Contracting can be a very lucrative way to work for professionals who choose to become self-employed. Reduced taxes and hourly pay can mean that contractors are able take home more than an employee working on the same project. However, when starting out as a freelancer there are a number of things that must be considered. After all, contracting is very different to being employed by a company.
Increased earning potential
Perhaps the main reason many professionals move from employment to contracting is the fact that it can offer the chance to increase earning potential.
A company may enlist you to carry out a certain project due to the specialist skills you posses. This means that you can potentially charge more for your services – although this will also depend on your experience and qualifications.
As a you will be on a temporary contract with a firm, you will not be entitled to benefits that full-time employees get as a part of their contracts. Sick pay, holiday pay, redundancy pay and employers’ national insurance will not be paid by the company you are currently working for.
While this may sound like bad news, it can mean that the firm can afford to pay you more on an hourly basis and still save money.
Due to the nature of freelancing, client contracts will be negotiable. Therefore, it is possible to acquire more money for the service you will be providing – again this process will depend on your experience.
As a contractor, you are in charge of managing your time and your own work. Many contractors thrive off this way of working, as it means that you are your own boss.
However, this means that things like taxes, invoices and administration tasks are now your responsibility and time must be set aside to carry out these duties properly.
For first-time contractors just starting out, it can sometimes be beneficial to seek out the services that umbrella companies offer. With this type of firm, areas such as taxes and payment are taken care of for the contractor as a part of the service.
This allows a contractor to focus fully on their current project while the umbrella company deals with the rest. They will work out your tax contributions, chase up your pay and perform all the necessary administration tasks that relate to these things.
Freelancing allows you a certain degree of flexibility that you would perhaps not find in employment. You can work where and when you want to. So if, for example, you decided that a long holiday was in order, you could take one in between contracts. This would of course depend on your financial situation and need to work, but the option is there.
You can also choose which contracts you would prefer to work on. This will become more common as you gain experience in your sector. Top contractors with experience and specialist skills can be a highly sought after commodity, as they offer businesses a service that they may not currently have with their current staff.