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.
As a contractor you are your own boss, which allows you to be more flexible:
- Contractors can be far more independent than permanent employees.
- You have the freedom to work when and where you choose, and for however long you want.
- Changing a contract can often be far easier than changing jobs.
- Contractors can take as much or as little holiday as they prefer, there’s no set holiday allowance.
- The company you work for is not your employer but is your client.
- Contract roles will give you much more flexibility when it comes to agreeing on working conditions.
- As a contractor, you have more flexibility when negotiating terms of payment.
- You can develop your career in a way that suits your personal circumstances at any given time.
You will naturally work in a variety of roles and in many different companies. This will help you to build a unique range of skills and experience.
- Working as a contractor gives you the opportunity to test out other industry sectors to see if you can widen your experience.
- Contractors tend to gain a good insight into different company cultures, processes, operations and structures.
- Working in many different companies gives you the ability to build up a wide-ranging CV and to establish an extensive list of reference contacts.
- You will have the chance to become known within your field for your excellent work, and you may even find that your services become sought-after.
- As your experience and network grows, opportunities will come along.
- You will be exposed to many styles of working.
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.
Planning to become a contractor?
Find out how to maximise your take-home pay and become a successful contractor in our free guide. Also covered in our guide is:
- Getting started – discover which business structure is best for you and how to get started.
- Your tax and financial obligations – all you need to know about your paying tax, filing accounts and what costs you offset.
- Making your business a success – learn how to grow your business, how to market yourself and to forecast for the future.
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