Is Contracting Right For You? The Pros & Cons You Need To Consider
Thinking about becoming a contractor? Explore the pros and cons of contract work versus full-time employment.
Making the transition from full-time employment to contracting is an exciting prospect for many people, as evidenced by the 4.2m self-employed professionals working in the UK.
Contracting offers a level of autonomy and independence that can be hugely appealing, particularly for individuals unhappy with their current work situation.
However, switching from a permanent role to contract work is still a huge adjustment.
Contracting may be more flexible, but it can also be very demanding - 53% of contractors cite ‘finding work’ as a source of stress, while 50% claim that ‘irregularity of income’ is also a contributing factor.
If you’re considering becoming a contractor, it’s important to think carefully about the pros and cons before committing. In this guide, we’ll run through a few advantages (and potential disadvantages) of contract work, helping you to make a fully-informed decision.
The pros of contracting
You can take control of your work life
One of the biggest advantages of becoming a contractor is the increased independence and flexibility that you can enjoy.
Contract work enables you to dictate your own working hours, select your own clients, and pursue jobs that genuinely interest you.
For one thing, this means that you can assert more control over your work-life balance. If you’d like more free time, you can take on jobs that require fewer hours - but if you’re keen to maximise your income, you can fill up your diary with projects.
This also means that you can choose when and where you work.
Whether you prefer the buzz of an office environment, hands-on site work, or the convenience of remote working, you can search for contracts that tick the right boxes.
You can earn better pay
Though it’s not guaranteed, contracting can also enable you to earn a higher income.
As a contractor, you may often find yourself helping a business to cover a resource gap or complete an urgent project. Since you’re offering a valuable service and helping companies on a short-term basis, you may find that clients are willing to pay a higher daily/hourly rate compared to a full-time hire.
For example, according to a salary survey from Dice, agency contractors in the tech world take home an average wage of $98,079 - in the same sector, the average salary for full-time employees is $93,013.
While contracting doesn’t always guarantee a better income, if you’re bringing significant experience and specialist expertise to the table, you can often negotiate a healthy paycheck.
You can expand your skill-set
The flexibility of contract work also means that you can choose to pursue specific skills and specialise in particular areas.
When an employer manages your projects and clients, you may end up developing certain skills that are beneficial for the company, rather than skills that you find interesting or useful. As a contractor, you’ll define the services (and skills) that you offer.
For instance, software development contractors could choose to add a new coding language to their repertoire, enabling them to explore different job opportunities.
If you spot a gap in the market or an area that’s lacking specialists, you can develop your skills accordingly to make yourself more desirable for clients and command a higher salary.
You can develop a business network
One of the biggest differences between full-time employment and contracting is the number of clients, recruiters, and specialists you’ll network with.
When you work in a permanent role at a business, you’ll generally work with the same teams for extended periods of time. But as a contractor, you may be regularly taking on new projects, meeting different clients, and jumping between teams.
This is great for growing your professional network.
If you’re a capable contractor, you’ll quickly find clients and recruiters recommending you to colleagues and offering repeat business. Over time, you’ll be able to develop a strong network that you can rely on for new contracts and placements.
You can avoid office politics
There are many benefits to full-time employment, from social relationships to job security - but this type of work doesn’t come without its downsides.
For example, not everyone enjoys navigating the world of office politics.
When you’re in a permanent role, you may find that you need to deal with troublesome colleagues, persevere with difficult projects, and follow a strict path for career progression.
As a contractor, you can avoid all of these pitfalls entirely. You have the ability to cherry-pick your work, pursue your own interests, and advance your career without relying on a corporate structure or performance review.
You can work on diverse projects
If you’re feeling restricted or pigeonholed in your current full-time role, then the freedom of contract work can be extremely appealing.
As a contractor, you’ll be able to specialise in the areas that you find most interesting, rather than being told what to work on.
For instance, an IT professional in a permanent role might need to take on a range of necessary projects, regardless of how tedious they might be.
