Tweet

Contract work: the pros and cons.

Guest post by: Bill Wynn

Article Overview: Bill Wynn, Managing Director of Project Resource Limited discusses the positives and negatives of considering to work on a contract/ freelance basis.

Contract work: the pros and cons.

There are many different ways that you can either choose to work (your decision)or be offered employment to work (the employer's decision).

I have previously mentioned in my articles that the UK and the world has an aging population and views towards work are changing. Over the coming 10 years many people will choose to work freelance as a lifestyle choice, is that you?

Are you the type of person who likes to settle in and dislikes ever-changing working conditions, then a so-called "permanent" job might suit you better. However, are you the adventurous, entrepreneurial type who likes new challenges, then working as an independent contractor might be right for you. Independent contractors can be called any of the following: ICs, consultants, freelancers, interim, free agents or just contractors. Regardless of title, all are self-employed for tax reasons and essentially the same in practice. Speaking of tax reasons, HMRC has only two distinctions: independent contractor or employee.

Reasons to contract

Control: You are your own boss. That's the main reason why most employees turn independent contractors. Even though you might occupy office space and work shoulder-to-shoulder with employees, companies are not your employers per se, but your clients. As clients, they are not entitled to direct you in your work like an employer may direct an employee. In other words, clients "hire" your services, not you.

Naturally, your clients are entitled to state the results they expect for the money they pay. You are charging for your independent contractor services. It's also in your best interest to satisfy your clients, if you wish to receive favourable referrals for landing more contract jobs.

Flexibility: you decide when, where and how to work to get the job done. It's all about degree of control and independence.

Money: Independent contractors usually make more money than employees. Companies are willing to pay more for independent contractors, because they don't have the expensive, long-term commitments they do with permanent employees, such as benefits, tax and NIC contributions, etc. Independent contractors may also deduct more business expenses than employees, which might increase your net pay.

Independent contractors "withhold" their own taxes, unlike employees. This gives you the option of "working the float" on your gross pay, until taxes are due. For example, you might bank it to earn interest.

Work variation. You will work with more companies, on a variety of different projects, in a shorter space of time than a permanent member of staff. It suits professional workers seeking diversity.

Increasing your adaptability. Working freelance can be very demanding: you are normally paid more than a permanent employee, so it is common that more may be expected of you. You may be given tight deadlines, work that may be a little outside of your skills or any other unexpected scenario, all of which add to your skills & experience.

In summary

• The contractor is rarely tied to an employer, so you are free to set your own rules of business, limited only by bargaining power which is why a recruitment agency normally represents each party's commercial interests.
• Since they usually develop a large network of clients, the loss of one or two often has a negligible effect.
• Be your "own boss", "working when you want".
• Higher pay available due to the short-term nature of the assignments and/ or expertise sought is in high demand.

Reasons to not to contract

Security: Independent contractors don't have the same job security as employees, if there is such a thing! Notice periods are shorter, meaning contracts can finish as quickly as they start. Independent contractors are usually among the first to get the axe when slowdowns and layoffs occur.

No employee perks: Independent contractors don't get free benefits and perks as do employees. You'll have to pay yourself for sick leave, holidays, fund your own pension and among other things, buy your own health, dental, disability and life insurance.

Since companies don't withhold taxes for independent contractors, you are solely responsible for filling out the paperwork and paying your taxes on time, every time. You will need to hire the services of an accountant or an umbrella services company.

Your own tools: independent contractors typically provide their own tools.

Expenses: No employee-like expenses, such as travel and entertainment. Companies are generally not allowed to reimburse independent contractors for such expenses, because it indicates an employer-employee relationship more than a client-IC relationship. If you incur such expenses, they'll likely come out of your own pocket. But it's acceptable to consider all of your expenses when calculating your desired pay rate.

In summary

• Sometimes less job security.
• Due to IR35 legislation (UK) it is less lucrative than it once was to work on a contract basis.
• Most independent contractors are usually also owners of their limited company, and as such, bear all the expenses of their product, which can be made up only by charging customers accordingly.
• Income taxes for independent contractors are drastically more complicated than those of employees.
• There are several monetary incentives that are guaranteed to employees, but not independent contractors.

