The Benefits of Contracting
Increased income, greater flexibility, increased freedom, and wider skill development are only a handful of advantages to be gained when becoming a contractor.
With employee benefits being reduced and salaries being cut, is it surprising that more companies are turning to contractors to fulfil positions?
What are the benefits of contracting?
If you are considering becoming a contractor, or if you have been made redundant and are on the lookout for something new, then there are plenty of reasons why contracting could be a very good move for you.
The first thing that springs to mind is the financial benefits, some of these are:
- An average contractor rate can easily be double that of a permanent employee, or even more.
- Contractors are paid more due to their skills and the flexible nature of the relationship, plus most positions can be relatively short-term.
- Depending on the state of the industry in which you work, or the market in general, you can command high rates of pay.
- The location of the contract has a high influence on the rate of pay.
- Contracting through your own limited company is the most tax-efficient way of operating. You also have far better tax planning opportunities which can reduce your overall tax burden and increase your take-home pay.
- If you operate through a limited company you have far better tax planning opportunities which can reduce your overall tax burden and increase your take-home pay.
- You can offset your business expenses against your income.
Are there any downsides to contracting?
As you will see, this is a fairly impressive list of positives, but it’s only fair to point out a few of the negatives as well.
Some of these include:
- Contractors are responsible for finding contracts, to ensure a steady stream of income.
- You will also be responsible for negotiating your own payment terms and working conditions.
- You will need to manage your own finances, appointing a contractor accountant can make this simple.
- Even in a buoyant market, there is always a level of uncertainty.
- At some point, you will need to decide whether to set up a limited company or work through an umbrella company.
- As a contractor, you won’t get the same benefits that permanent employees receive.
- It can become lonely at times, as there won’t be any colleagues around you.