are basically filled before they officially become live. Line managers need to wait for approval for hires, budget and so on. Like anything, once it's all official they need someone yesterday. Some will try to expedite the process before filling the position before it's official so you need to walk a tightrope here between wasting your time and missing out on good opportunities. This will come down to your relationship with the agent but it is so hard to figure out if someone is full of it or not;
- Agents set up fake interviews to make it look like they're getting things done for you. They day before (or even the same day) they'll cancel the interview saying something has come up. Do yourself a favour: if this happens, ring the company and speak to the person involved. This may be hard to do as agents are there to shield them from direct contact but persevere. Some will care but many won't. At least you can figure out if the agent is full of it or not;
- Agents advertise fake positions to harvest CVs;
- Agents will submit you without your permission. I've had my CV turn up for the same job from 5 different agents (literally). That killed the position for me through no fault of my own;
- Agents will want CVs in Word format. This is partly for convenience but also they will often change things. You could mitigate this by sending a protected PDF CV for each position. Some will drop you if you create this hassle for them but if you want to control who sends out your CV, it may be worthwhile;
- You have no control of the markup the agent will charge on top of what they pay you. Combined with a lack of technical expertise, the agent may hurt you in this regard without you being able to do anything about it.
Let's say your market rate is 400 pounds/day. If that's too close to the maximum the agent might not put you up even though you're the best candidate. They simply won't make the margin they want.
Or you can go in with a low quote because you're not entirely suited to the job or its a company you really want to work for. The agent may mark you way up anyway, putting you out of the running. They can do this simply because they don't know your deficiencies for that application.
Honestly I could go on. Contracting in London for me was an horrific, anarchic, soul-destroying experience. Recruitment is one of those industries in the UK in drastic need of regulation to stop these shenanigans.
Everything is rosy when times are good. When work is plentiful and qualified workers are in short supply agents are your friends. But having lived through the IT recession in the early 2000s in the UK, I can tell you that there's a whole other side to that coin.
In 2003 the unemployment rate amongst self-identified contractors was 39%. THIRTY NINE PERCENT. And that didn't include those that had left the industry, taken permanent jobs or retrained (many as plumbers for some reason).
In this environment the agents are the worst enemies of both the contractors and the companies.
Some things worth knowing:
- When a job is officially posted, many companies will have PSLs (preferred supplier lists). These are 5 or so agents who they will source all their contractors from. For this reason alone you need to spread yourself around a few. Deutsche Bank's set of 5 might be completely different to, say, CSFB;
- Often the PSLs will be able to submit a quota of CVs, often 2. 2 x 5 = 10 CVs to review. This has some unfortunate side effects, namely you have no idea if you've actually been submitted for a job or not. Let me explain:
- When you respond to an ad, the agent will typically filter you through some basic questions (of which he or she typically has no clue regarding the correctness of your answers but, hey, if you sound confident you must be right). After that they will say they will submit you. They may even be telling the truth at that point. Or they might be lying. If they say they won't put you forward you'll go through someone else and how embarrassing would that be if they turned you down and you got the job through someone else? Better to sideline you in favour of a candidate that looks better on paper;
- Even if they intend to put you up, a better candidate may come in before the submission deadline. Will they tell you they're no longer submitting you? Not at all. They'll simply quiet drop you, effectively sidelining you;
- If companies get the same CV from multiple sources that will often kill your application as the company doesn't want the fight with the various agents as to who is entitled to the commission;
- Before a hiring manager or line manager even sees your CV it has to make it through HR (in large companies). HR has no idea what your technical CV means. They simply scan it for known keywords and acronyms. The result? You have to fill your CV with acronyms to pass this filter.
Example: I once told an agent I had 5 years of Java experience. He said (literally) "that's great but do you have any J2SE experience?" I'M NOT MAKING THIS UP.
- When times are lean (and even when they're not) recruiters will proactively recruit for managers they know. To do this they will tell the prospective candidate the position is live. 90% of the time this is a waste of your time.
