Job satisfaction is reliant upon different factors for different people. In the first instance, it might appear as though establishing yourself within a company, forming close working relationships with colleagues and receiving promotional opportunities as part of your career progression are more readily achievable as a permanent employee. However, all of these things can be accomplished as a contractor, and your career progression could be hindered if such factors are preventing you from considering a move into contract work.
The decision to go contract can be a difficult one unless you have an adequate understanding of how it can work to your advantage, so it is important that you consider the potential benefits of this type of employment in order to avoid inadvertently closing the door to opportunities that could take your career to new levels.
There are a number of ways in which contractors can work, including working through your own personal services company, as an employee of an umbrella company or as PAYE (Pay as you Earn).
An incentive for opting for contract work is the tax benefits employed when working as a self-employed individual, in business on your account, through a personal limited company. Working this way can significantly reduce the amount of tax you pay. While this is the more time consuming and complex way for the contractor, limited companies allow contractors to have total control of their own business. A large proportion of contractors operate in this way. Agencies like NES also offer month payment options for contractors to help fit in with other financial systems such as mortgages, loans and insurances.
Umbrella companies relieve contractors of the hassles associated with setting up their own limited company. The umbrella company bills the agency for work carried out and then pays a net rate with employed levels of tax and national insurance deducted. For those working on a contract basis in between permanent placements, or for those undertaking their first contract assignment, an umbrella company may be an ideal option. It is also likely to be more appropriate if a contractor is operating within IR35.
The third option for contracting is as a PAYE individual, where you are engaged by the agency directly and the agency deducts the appropriate PAYE taxes and National Insurance contributions.
With the legislation surrounding managed service companies, it is important that contractors understand the above options, particularly whether they are operating within or outside of IR35 or not.
Advantages for the employer
By understanding how employers benefit from hiring contractors when seeking this type of work, you can demonstrate the ways in which you match their hiring requirements. There are a number of different reasons for employers to appoint contractors and if you can understand these reasons you will be able to market yourself in the best possible light. Three key advantages associated with hiring contractors include flexibility, cost saving and up-to-date business knowledge.
With predetermined budget and skills requirements often dictating the type of individual needed for a given position, flexibility from the labour market is a distinct advantage for the employer when it comes to hiring contractors.
Having access to specific skills and experience for the length of time needed to complete a particular project; effectively being able to select the most suitable person for the job from a pool of potential candidates is another reason that employers choose to take on contractors.
When working with a recruitment agency (which is typically how employers take on contract personnel) wages become their responsibility, freeing up the time and resources that would otherwise be spent on duties like payroll. Recruitment consultants are also able to dedicate the necessary time and effort into selecting candidates from their database that best match an employer’s requirements.
Additionally, hiring contractors is a good way for employers to supplement a permanent workforce as the demand from projects becomes greater. With a notice period for contractors typically being just a week, these employees can then be released when project demands lessen.
Disadvantages for the employer
As many Foreign National Candidates require sponsorship from a client company in order to gain work in the UK, employers can encounter difficulties when attempting to hire such candidates on a contract basis.
There is the potential for contract personnel to be perceived as less loyal to the organisations for which they work in comparison to permanent members of staff. However, the skills that contractors bring to a project mean that employers often cannot afford to let anxieties about this affect their judgement in a hiring situation. By ensuring that the working environment, rate and roles and responsibilities of the contractor are to their satisfaction, employers can minimise the likelihood of them wanting to leave before their contract has expired.
Advantages for the contractor
Before making the decision to seek contract work, it is important to consider the advantages in addition to the disadvantages available to you with this type of employment, as they can considerably outweigh those of permanent work for the right person in the right circumstances. For example, within the Oil and Gas sector, which has traditionally recruited a large proportion of contract personnel, contract rates appear to have accelerated far faster than salaries as a result of high demand and scarce supply.
Many people may also be reluctant to opt for contract work due to concern that it will hinder their chances of gaining Chartership. However, a large proportion of employers will offer opportunities to experience a variety of job roles and responsibilities to help contractors working with them in achieving chartered status.
By working as a contractor, you can experience a wide variety of environments, acquiring a range of transferable skills that can work to your advantage as you develop your career. These skills are also likely to be gained faster in a contract position than in a permanent post and, as well as expanding your knowledge, they can make you a more desirable recruitment option and increase your chances of future employment and assignment opportunities.
The amount of control you have over factors such as when to work, where to work, who to work for and a contract length to suit you, is substantially increased with contract work. Permanent employees are usually subjected to greater restrictions than contractors, which can strongly influence the decision to take on a contract assignment.
Contracting also provides an excellent opportunity to meet new people, not only socially, but also as a fantastic networking opportunity. By forming relationships with the people you meet working on different projects, you can keep up to date with new developments as well as the challenges faced by your industry. These new relationships can also provide important links to future career opportunities.
Project managers regularly have tight deadlines that they work to, so are therefore generally more concerned about employing contractors with the right skill set that will successfully work within a specified timeframe than they are about getting a cheaper candidate who might not be as efficient. This can result in contractors being paid a premium for their services.
Under normal circumstances contractors are not tied to the same period of notice as permanent staff either, which gives them more freedom to move around quickly and easily. As a week’s notice is not unusual for contractors, it can be easy to change jobs as soon as new opportunities arise.
Contractors have the added advantage of choosing when they work, so can enjoy longer holidays than their permanent counterparts. It is not uncommon for contractors to take holidays of up to six weeks after an assignment has been completed. Being paid on an hourly basis also means that paid overtime is available for contractors, whereas permanent employees do not always have this option.
As a contractor, it is important that you work through a reputable agency, as they are able to offer good relationship management and links to companies throughout the UK, as well as discounted PI and PL insurances, free careers advice, ongoing rate negotiation and updates about the latest market trends.
Disadvantages for the contractor
Permanent employees are a company investment so they will often receive substantial training for their role. However, because of the flexible and comparatively transient nature of contract work, employers are less likely to provide training. Contractors will have already been assessed to ensure that they possess the skills required for a specified role; so further training is unlikely to be offered.
Another consideration is that promotional opportunities for permanent staff may arise that do not get advertised externally. Many organisations advertise senior positions internally prior to conducting an external advertising campaign, which could mean that without the same well-established relationships with senior staff, contractors will need to be much more pro-active in their career progression.
While work opportunities are likely to be in good supply as a contractor, in the current market at quiet times it might also be necessary to move to a new location in order to work on the most desirable project or gain the most advantageous skills. This requires flexibility with regard to location: something that may or may not suit your lifestyle and personal circumstances.
Going contract depends upon individual circumstances, opportunities available, stages in a career and is a personal choice. These are just the pros and cons of each from an informed perspective but, of course, the ultimate decision will be yours.
