Contractors might be self-employed and work as sole traders, or they can create their own limited company. Independent contractors are self-employed and find their own clients.
A contractor differs from a temp (even though they may both work for an end client through an agency) in the following ways:
- The Agency will pay for a temp. The work they do is controlled by the Client, just like any other permanent employee (you are supervised and informed when to start and complete work, as well as what to perform). Temps are entitled to vacation and sick leave. They will be eligible for ‘equal treatment' in most cases beginning in October 2011 under the new Agency Worker Regulations. Temping is frequently done for a brief amount of time and/or as a transitional period while they hunt for another permanent career.
- A contractor, on the other hand, is accountable for their own 'business' affairs and should be able to control how and when they complete their work. They would either be employed by an umbrella company that pays them (and pays their taxes), or they would have their own limited company, or they would be a sole trader and pay their own taxes. They may or may not be represented by an agency. They may have many assignments from different clients at the same time. They may employ a ‘substitute’ to do the work for them. Contractors are typically higher-paid 'professionals' who work on a long-term basis.
Why Do Companies Hire Contractors?
Many companies prefer to recruit contractors rather than full-time workers for specific positions or projects. Hiring contractors can be more cost-effective, especially for exceptional projects or operations that are not performed on a daily basis.
While contractors may charge more per hour or project, they can still be less expensive for firms than hiring a permanent employee. Businesses do not have to incur payroll costs such as payroll taxes, vacation, retirement, or insurance benefits when they hire contractors.
Hiring contractors also provides firms with the opportunity to bring in individuals with specialised knowledge who are pre-qualified for safety-critical jobs.
Different projects may necessitate the use of employees with diverse skill sets, and contracting allows firms to employ the professionals they need when they need them. Choosing the ideal individual for the position can lead to better efficiency and profitability.
The Advantages of Working as a Contractor
Working as an independent contractor is a perfect career for many people because of the freedom it provides. Many contractors can choose their own hours and work around their personal and family lives, as well as choose when to take vacations. Contractors can also choose which companies they deal with and where they are willing to travel for employment (or whether they want to work from home).
Working with a variety of organisations may also be quite beneficial since it allows contractors to expand their skills and expertise. Contractors may expand their knowledge with each new assignment, and with more talents under their belt, they can advance up the salary ladder faster than those in regular employment. Contractors typically earn more than employees and have more opportunities to raise their pay. Completing further training or health and safety exams, as well as being recognised, are some of the actions contractors can take to boost their rate and attract new clients.
Contracting provides individuals and businesses with a flexible alternative to regular employment. You may find yourself working with or becoming a contractor at some point. For accounting and business advice, please contact Persona Finance [enquiries@personafinance.co.uk].