Many (but not all) companies use job reference numbers for live positions. You need to learn which companies do and which don't. You can ask for this. If the agent is cagey about giving this information or they say the company doesn't use this when you know they do, just hang up. They're wasting your time.
But some positions are basically filled before they officially become live. Line managers need to wait for approval for hires, budget and so on. Like anything, once it's all official they need someone yesterday. Some will try to expedite the process before filling the position before it's official so you need to walk a tightrope here between wasting your time and missing out on good opportunities. This will come down to your relationship with the agent but it is so hard to figure out if someone is full of it or not;
- Agents set up fake interviews to make it look like they're getting things done for you. They day before (or even the same day) they'll cancel the interview saying something has come up. Do yourself a favour: if this happens, ring the company and speak to the person involved. This may be hard to do as agents are there to shield them from direct contact but persevere. Some will care but many won't. At least you can figure out if the agent is full of it or not;
- Agents advertise fake positions to harvest CVs;
- Agents will submit you without your permission. I've had my CV turn up for the same job from 5 different agents (literally). That killed the position for me through no fault of my own;
- Agents will want CVs in Word format. This is partly for convenience but also they will often change things. You could mitigate this by sending a protected PDF CV for each position. Some will drop you if you create this hassle for them but if you want to control who sends out your CV, it may be worthwhile;
- You have no control of the markup the agent will charge on top of what they pay you. Combined with a lack of technical expertise, the agent may hurt you in this regard without you being able to do anything about it.
Let's say your market rate is 400 pounds/day. If that's too close to the maximum the agent might not put you up even though you're the best candidate. They simply won't make the margin they want.
Or you can go in with a low quote because you're not entirely suited to the job or its a company you really want to work for. The agent may mark you way up anyway, putting you out of the running. They can do this simply because they don't know your deficiencies for that application.
Honestly I could go on. Contracting in London for me was an horrific, anarchic, soul-destroying experience. Recruitment is one of those industries in the UK in drastic need of regulation to stop these shenanigans.
There's very little I can add to this but this is right on the money for London, and indeed as far as I can tell the whole UK. To provide an employer's perspective:
We contacted a 'trustworthy' recruiter through a recommendation, who immediately told me how ethical they were - immediate red flag. Nobody should need to tell you how ethical they are, no matter if the industry is considered one step below estate agent sales.
Someone contacts me saying they heard that there was a job going, tells the recruiter to sling their hook as they already know me. The next day the recruiter calls my colleague to say they have someone but won't mention the name. Cue a game of he said she said, as the recruiter tells us that we owe them the money if we hire them. The recruiter then starts going mental and crazy about integrity and all this stuff after we stop laughing at them. I tell them I've known the guys for years, he told me that he didn't give them permission to send the CV over to us, and that he told them to sling their hook. Recruiter calls back, gives me a load of grief. In the end we don't hire the guy, which is a shame as I've known him for a long time and he's a really good chap, just lives out in the middle of nowhere.
The recruiter didn't have a leg to stand on, had submitted the CV without permission, tried to tell us that we were legally obliged under their T's & C's to pay them when we couldn't see how (as the contract made no sense) and they couldn't point to a specific clause. They wanted a commitment that we'd never ever try and recruit the guy without paying them, so I just told them that it wasn't working out.
We still get the odd e-mail from them.
In respect of that, I've worked with some very good recruiters in the UK as well as some terrible ones, both as employer and employee.
We contacted a 'trustworthy' recruiter through a recommendation, who immediately told me how ethical they were - immediate red flag. Nobody should need to tell you how ethical they are, no matter if the industry is considered one step below estate agent sales.