An IT contractor, on the other hand, can choose to accept jobs that are aligned with their personal interests. If you’re an IT expert that prefers data analytics to project management, then you can focus exclusively on projects that fit the bill.
Working on diverse projects is a great way to stay engaged with your job, and this is key for long-term satisfaction.
The cons of contracting
You’ll need to be financially responsible
Although contract work can offer a range of compelling benefits, it doesn’t come without a few drawbacks.
For example, as part of a full-time position, your employer will automatically handle your income tax, pension contributions, student loan repayments, and other fees. But as a contractor, you may find that you need to manage your own finances at times, depending on your contract.
If you’re working independently (i.e. outside of IR35) then you’ll be in charge of deducting the correct amount of tax from your pay and covering business expenses such as accountancy fees and insurances.
However, it’s worth noting that as a contractor you can still operate through PAYE, via an umbrella company or a recruitment agency.
If you’re set up with a PAYE contract, your umbrella company (or agency) will take responsibility for tax, national insurance, and statutory pension contributions. There’s often a small charge associated with using an umbrella company for PAYE purposes, but it can be worth the cost if you’re concerned about financial management.
You’ll regularly work solo
If you enjoy the collaborative and social elements of teamwork, then you might struggle with some elements of contracting.
As a contract worker, you’ll spend a lot of time working alone across different businesses.
You may temporarily work alongside certain teams or departments, but in general, contracting is focused heavily on individual projects.
You’ll lose out on certain benefits
Full-time workers often enjoy several employment benefits that contractors won’t necessarily receive. For instance, many permanent roles will come with perks such as:
- Medical insurance
- Paid sick leave
- Paid holidays
- Pension contributions
If you’re contracting outside of IR35, you’ll need to make provisions for insurance and pension contributions, which requires extra admin. Sick leave and holidays can also be less convenient for certain contract workers.
However, once again, it’s worth remembering that operating through PAYE (via an umbrella company or agency) can resolve many of these issues. Many umbrella companies offer great benefits (including holiday pay) as well as handling tax contributions, meaning contractors don’t need to sacrifice all the perks of full-time employment.
In saying that, working outside of IR35 can offer superior tax-efficiencies versus PAYE through an umbrella company, so it’s important to weigh up your priorities as a contractor.
You can’t rely on job security
This is one of the most obvious challenges with leaving full-time employment, and although it’s an inherent part of contracting, that doesn’t mean it’s not worth considering.
When you become a contractor, you’ll be solely responsible for finding new clients, attracting job offers, and earning recommendations.
Permanent roles may not be ideal for everyone, but they do offer long-term stability. As a contractor, you’ll need to be constantly motivated to seek out new opportunities and grow your reputation.
It’s also important to remember that the notice clauses for contracting work are much shorter than for full-time positions.
While some contracting assignments can last for years, both the worker and client usually have the flexibility to terminate the contract on short notice. Permanent jobs are typically more stable, with at least a month’s notice period built into a contract.
If a company falls on hard times, it’s often these short-term contracting arrangements that are the first to be reviewed.
You’ll need to advance your own career
The rigid career ladder of full-time jobs can be frustrating sometimes, but it does provide a structure that can be handy for progression.
If you’re a contract worker, you won’t be receiving promotions like a permanent employee, and there might not be a clear path for you to follow to achieve your next professional milestone.
Instead, you’ll need the initiative to progress your own career. You may need to enrol in training courses, complete qualifications, and gather real-world experience to feel like you’re moving in the right direction - this is very doable, but it takes commitment!
Is contracting right for you?
Making the leap from full-time employment to contracting is a big decision, so you’ll need to make sure that you’ve considered all of the pros and cons.
However, if you feel like you have the experience, expertise, and confidence to carve out your own professional path, contracting can be a fantastic choice.
Contracting allows you to take more control over your work life, manage your career trajectory, and select projects that you’re genuinely passionate about. Although you’ll need to take on some additional responsibilities (i.e. managing tax, pension contributions, and annual leave) if you’re prepared for the extra work, contracting can be incredibly fulfilling.
Planning to switch from full-time employment to contracting?
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