The reasons they give us are different. One constant is the financial benefit – contract rates can easily double that of a permanent employee and the tax advantages of operating through a Limited Company mean that you will take home even more of that increased income. Carving out a career as a professional freelancer or contractor is hard work, but can be extremely lucrative.
The other reasons we typically hear are more diverse. Some people love the flexibility of being their own boss, deciding who their clients are, choosing when to work – and choosing when to holiday! Others say they are able to broaden their skills and experience far more quickly than in a fixed permanent role, with the freedom to take on challenging contracts and devote time to learning. We also increasingly hear that permanent employment isn’t what it was… with less job security, declining salaries and disappearing employee benefits; a twelve month contract can offer just as much security as a ‘permanent’ role.
Whether you are considering making the jump or have been made redundant and have found yourself forced in the direction of contracting, some of the upsides are broken down below…
The Benefits of Contracting
Everybody needs to eat and keep a roof over their head – although contracting can be rewarding in many ways, it’s rare that money isn’t at the top of people’s lists.
- Higher pay rates. Contractor pay rates are typically much higher than permanent equivalents – if a permanent equivalent even exists! Specialist skills are in short demand and command higher fees. Experienced contractors can afford to pick and choose contracts, pushing fees higher in some sectors. In addition, the short term nature of the work means that a premium is often paid.
- No unpaid work. Unlike salaried employment, many contractors bill by the hour and charge overtime. Doing away with unpaid overtime not only increases your income, it also feels much fairer!
- Tax efficiency. A Limited Company offers opportunities for tax planning far above permanent employment. A contractor accountant will help you draw funds from your business in the most tax efficient manner, to minimise your overall tax liability.
- Business expenses. In addition to the tax planning benefits, you can offset the costs of necessary business expenses against your tax liability.