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I'd be due to apply for ILR Set(M) in a few months having been on family visa for almost 5 years. Is it mandatory to be employed by the time I'm submitting the application. If yes, can it be a contract job?

You need to meet rhe same financial requirements as you did foe your spouse visa and extension, with a minimum of 6 months employment, payslips and bank statements.

If your spouse works, their employment can be used if it meets rhe requirements.

Not mandatory for rhe applicant to be employed if financial requirement is met by other means.

Any employment is usually accepted.

Thank you! Just to confirm, contract jobs are acceptable too, right?

Yes