There was a time when contract work was considered an undesirable option for those facing redundancy or who were unable to find full time work.
However, times have changed and more skilled people are seeing the benefits of contracting, especially when it comes to work/life balance, being your own boss and having the flexibility and freedom contracting offers.
Contracting is becoming so popular that many are choosing to leave full time employment to set up their own business.
Running a successful contracting business has many advantages, however, there are still some considerations to take into account.
Here’s a look at some of the pros and cons of contracting.
- Contractors can earn more than full time employees. As clients don’t need to pay contributions such as pensions, sick and holiday pay, a contractor can charge a higher hourly or day rate.
- Contractors have the freedom to set their own rates and the flexibility to choose and negotiate packages with clients.
- Overtime rates are higher for contractors.
- Contractors won’t receive severance compensation if a contract is cancelled, unless specifically mentioned in their contract agreement.
- Contracting is more financially unstable than a full time job. Once a contract ends, there are no guarantees that another one will immediately begin, so there could be periods of unemployment.
- You don’t work, you don’t earn. There’s no holiday or sick pay with contracting.
- Many contractors can achieve a good work/life balance and have the flexibility to take time off when they choose and fit work around family life.
- They have the satisfaction of being their own boss and being in control of their business; contractors have clients, not employers.
- The variety of jobs can be interesting, helping gain invaluable experience. Contractors rarely feel they are stuck in a rut.
- Many miss the financial stability a 9-5 job brings.
- Running a business requires much more responsibility and constant ongoing marketing to pitch new clients and drum up more business.
- There are many tax benefits to running a limited company meaning a contractor’s net pay can be far more than an employee’s.
- Business expenses can be offset, reducing their tax bill even further.
- A contractor will be responsible for organising their own pension, medical insurance and business accounts.
- Sorting out taxes and dealing with IR35 can be a daunting task.
Accountspoint are a firm of small business accountants in Derby with a growing client base in Nottingham. For more information on our accountancy services, contact us today.