There really never has been a better time to join the exciting and rewarding world of contracting, what with permanent employee benefits being significantly reduced, final salary pensions disappearing, and salaries being cut.
So, whether you’ve chosen to become an independent contractor or you’ve considered the idea of being made redundant, it could well be the best decision you’ve ever made, and here’s why…
There are so many ways in which independent contractors can benefit financially compared to a permanent worker, and rightly so seems that they’re not entitled to certain employee benefits, such as holiday and sick pay…
Rates – An average independent contractor rate can easily be double that of a full-time employee, sometimes even more and this is mainly because they can offer their clients both specialist skills and flexibility. The fact that they’ll usually only be carrying out short-term projects without the added employee benefits means that it’ll still be more cost-effective for the company. This contractor calculator can give you an idea of how much your take-home pay could be as an independent contractor.
Expenses – Another huge advantage to contracting is being able to claim back on business expenses. Now, the type of expenses you can claim will depend on several different factors, such as whether you decide to contract through an umbrella company or your own Limited company, as well as your status within the IR35 legislation.
However, all independent contractors will be able to claim something back, providing that the expenses are wholly and exclusively for the running of their business. And, the higher your expenses, the lower your tax bill; when you make a claim you only get taxed for your profits, with the amount spent on your business remaining tax-free.
The most common types of expenses include travel, the cost of work equipment, business telephone calls, advertising, the rent, heating and lighting of your business premises, and business ‘entertainment’.
Other financial benefits:
- By contracting through your own Limited company, is the most tax-efficient way of working.
- You are also able to benefit from better tax planning opportunities with a Limited company.
- As an independent contractor you can work overtime and, if you can, you could also take on more than one client at a time, which will further increase your take-home pay.
Being an independent contractor offers a level of freedom and control that permanent employees might only dream of – you essentially become your boss!
This means you have complete autonomy over your work schedule – when, where, and for how long you choose to work. Taking time off becomes much more manageable, as you won’t need to navigate around the schedules of colleagues. Additionally, if you’re working as a contractor under a boss, you may be required to work with specific suppliers chosen by the company, regardless of their quality. However, as an independent contractor, you have the flexibility to select raw material providers, equipment rental agencies, and sub-contractors that align with your project’s needs. This ensures that the quality of materials and equipment meets your high standards and that you get the best value for your investment.
It also enables you to build and establish meaningful relationships with your suppliers and vendors. When you, as an independent contractor, invite sub-contractors to collaborate on a project or take the time out to visit the local timber yard to source materials, you’re much more likely to have a positive impact and get better services or better prices. This hands-on approach empowers you to make better-informed decisions, promoting both the success of your project and the responsible use of natural resources.
However, it’s important to remember that with great power comes great responsibility! If you are a drywall contractor, for example, you must ensure that you have the motivation to keep yourself working and meeting deadlines. Your income directly correlates with the work you complete. In addition to the financial aspect, being an independent contractor offers significant flexibility and control over the terms of your work agreements. When working as an independent contractor, the company you provide your services to is your client, not your employer. This distinction means that you have far more influence over your contract, working conditions, and payment negotiations than a permanent employee would typically enjoy.
If you are considering a career as a drywall contractor, you may also need to delve into the intricacies of obtaining the necessary license or certification to operate in your area. Understanding how to get a drywall contractor license is a vital step in ensuring that you meet the legal requirements to practice your trade. This additional layer of regulation is important for compliance and for establishing credibility and trust with your clients as an independent contractor. These contractor benefits extend beyond legality and trustworthiness, as they also offer you the opportunity to showcase your commitment to professionalism and excellence in your field.
Other benefits of working as an independent contractor include:
- As an independent contractor dealing with a variety of different clients, this will give you the ability to build up a wide-ranging CV and establish an extensive list of reference contacts.
- Working for different organisations gives you the ability to advance your career and your knowledge, without being limited by a single employer’s processes, procedures, or business ethos.
- Depending on the type of contractor you are, you will gain added experience with different types of products and/or services, which can widen your experience and make you more attractive and interesting to future clients.
About the Author: This piece represents the work of Senior Product Manager Luisa Lawrence, acting on behalf of SJD Accountancy. For more information about the UK’s largest Contractor Accountants, please visit the site today.