Getting Started as an Independent Contractor

Speak with a professional recruitment agency and build a trusting relationship.

Related Articles
  The Pros and Cons of Hiring Green Salespeople
  The pros and cons of working as an independent contractor
  To Change or Not To Change
  Pros and Cons of the Coffee Franchise
  Which Business Plan Software is For Me
  Four Places to find Small Business grants for women
  MassMutual Insurance Company - Car Insurance Coverage
  Pros and cons of franchise ownership
  Leadership Theories Pros and Cons
  Boilerplate in Contracts ... a Dangerous Thing to Ignore
  Work from Home vs. Work from Office
  The Hartford Insurance Company - Car Insurance Coverage
  Are Mutual Funds or Stocks Better
  Working with a Professional Local SEO Company VS DIY SEO
  Execute Your Business Idea
  Farmers Insurance Company - Car Insurance Coverage
  Entrepreneurs – Do It Yourself Or Buy A Franchise?
  Whats all the fuss about Twitter
  The Seduction of Technology
  Topgrading Pros, Cons, and Sales Assessments

Article Tags: bill wynn, contract work, negatives, positives, project resource limited, pros and cons



Related Forum Posts
To incorporate or not? - Just wondering what the pros and cons are to incorporate a business. I found in my research that there is more paperwork after the incorporation, e.g. filing minutes, etc. (I am in Canada). Can anyone tell me what kind of work is involved and what the pros and cons are? Thank you!
Franchise Info Website - I took a look at your website too and it has a wealth of info. It seems that a priority would be to analyze the pros and cons of franchise ownership and to see if that's the right option for each person, their experience, goals, etc. Then I think your questions are great and would help a person making the initial decisions about franchising. Do you have a pros and cons questionnaire for potential franchisees on your site? Sorry, I didn't think about it while I was looking around. Chris
Re: Franchise Info Website - [quote="ChrisH":r196k9x5]I took a look at your website too and it has a wealth of info. It seems that a priority would be to analyze the pros and cons of franchise ownership and to see if that's the right option for each person, their experience, goals, etc. Then I think your questions are great and would help a person making the initial decisions about franchising. Do you have a pros and cons questionnaire for potential franchisees on your site? Sorry, I didn't think about it while I was looking around. Chris[/quote:r196k9x5] I do not have an "all made" questionnaire for really analyzing the pros and cons but I have several articles that help you find out if franchising is for you or not. If the moderator of this forum is ok, I'd like to post an extract from some of my articles everyone in a while in this forum.
Re: Best way to start a business? - Kevin; you are right, one needs to be under guidance of experienced person before starting own business so that he knows all the pros and cons of that business beforehand. The person should need to know his interest area before that, as one can excel in the field in which he has interests and zeal to work on it.
Re: New Google Tool Makes Websites Twice as Fast - I was reading an article on the pros and cons of shared web hosting. One of the cons was that it was a lot slower than say, a dedicated sever. So, I was wondering for those of you who are on a dedicated server, have you experienced faster load times compared to when you were on shared hosting? Would love to hear your input on this. I eventually plan to move my sites over to dedicated hosting, so any thoughts and overall input on how you like it would be great. Thanks!


Share this article with your friends. Fund someone's dream.

Leave a comment below or share on the left and you'll help support entrepreneurs in Africa through our partnership with Kiva. Over $50,000 raised and counting - Please keep sharing! Learn more.

Newsletter

Get advice & tips from famous business
owners, new articles by entrepreneur
experts, my latest website updates, &
special sneak peaks at what's to come!

Name:
Email:

Popular Articles

Are You Reaching Out?

Providing Feedback

3 Pointers to Recruiting and Retaining Good Staff

Suggestions

Email us your ideas on how to make our
website more valuable! Thank you Sharon
from Toronto Salsa Lessons / Classes for
your suggestions to make the newsletter
look like the website and profile younger
entrepreneurs like Jennifer Lopez.