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Contract work has always been dominant in the Telecommunications, Construction, Power/Utilities and Engineering sectors, from Technicians and Field Engineers to Procurement Managers and Project Directors. In recent years, companies have also begun to utilise contractors over permanent employees with increasing frequency in other areas such as IT, Marketing, Business Administration and Technology, to name a few. This is in large because employees are the most expensive cost to a company, and by using contractors instead of permanent staff, employers benefit by having more flexibility in hiring to suit business needs, with less risk and red tape.


But what are the benefits of contract work? Let’s find out what contract work is, and how it compares with permanent employment.

Contract work…

Contract work, or contracting, is work done for a client or company for a fixed period, be it 3, 6 or 12 months. In many cases, contract workers are hired because they either have specialist skills needed for a project, to cover seasonal periods and maternity leave, or for extra hands-on time sensitive jobs. A contractor can either work for a company directly or through an agency, where they may work for one or more clients at the same time. A contractor is usually paid an hourly or daily rate and invoices their client for payment. Contractors can operate in a few different ways such as a Sole Trader, through a Limited company or through a third-party Umbrella company.

Permanent Work…

Permanent work is employment through one company that offers a fixed salary in exchange for a set number of hours per week, for an indefinite time. When working for a company on a permanent basis, the employer handles the employees’ tax, national insurance contributions and other statutory deductions, commonly known as Pay As You Earn (PAYE) tax, which gets deducted before the employee receives their final pay either weekly, fortnightly or monthly.  In many cases, a company will also offer permanent employee’s additional benefits which are not made available to other types of workers.

Should I work as a contractor or permanent employee? – The pros and cons.

The advantages to being a contractor…

Better pay – It is typical for contractors to earn more than a permanent employee counterpart, with a higher overall take home pay after deductions like tax etc. What you get paid will depend on a few things including the current market rate, the demand for your specific skill set and the travel the role requires etc. On the whole contracting is more profitable, as you do not pay the same tax as a permanent employee and can usually claim back for certain job relate expenses like fuel costs or accommodation.


Variety and accelerated learning/knowledge – As a contractor you have the chance to work on numerous jobs in a much shorter period, on a variety of projects, for a range of different clients. And because you can control your own schedule, it is easier to find time for training and qualifications which will boost your skill set, offerings, and overall value to future clients, enabling you to potentially demand a higher rate of pay. Besides allowing for the opportunity to increase your experience, knowledge, and skills, working for more than one company or project also means you are less likely to become bored with the role, leading to better performance and increased job enjoyment.

Freedom and flexibility – Working contract roles can increase your chances for a better work/life balance, as you’re essentially your own boss, so you can set your own schedule and, in some cases, your own work hours. As a contractor, you not only have the freedom to decide which projects or clients to work for, but also when you want to work e.g., choosing only to work during school term time or just working 9 months of the year and using the other 3 months to travel the world etc.

Networking opportunities – Undertaking a variety of contracts with different companies maximises your chances to interact with a higher number of industry professionals, allowing you to build a useful network of connections you can utilise in future roles, making you potentially more appealing to companies. Building your network of contacts can also be useful in securing new contracts or roles, as it increases your visibility and chance of being known to potential hiring managers, or alternatively someone in your network could tell you about a new contract or even recommended you for a role.


The disadvantages to contract work…

Lack of job security and consistent income – As a contractor you don’t have the certainty of long-term, full-time employment. For example, if the project you are on runs into problems causing delays or is suddenly terminated, the demand for your skillset may decline meaning less work, or your contract may be ended altogether.

You also may find yourself with gaps in between contracts with no income, as you can’t always ensure the start of another contract as your current one ends. It may take time to secure a new contract that suits your skills and experience, then start earning again.

Administration – As a contractor you are responsible for your own taxes, insurance, training etc. and the paperwork related to it. This can take up a lot of your time, whether you outsource these tasks or not, as they are ultimately your responsibility to oversee. You will also need to actively keep up to date on things such as regulations and legislation that may affect you and your business, such as IR35.

Lack of benefits – Contractors don’t qualify for the same benefits available to full time, permanent employees. It is important for contractors to build up a safety net to cover any eventuality such as; reduced working hours, holidays, sick pay and pension contributions, by factoring them into your profit margins.

Training costs – Occasionally a company may fund additional training during a contract, but in general you will have to pay for any courses or qualifications yourself. Keeping your certifications and training up to date, or adding to your current skill set, although beneficial and crucial to securing future roles, can also be very expensive.

The advantages to being a permanent employee…

Job security and a guaranteed income – As a permanent employee, you will get the same basic salary each month, whether you’re hyper-productive or having an off week, so it usually won’t affect your finances. Having this guaranteed income will allow you to plan much further ahead for your future and provide other advantages like access to credit. Depending on your financial situation, it is easier for permanent employees to get credit such as a mortgage, rather than contractors, as permanent staff have proof of a regular and stable income.

Additional benefits – As a permanent employee, you will usually be entitled to several benefits and bonuses that contractors are not, including paid holiday allowance, sick pay, pension salary sacrifice schemes, annual bonus and commissions, healthcare, travel expenses and more.

Training and development – Training is usually included in permanent roles as it’s more worthwhile for the company to invest in you, with many companies having dedicated learning and development programmes for employees. This training may include learning directly from your colleagues, in-house training courses, and even accredited qualifications sponsored by the company etc. After all, the more knowledgeable you are, the more valuable you are to the business.

Progression opportunities – Working in a permanent role within a company, allows for clearly defined avenues for promotion and more scope for moving up the career ladder in a more traditional sense. Many companies are willing to invest their time and resources in developing their permanent employees to reach the next level. Supporting an employee’s progression, not only adds value to their contribution to the business but generally results in improved job satisfaction, commitment, and job performance, leading to higher retention rates, saving the business money in the long run.


The disadvantages to a permanent role…

Lower pay – Permanent salaries are generally substantially less than a contractor performing the same role, however you are usually entitled to other benefits that could make up for this, like performance bonuses or commission.

Limitations on roles – If your skillset is very specialised or in a less common area you may be restricted in the roles you are suitable for outside of your current role and company. For example, you may only be experienced with the technologies and systems that are specific to your employer, meaning your likely months or even years of experience could have little value when it comes to looking for another job opportunity on the open market.

Less flexibility – Permanent roles usually have fixed set hours with less flexibility to suit other life circumstances and commitments, although more and more companies are starting to embrace remote, flexible and hybrid working.

Less variety – Permanent roles lend themselves to repetition and routine, meaning you can be doing the same tasks, with the same people, in the same setting for maybe years at a time. This means you are more likely to become frustrated due to the lack of change and new challenges. The structured environment of permanent work may also restrict opportunities to deepen your knowledge and develop your abilities in different environments and more diverse roles that could ultimately expand your skill set and experience, aiding in career progression.

So, what type of role would be the best for you?

When thinking about your career, as you can see, there are numerous things to consider. It is important to do your research and weigh up everything before making an informed decision, especially about something that has a direct impact on your daily life and future.

While contracting can earn you more money for the same work, there is also a lot more admin and paperwork that goes into it. And despite the financial rewards, many people aren’t willing to forgo the employee benefits like bonuses, pensions, and overall stability that a permanent role provides.

However, if you are feeling stagnant in your current role and want a new challenge or just enjoy new experiences, environments and relish opportunities that allow you to diversify your skills, then contracting may be for you.

Ultimately, you must decide what your career goal is, how you can achieve it and more importantly how your priorities could be affected during this journey, factoring in critical things such as finances, lifestyle, health and family.

The answer to the question, as to what type of role is best for you, contract or permanent, is something only you can decide.