Since the global economic crisis, more and more people have been choosing to become contractors in their chosen field. Not only does this help to counter a reduction in the amount of full-time salaried roles available, but it also has a number of specific advantages.
A recent contractor attitude survey discovered that almost three-quarters (74 per cent) of those currently working on a freelance basis chose to do so, which goes some way towards demonstrating how popular it is becoming as a career choice.
At a time when companies are more likely to offer their workers redundancies than promotions or pay rises, they are increasingly turning to contractors. So is a move into contracting the right one for you?
If you have other commitments outside of work, for example childcare, then contracting is one way to ensure you can strike a suitable balance. This is one of the main advantages cited by existing contractors and the ability to pick and choose the contracts that fit around your responsibilities is a significant draw towards this career choice.
However, this is something you need to balance against the reduced security. While it could be said that no one’s job is really 100 per cent safe, there is an inherent risk in the short-term nature of contracting. Although the vast majority of contractors do not experience any major problems, there is no guarantee you will receive another contract when your existing one ends.
If flexibility is the main thing that attracts people towards contracting, then it is probably fair to say that one of the things that puts people off the most is the belief they will be required to complete a great deal of paperwork and concern themselves with tax and National Insurance.
While this may be true for limited company contractors, although there are accountancy services providers who will be able to help, there is another option.
Many contractors choose to enlist the services of an umbrella company, which will take care of all deductions, leaving contractors free to concentrate on their work. Because they act as your employer, it is also possible to claim sick pay and holiday pay from umbrella companies.
Contractors usually earn more than their full-time salaried counterparts and it is possible to select contracts based on which offer you the best financial reward. As a result, you will normally take home more money as a contractor than you would if you were employed as a member of staff.
Furthermore, if you have control over when, where and how you work and your relationship with your end client is business to business, you will be considered to be outside of the IR35 legislation and are free to set up as a limited company. This means that you will be able to significantly reduce the amount of tax and National Insurance you are required to pay, using dividends and directors’ loans to receive money from the company.
However, if you feel you may fall inside IR35, you do not need to worry as you can still operate as a contractor by utilising a company offering umbrella services.
As a contractor, it is also possible to claim money back for expenses such as travel and any costs relating to tools or machinery you will require. This can further increase the financial benefits associated with contracting.