Contracting FAQs
Many of our candidates in permanent positions, particularly in the IT sector, have considered contracting at some point. At Fuel Recruitment we’re often asked about the various aspects of contracting and have put together the following list of questions and answers based on our experience in the industry.
Q. Why do companies hire contractors?
A. Companies hire contractors for a variety of reasons, but on the whole it’s a way of quickly bringing skilled people on board for specific projects. Companies will always need technically skilled people and there may not always be the need (or the budget) for a permanent role.
Q. Will I have less job security as a contractor?
A. Although there are plenty of contractors that secure long-term contracts, if you go into contracting you have to be prepared for the possibility of being out of work at some point. Most roles have a notice period whether it is a contract or permanent position, but if job security is your main concern then perhaps contracting isn’t for you.
Q. Will I learn more skills as a contractor?
A. The nature of contracting means that you’ll be working for a variety of different clients and projects, which usually means you can gain broader experience in your particular field. On the other hand, if you’re thinking of doing a training course you will probably have to pay for it yourself, and keeping your skills updated is vital for long-term contracting.
Q. How do contractors get paid?
A. The majority of contractors are paid by the hour, but some are on daily rates. Contractors can be paid through their own limited companies, or through a PAYE umbrella company. For more details on our methods of payment, see our Payment Options page.
Q. I’m no good with money – is contracting right for me?
A. Contracting does bring with it more financial responsibility, especially if you opt to set up your own limited company. Seeking good advice is crucial and any contractor will tell you that a reliable, trustworthy accountant is worth their weight in gold.
Q. Can I earn more as a contractor than I would as a permanent employee?
A. Contractors do usually earn more than their counterparts in a permanent role, and money is typically the main motivator for people to move into contracting. However, contractors aren’t always entitled to the peripheral benefits that permanent employees might have.
Q. What about benefits like sick pay, holidays and health insurance?
A. Professional contractors who work through limited companies will not receive these benefits – for instance holidays are unpaid and you will have to plan your finances carefully. However, there’s always the option to take time off in between contracts. As a contractor the onus is also on you to arrange and pay for things like health insurance yourself. PAYE contractors may have more entitlement to certain statutory rights which will be enhanced from 1st October 2011 with the implementation of the Agency Workers Regulations. For further information on the AWR, please contact us directly.
Q. What is IR35 and how does it affect contractors?
A. IR35 is a piece of tax legislation that affects all Limited Company Contractors. The factors determining whether a Contractor falls under IR35 are numerous and encompass many qualifying areas. No two contracts are the same and Fuel strongly recommend that you seek advice from an accountant and HMRC directly for guidance. For further details:www.hrmc.gov.uk/ir35/.
If you have any further questions relating to these points or any other areas of contracting, please contact one of our consultants on 01926 487487.
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