What to do when you're out of work

Sadly, many contractors go through periods during which they cannot secure work. However, contractors are generally encouraged to plan for these periods in advance; they should be thought of as an occupational hazard and, where possible, you should put money aside to tide yourself over. Most experts suggest that contractors should avoid getting on the benefits treadmill.

Claiming Jobseekers’ Allowance as a contractor is very difficult as, in the eyes of the Department for Work and Pensions (DWP), your employment status is vague. The situation is complex regardless of whether you contract through an umbrella or run your own limited company; the DWP may treat you as an employee if you have an arrangement with an umbrella, thus requiring you to break off the relationship if you wish to claim benefits.

On the other hand, you may well be forced to liquidate your company if you are a Director. Neither course of action is desirable.

Where possible it is therefore always better to keep a ‘slush fund’ so that you can pay the bills when you are between contracts. Ideally this fund should be the equivalent of 3 to 6 months’ pay.

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