Someone contacts me saying they heard that there was a job going, tells the recruiter to sling their hook as they already know me. The next day the recruiter calls my colleague to say they have someone but won't mention the name. Cue a game of he said she said, as the recruiter tells us that we owe them the money if we hire them. The recruiter then starts going mental and crazy about integrity and all this stuff after we stop laughing at them. I tell them I've known the guys for years, he told me that he didn't give them permission to send the CV over to us, and that he told them to sling their hook. Recruiter calls back, gives me a load of grief. In the end we don't hire the guy, which is a shame as I've known him for a long time and he's a really good chap, just lives out in the middle of nowhere.
The recruiter didn't have a leg to stand on, had submitted the CV without permission, tried to tell us that we were legally obliged under their T's & C's to pay them when we couldn't see how (as the contract made no sense) and they couldn't point to a specific clause. They wanted a commitment that we'd never ever try and recruit the guy without paying them, so I just told them that it wasn't working out.
We still get the odd e-mail from them.
In respect of that, I've worked with some very good recruiters in the UK as well as some terrible ones, both as employer and employee.
Many thanks for sharing all this. Since you seem to know how the UK agents think, is locality of candidates a crucial factor for the agents? I live in the continent and had little luck whenever applied for UK based contracts, much more interest from the same UK agents when the contract position is based in my country. Is there a workaround to this, given that I'm perfectly ok with relocation?
UK agents definitely want easy. Either be in London or say you you are if you're not but canget there quickly (eg eurostar from Paris).
There is a practical reason for this. Once a position can be filled it is often filled very quickly. Getting a position can come down to who is available right now. This can even hinge on whether someone can be reached by phone that afternoon.
Also if you have a choice of interview slot, pick the earliest you can, later interviews will often get cancelled if a suitable candidate is found earlier. Companies don't want to waste time.
I got a job once that caused the next TWO DAYS of Interviews to be cancelled. This came down to being reachable by mobile phone and having access to a fax machine (this was 2001).
There is a practical reason for this. Once a position can be filled it is often filled very quickly. Getting a position can come down to who is available right now. This can even hinge on whether someone can be reached by phone that afternoon.
Also if you have a choice of interview slot, pick the earliest you can, later interviews will often get cancelled if a suitable candidate is found earlier. Companies don't want to waste time.
I got a job once that caused the next TWO DAYS of Interviews to be cancelled. This came down to being reachable by mobile phone and having access to a fax machine (this was 2001).
This made me realize that countries with only one major city may be more susceptible to these sorts of problems. While Japan has a handful (well, 3) of big cities, for most of IT and advertising it really is just Tokyo. The details are different than your experience, of course, but the general pattern is one of too much control by a small group of middlemen.
To be fair, when you head up north, places like Manchester and Leeds have a similar set up with local recruiters. The M25 belt recruiters and London recruiters don't want to go North, and the Northern recruiters generally don't want to go south for a job.
It's a really cutthroat role and recruiters can easily get screwed over by either the person they're placing or the company they're placing in. The combined mediocrity of the majority of recruiters (at least in my industry, and IME) with the paranoia tends to make for some wacky situations.
Realistically the role of a recruiter shouldn't exist. You should just put your job advert up and that should be it, but there seems to be a place for them at the high end and the low.
It's a really cutthroat role and recruiters can easily get screwed over by either the person they're placing or the company they're placing in. The combined mediocrity of the majority of recruiters (at least in my industry, and IME) with the paranoia tends to make for some wacky situations.
Realistically the role of a recruiter shouldn't exist. You should just put your job advert up and that should be it, but there seems to be a place for them at the high end and the low.
For what it is worth, it is the same elsewhere too. I've experienced this "who is entitled to commission" problem myself, so I can confirm it is true
Just to add a few extra data points, for those in the UK but outside London...
I've set up more than one small company, with various accountants. The typical fee for a bespoke deal (customising things like share classes if you want) always seems to work out around £300, one way or another. You could get a limited company much cheaper, probably under £50, if you don't need anything special and you're happy to buy one off the shelf and sort out all the paperwork yourself.
