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Thinking of being a contractor? Are you wanting more flexibility in your working life? More of a say in who you work with or what projects you work on? Then Contract work may just be for you.
What is a Contractor?
A contractor is someone who provides their expertise and/or specialism to a company for a specific project, within a fixed period of time. Contractors can be self-employed or work through an agency.
Contract roles can offer great flexibility, better work/life balance as you choose where and when to work and an increase in earnings. Many professionals have actually made the move from PAYE to become contractors for these reasons, plus the added benefits of gaining additional skills and experience. As well as being specialists in their field, contractor’s strengths lie in quickly fitting into an organisation, delivering and expertly managing key projects.
An Opportunity to Grow your Skills
The variety that comes with working in contract roles increases your skills base, industry knowledge, experience and exposure to dynamic environments. This is often the biggest benefit for moving to contract as it gives the opportunity to test your abilities in new environments. Contracting while you’re travelling is also a viable option with contract roles available internationally as well.
Benefits of being a Contractor
There are quite a few benefits to taking on a contract role, these include:
- The flexibility to work when you want, for who you want and to do the things you enjoy and are good at
- Broaden your sector experience or you can specialise in a certain industry
- Develop your skill set or specialise and hone those skills
- Gain experience of working for a variety of organisations with different cultures, structures and management styles
- Greater earning potential, particularly if you’re paid on an hourly basis with extra for overtime
- Contract positions tend to move very quickly. Its not unheard of to interview, receive an offer and start all in the same week!
It’s also a good idea to speak to any contractors you may know to give you the perspective from someone that has gone through this process and can point you in the right direction.
Why do Companies Hire Contractors?
There are actually a number of reasons. The main one being that they can hire in specialisms and skills they do not have on staff. Specialists take less time to train, so the job can be done more quickly by a contractor. There are also less costs involved than hiring someone permanently, not to mention having to find something for them to do when the project ends.
Negatives of becoming a Contractor
It would be wrong to pretend that there are no downsides to this type of employment. You have to make sure you are comfortable with the potential negatives before you proceed. This could mean you:
- Won’t have the security of a long-term employment contract
- Have to be able to organise your accounts (or use an accountant)
- Don’t have the infrastructure of a company for things like an IT or HR team to fall back on
- Have to be able to source and secure work for yourself
- Won’t be able to enjoy other employee benefits such as sick pay, company pensions or bonuses
- There is generally only a 1 week notice period – however this could also be seen as a positive!
But don’t let this list put you off – just don’t go into life as a contractor without an awareness of any potential drawbacks as well as benefits.
Tackling Potential Risks as a Contractor
There are a number of potential risks when starting out as a contractor, so make sure you:
- Read and understand the terms of any contract you take on. Don’t be caught out by the fine print further down the line.
- Keep accurate records of your incomings and expenses to be able to keep on top of your books.
- Are protected in case your work is challenged. Protect yourself by taking out a Liability insurance policy that is geared towards your circumstances and can cover you for legal action if necessary.
- Recruitment firms who specialise in your skill set can help you in building a reputation and take the slog out of finding roles.
- Are up to date with the latest legislation. Pay careful attention to IR35 rules, for example (see below).
Contractors must be compliant of what is known as ‘IR35’ legislation. You will probably have seen quite a lot in the press on this recently as these reforms have been quite controversial. This is the Government making sure people claiming to be contractors are not ‘disguised employees’ in order to save tax. If the Government finds you shouldn’t be treated as a contractor, then you could be hit with a big bill for tax and National Insurance payments. Contractors who know their work will fall under IR35 may be better off establishing an umbrella company and taking a salary via PAYE to avoid an issue.
These rules are complex and so it’s important that you speak to an expert to ensure you can clearly demonstrate your status as a legitimate self-employed contractor. More details and rules can be found on the government site.