Are you considering contracting? With a range of benefits – independence, greater flexibility and more money for your time – it could be the perfect next step for your career. That said, it’s not necessarily the best option for every professional.
Like any big career change, it’s important to know as much as possible before making the decision. Fortunately, Umbrella Broker is here to help. Read on as we take a look at the pros and cons of contracting and whether it’s right for you.
Pro – Earnings
We’ve all been in jobs where you feel you’re simply not paid enough. And, while there are other factors at play, it’s hard to get over the unrewarding feeling of a sub-standard rate of pay. The good news for contractors is they can charge their own rate – within reason.
Understandably, this rate depends on experience and skills, but it generally means contractors earn more. Figures from Emolumentshow that the daily rate for contractors could be as much as 49% higher than full time employees in the same role.
Pro – Freedom
We’ve all heard of the supposed benefits of ‘being your own boss’ – but does it really improve job satisfaction? In short, yes. The McKinsey Global Institute found that an impressive 97% of contractors are happier than permanent workers in almost every aspect of working life.
Among the top reasons were the flexibility and autonomy. Contractors choose how they work – which projects they take on, the locations of these projects and how long they last. In stark contrast to the controlled 9-to-5 routine, contractors are in control of their own working life.
Pro – Development
In a standard job, your development is controlled by managers or other staff. You might want to specialise in a certain area or take up special training but are held back by a lack of support from management. Not with contracting. Remember, you are your own boss as a contractor.
It’s up to you to gain experience and develop new skills as and when you choose. This is perfect for ambitious, driven individuals who can continually push themselves to develop in a number of ways:
- Networking events
- Taking on challenging jobs
- Studying for a qualification
- Taking training courses
It’s not just about pushing for development through training and networking however. Contractors also benefit from the natural development of varied work. Working on projects of 12, 6 or even 3 months, contractors gain a more varied, rich portfolio of work.
This naturally provides greater experience and a wider skillset compared to permanent employees – not to mention the stimulation of an ever-changing working life. Further down the line, these experiences and skills will pack out your CV and provide the selling points that get clients interested in you over other contractors.
Con – Benefits
Working a standard 9-to-5 isn’t all bad. Permanent workers benefit from the safety net of statutory employer rights. This includes access to an employer pension, sick pay and annual leave. If contractors are ill, they lose money. The same can be said when they want to take a summer break. And they need to plan ahead with their own pension scheme. And let’s not forget the security of having a set wage coming in every month.
With some planning, these benefits can be accounted for by contractors. Plan ahead when lining up contracts so you can spread your income across the year. This will allow you to make the most of time in between for holidays as well. It’s also a good idea to keep some money aside as an emergency reserve in case anything goes wrong. This could be used to cover sick pay or simply periods where work is sparse.
There’s also the option of working through an umbrella company. This allows you to work as a contractor, while still being classed as an employee who benefits from statutory rights and benefits like sick pay, holiday pay and a monthly wage.
Con – Securing work
As a permanent employee, you’re not generally in charge of finding your own work. In contrast, contractors have to source, apply for and secure jobs and contracts. To do so, they need to be proactive – especially at the beginning. Here are some ways to actively source new work:
- Use recruitment agencies
- Tailor your CV to specific roles
- Post on contractor jobs boards
- Network with potential clients or employers
Con – Administration
As a contractor, the term ‘take home pay’ takes on a bit more of a loose meaning. You can set up as a sole trader or a limited company, but in either case you’ll be in charge of your own finances and administration. As a limited company, or working through agencies, you’ll be subject to administration charges.
With invoicing, contracts and tax payments the administrative burden is another consideration for contractors, which puts many people off. Some contractors seek assistance from an accountant, which can add further costs coming out of your pay.
Alternatively, you can use an umbrella company. They will take care of administration and client management for a fee, making it easier to manage your business or contract work.
Weighing things up
There are clear benefits, and also some drawbacks, to working as a contractor. Ultimately, it’s about which style of working is the best fit for you. People who are proactive might not find securing work a problem and will benefit most from the development opportunities contract work provides.
On the flip side, workers who want job security from a monthly pay packet and statutory rights will feel more comfortable working as an employee.
Umbrella companies provide a happy medium, combining the benefits of permanent employment with the freedom of contracting. If you find yourself worried about some of the drawbacks of going it alone, an umbrella company could be the best fit for you.