(Pro tip: If occasionally dropping a few hundred pounds on good professional services makes you wince, this is not the lifestyle for you. You need to understand the value of your time, how much time it really takes to deal with overheads, the real cost of getting official paperwork like contracts and financial statements wrong, and the benefits of different kinds of professional insurance and organisation memberships. Contractors charge much more then employees per hour for good reasons, and one of those reasons is that they have to deal with these overheads.)
IMHO, the tax and legal regulation isn't so bad, as long as you have a reasonable accountant. Producing annual financial statements for a personal contracting company shouldn't cost more than £1,000 unless you're exceptionally busy, and even good accountants might charge closer to half of that if you're only raising an invoice every few weeks and paying out occasional dividends so there isn't much work for them to do. Filing the other statutory paperwork and keeping track of the various deadlines is irritating and does waste a few hours each year, but it doesn't require specialist knowledge or skills you can't learn in an hour-long meeting with your accountant.
(Pro tip: If you're worrying about whether you can keep business records effectively and remember to file stuff, this is not the lifestyle for you. As a freelancer, whether you are self-employed or a company director, you will be legally responsible for getting this stuff right, and while most honest mistakes can be fixed without incurring major penalties, you certainly do hear about people who got it wrong and wound up paying tens of thousands in back taxes.)
Contract rates outside London are significantly lower, but still far higher on an hourly basis than working as an employee.
Some other general comments...
I second the recommendation in the article for PCG membership. To me, just having access to templates for standard contracting documents and to the tax and legal helplines was very useful when I first started out. There are also some benefits in terms of insurance, either directly in some cases or where membership gets you a discount with a third party on other professional insurance policies you might want/need. And there is a lot of other generally useful contracting advice to be had, forums that might help some people, etc.
The same does not apply to many other professional bodies. As a general rule, if membership costs a lot and lets you put letters after your name, but it's not a genuine university awarding a recognised qualification, there is about a 98% chance that it is a waste of money IME.
For finding work, recommendations/networking >> agencies. You probably know some friends or former colleagues who do contract work if you've been in the industry for a while, and they might well share potential opportunities if you just tell them you're going freelance and ask.
Being able to choose your own hours (including how many of them you work in a week) is a huge advantage to completely freelance work. There is no more putting in silly hours without overtime pay because your megalomaniac boss screwed up the project timescales and the deadline is coming up.
Working from home is both a blessing and a curse. It can be wonderful, but you do need to consider basic things like setting up a proper office in a dedicated room (particularly if you've got a partner/family) and how you're going to interact with other real people if you're not getting out of the house every day. Do check the implications for things like capital gains tax and planning consents with someone who knows what they're talking about as well.
Finally, as far as job security goes, I'm not convinced employment isn't a bit of a con here. Sure, firing someone is relatively difficult in the UK, but not if your company is going bust anyway, and with employment you're effectively locked into working with a single serious employer, often on quite nasty terms that interfere with or outright prohibit other commercial activities while not guaranteeing you any career progression. Who really has more financial security, the employee working for Big Employer (who lays off people 5,000 at a time when the axe falls) or the freelance contractor who can take on two contracts simultaneous, each using about half their time but with a different client, and who has developed relationships with half a dozen clients who come back with repeat business?
In a nutshell, if you're technically competent and you are organised and professional enough to deal with some basic business management, freelancing can be an excellent career choice. I think far more people in many technical/creative industries would choose to do it if they knew what it was really like, and you find far more people who say they wish they'd made the jump sooner than who give it up and went back to working for The Man. It isn't for everyone, but I'd certainly encourage anyone who has wondered if it might be for them to at least look into it properly.
I've set up more than one small company, with various accountants. The typical fee for a bespoke deal (customising things like share classes if you want) always seems to work out around £300, one way or another. You could get a limited company much cheaper, probably under £50, if you don't need anything special and you're happy to buy one off the shelf and sort out all the paperwork yourself.
