As has been well documented in the press over the last few months the global economy has been experiencing a sharp downturn recently, a situation that looks likely to continue for some time still. All around London and the UK companies are cutting costs and implementing hiring freezes in an effort to stay afloat in times of great uncertainty.Companies do, however, still need people to ensure they can endure these tough times and this has led to a surge in the number of contracting positions being offered today as opposed to permanent positions. This presents some interesting prospects for those potential employees who are willing to forgo the perceived stability of a permanent position for an opportunity to work as a contractor.
What is a Contractor?
Typically a contractor is an individual who is engaged to do work for a pre-determined length of time, to fill a specific role or complete a project. Usually an hourly/daily rate will apply or payment may be made on completion of a specific task.
As a contractor the individual may fall into various categories in terms of employment status. These may include being a temporary employee or being self employed, where the individual takes care of his/her own taxes. Some individuals will find that doing regular contract work is more suited to them than seeking permanent employment and so may choose to work through an Umbrella or Limited Company structure, especially if they have sort-after or specific skills.
So what are the Benefits for Contract Workers?
In the current economic climate a lot of companies will consider outsourcing work to contractors rather than recruiting for permanent staff. For a company this has benefits such as shorter notice periods, less HR intensive recruitment process and, in the case of engaging with a Self Employed person or Limited Company, lower Employers NI contributions. For the contractor though there are benefits as well which may include:
- A higher rate of pay is often offered to contractors in light of the decreased job security contractors have. This may be sufficient enough to tide you over at times when you are between contracts
- Contracting may be a good fit for those wishing to try a new career or industry without the need to make a long term commitment. If the work is suitable a contract position is also often a way to prove oneself
- Very often these days contractors may still qualify for SSP (Statutory Sick Pay) SMP (Maternity Pay) and SPP (Paternity Pay) and even paid leave although this will often depend on the length of time the contract has been going
- Contracting gives those more adventurous types the chance to earn quickly and take leave for longer periods to travel or pursue other interests
- In the current climate contract work will be more readily available and it’s questionable whether or not permanent employment presents any increased job security unless you have been in employment already for more than 2 years
Contracting Vs Permanent Employment?
The obvious advantages of permanent employment are the benefits that employees receive. These may be as simple as paid sick leave or annual leave entitlement but can extend to pensions and medical insurance. Often however taking up a permanent position is seen as a more secure options as, in times of economic strife contractors are usually the first casualties.
It can be argued that in the current economic climate no employment is safe. As a permanent employee you are not entitled to statutory redundancy pay until you have been employed for more than 2 years! Companies often have their own internal redundancy procedures and packages although in times when many firms are losing money it’s questionable whether these policies will be adhered to.
Contracting then can be seen as a chance to make more money more quickly and there are also opportunities to make use of various tax structures like Umbrella products.
The risks are probably slightly higher, but who can weigh up the benefit of getting that foot in the door with a prospective full time employer?
For more information, visit 1st Contact Accounting at www.1stcontact-tax.com