Is contracting right for me? The pros and Cons of Contracting
More professionals than ever before are leaving their permanent roles in favour of contract work. Contracting is an option that provides increased autonomy and flexibility, a higher income, and is the perfect move for those looking to expand their skills and experience.
Contracting can be an attractive option with many benefits, but it isn’t necessarily right for everyone. ContractingWISE is here to help, so we’ve summarised the pros and cons of contracting to help you decide what’s best for you.
Pros – there are many perks to being a contractor
On average, contractors earn more
As a contractor you can charge what you feel your time is worth – subject to experience and skills. Not only does this mean that contractors can earn more, but it also contributes to contractors feeling more valued than permanent employees. You’ll be surprised at how much more productive and positive you are when you feel that your work is appreciated.
A study by Intuit Quick Books has revealed that contractors tend to work fewer hours and earn more money than permanent employees. This means that aside from contractors benefitting financially from a higher income, they can also experience a better work/life balance. Additionally, contractors can often claim expenses on food, travel, and most things required for work.
There is more freedom and flexibility
As a contractor you are your own boss, a factor that many contractors are happier for. A study into independent work by the McKinsey Global Institute has reported that 97% of contractors are happier and more satisfied with their work compared to permanent employees and list the flexibility and autonomy of contracting as a major reason for this.
Contractors choose which projects they work on, where they’re working, and for how long. This makes contracting a great solution for those desiring greater flexibility and freedom. If you’re looking to get away from the same day-to-day routine, then contracting could be a great choice for you.
Room for growth and development
Contractors control their own professional development. There’s no waiting around to be promoted or recognised – after all, you are your own boss and you can gain experience and skills at your own pace. The independent nature of contracting means contractors take more responsibility in pushing themselves to grow and develop professionally. Whether that’s when networking, taking on a challenging project or studying for a new professional qualification. In fact, the increase in opportunities for development is another major contributor to the greater happiness of contractors versus traditional employees.
Contractors typically work on projects that last between 3 and 12 months. This means that not only do contractors gain more experience and skills by working on numerous and varied projects, but this change and variety is a great way to keep work interesting and stimulating. Most importantly it means that there is very little exposure to office politics which traditional employees often encounter.
Gaining experience on multiple projects, contractors generally build up extensive and varied CVs that reflect their diverse expertise and experience. This wealth of experience provides a great unique selling point to potential clients, helping secure future contracts.
Cons – because you can’t make an omelette without breaking an egg
Benefit packages will be a thing of the past
Permanent workers can enjoy benefits packages that contractors often don’t have access to, such as an employer pension or the guarantee of receiving a set wage every month. If you are an umbrella company employee you will still benefit from statutory employment rights and benefits which vary from umbrella to umbrella, but if you run a limited company you won’t be entitled to the likes of statutory sick pay or holiday pay.
If you are considering contracting but worry about the potential lack of benefits, we suggest always planning ahead in terms of lining up contracting opportunities and maintaining a good network of clients and contacts. It’s also a good idea to have an emergency fund in place, to cover you for when things don’t go to plan. Knowing what work opportunities are available and having money set aside will give you peace of mind and enable you to get on with the contract at hand.
Be prepared to hustle
Unlike permanent employees, contractors have to source and secure their own work. If you’re willing to be proactive in seeking out and securing your own work, then contracting is for you. However, if this doesn’t sound like you, you might prefer the stability and routine that permanent work brings.
Sourcing and then winning that important first contract can be a daunting process. You can always use a recruitment agency to help you line up your next contract, but if you’re going it alone the key is to network, tailor your CV to your specific target audience, and to get your CV noticed by posting it on contractor jobs boards.
Remember there’s a cost to running your own business
As a contractor you can either set up your own limited company, of which you’ll be a director, or join an umbrella company. If you decide to establish a limited company you’ll be in charge of your own finances and business administration, but both an umbrella and limited company will come with administration charges. The prospect of running a business can be daunting for some, and can put people off the idea of contracting.
If you’re going to go it alone and set up a limited company, hiring an accountant who can help handle your admin and finances will be a cost well justified, freeing up your time to get on with your contract. Alternatively, you can join an umbrella company who will take care of the business side and make it easy to manage for a fee.
If you’re considering contracting and want to talk through your options, ContractingWISE is here to help. Our knowledgeable team can offer objective information to help you make the right decision.