(Pro tip: If occasionally dropping a few hundred pounds on good professional services makes you wince, this is not the lifestyle for you. You need to understand the value of your time, how much time it really takes to deal with overheads, the real cost of getting official paperwork like contracts and financial statements wrong, and the benefits of different kinds of professional insurance and organisation memberships. Contractors charge much more then employees per hour for good reasons, and one of those reasons is that they have to deal with these overheads.)
IMHO, the tax and legal regulation isn't so bad, as long as you have a reasonable accountant. Producing annual financial statements for a personal contracting company shouldn't cost more than £1,000 unless you're exceptionally busy, and even good accountants might charge closer to half of that if you're only raising an invoice every few weeks and paying out occasional dividends so there isn't much work for them to do. Filing the other statutory paperwork and keeping track of the various deadlines is irritating and does waste a few hours each year, but it doesn't require specialist knowledge or skills you can't learn in an hour-long meeting with your accountant.
(Pro tip: If you're worrying about whether you can keep business records effectively and remember to file stuff, this is not the lifestyle for you. As a freelancer, whether you are self-employed or a company director, you will be legally responsible for getting this stuff right, and while most honest mistakes can be fixed without incurring major penalties, you certainly do hear about people who got it wrong and wound up paying tens of thousands in back taxes.)
Contract rates outside London are significantly lower, but still far higher on an hourly basis than working as an employee.
Some other general comments...
I second the recommendation in the article for PCG membership. To me, just having access to templates for standard contracting documents and to the tax and legal helplines was very useful when I first started out. There are also some benefits in terms of insurance, either directly in some cases or where membership gets you a discount with a third party on other professional insurance policies you might want/need. And there is a lot of other generally useful contracting advice to be had, forums that might help some people, etc.
The same does not apply to many other professional bodies. As a general rule, if membership costs a lot and lets you put letters after your name, but it's not a genuine university awarding a recognised qualification, there is about a 98% chance that it is a waste of money IME.
For finding work, recommendations/networking >> agencies. You probably know some friends or former colleagues who do contract work if you've been in the industry for a while, and they might well share potential opportunities if you just tell them you're going freelance and ask.
Being able to choose your own hours (including how many of them you work in a week) is a huge advantage to completely freelance work. There is no more putting in silly hours without overtime pay because your megalomaniac boss screwed up the project timescales and the deadline is coming up.
Working from home is both a blessing and a curse. It can be wonderful, but you do need to consider basic things like setting up a proper office in a dedicated room (particularly if you've got a partner/family) and how you're going to interact with other real people if you're not getting out of the house every day. Do check the implications for things like capital gains tax and planning consents with someone who knows what they're talking about as well.
Finally, as far as job security goes, I'm not convinced employment isn't a bit of a con here. Sure, firing someone is relatively difficult in the UK, but not if your company is going bust anyway, and with employment you're effectively locked into working with a single serious employer, often on quite nasty terms that interfere with or outright prohibit other commercial activities while not guaranteeing you any career progression. Who really has more financial security, the employee working for Big Employer (who lays off people 5,000 at a time when the axe falls) or the freelance contractor who can take on two contracts simultaneous, each using about half their time but with a different client, and who has developed relationships with half a dozen clients who come back with repeat business?
In a nutshell, if you're technically competent and you are organised and professional enough to deal with some basic business management, freelancing can be an excellent career choice. I think far more people in many technical/creative industries would choose to do it if they knew what it was really like, and you find far more people who say they wish they'd made the jump sooner than who give it up and went back to working for The Man. It isn't for everyone, but I'd certainly encourage anyone who has wondered if it might be for them to at least look into it properly.
I would not discount them entirely just don't spend a lot of time chasing their lead and doing prep work for them to represent you and stay firm on your rate. A good deal will fall through but you can find some gems this way. A lot of large corps use agents to find freelancers and have exclusive contracting arraignments with the agency.