The Benefits of Contracting

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If you are already a contractor or freelancer and are using an umbrella company click the link to see how much you could be taking home working through your own limited company and here for a detailed review of the major differences between limited and umbrella company take home amounts.

Whatever your industry sector there are numerous advantages to be gained, so we thought it might help to summarise the key ones below. Basically, they boil down to more money, greater flexibility, increased freedom, wider skill development and an opportunity to be seen in a different light by a potential future employer, that is if you ever wanted to go back to the world of permanent employment. However let’s face it, there really isn’t such a thing as a ‘permanent’ job or a ‘job for life’ anymore, and some may say that a six to twelve-month contract offers as much, if not more job security than a new permanent position within a company.

With employee benefits being reduced, final salary pensions disappearing and salaries being cut is it any wonder more companies are turning to contractors to fulfil positions?

If you are considering becoming a contractor or if you have been made redundant and are finding yourself pushed in this direction, there are a number of reasons why contracting could be a very good move.

Financial benefits

The first thing that most people think of is the financial benefits, and these are of course very compelling. For example:

  • An average contractor rate can easily be double that of a full-time employee, or even more.
  • Contractors are paid very high rates due to their skills and the flexible nature of the relationship and the fact that many positions can be relatively short-term.
  • Depending on your individual skills, the state of the industry in which you work (or the market in general) and the location of a contract, you can command very high rates of pay.
  • Contracting through your own limited company is the most tax efficient way possible and isn’t as hard or time-consuming as you might think, for more information see our guide on how to contract.
  • As a contractor, you may be paid for every hour that you work, as well as having the opportunity to work overtime at very good rates.
  • If you operate through a limited company you have far better tax planning opportunities which can reduce your overall tax burden and increase your take-home pay. Forming your own limited company just takes 5 minutes.
  • You can offset all of your business expenses against your income to further reduce your tax bill.

For more detail on the financial benefits of contracting through a limited company, have a look at our pay less tax page.


As a contractor, you are, in effect, your own boss – something which can be very satisfying and extremely enjoyable! For example:

  • Contractors have the ability to be far more independent than permanent employees. Visit our Careers Section for hints and tips on contractor resumes and job hunting.
  • You have the freedom to work when you choose, where you choose and for however long you like.
  • Changing a contract can often be far easier than changing jobs.
  • Contractors can take an as much or as little holiday as they prefer, most permanent employed people don’t get paid for any holiday entitlement unused during the year, as a contractor you will.
  • The company you work for is not your employer, but is instead your client, which puts a whole different flavour on the relationship!
  • Contract roles will give you much more flexibility when it comes to agreeing on working conditions.
  • As a contractor, you also have more flexibility over the payment terms that you can negotiate.
  • You have the opportunity to develop your career in a way that suits your personal circumstances at any given time.

Skills development

You will naturally work in a variety of different contract roles and in many different companies, and this will help you to build a unique range of skills and experience. For example:

  • Working as a contractor gives you the opportunity to test out other industry sectors to see if you can widen your experience.
  • Contractors tend to gain a really good insight into different company cultures, processes, operations and structures.
  • Working in many different companies gives you the ability to build up a wide-ranging CV and to establish an extensive list of reference contacts.
  • A good contractor will become known within their own field for their excellent work and you may even find that your services become sought-after, rather than you having to apply for new positions all the time.
  • As your experience and network growth opportunities will come along with other contractors contacting you with regards to opportunities with their clients.
  • Carrying out project work in different organisations and environments gives a contractor the opportunity to develop existing skills and to learn new ones – making you an even more valuable commodity in both the contracting and permanent world.
  • As a contractor, you will be exposed to many different styles of working, not only in relation to your peers but also in relation to your managers and your subordinates. This helps you to develop as an individual, in more ways than just your core skill set.
  • Depending on the type of contractor you are, you will gain added experience of different types of products and/or services which will all widen your experience and make you more attractive and interesting to future clients.
  • Contractors often come into new client organisations as the ‘industry expert’, which is not only a nice position to be in, it also adds to your credibility as an industry professional, widens your experience further and helps increase your daily rate.
  • 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.

Other more general advantages:

  • Most contractors who leave permanent and go contracting earn more than if they’d stayed in the permanent world.
  • Opportunities aboard become that much easier and you become more attractive to clients if you have a broader skill set and experience. Many roles aboard are contract based.
  • If you don’t like contracting you can always become an employee again.
  • Your clients will see you differently, you will be treated differently. There are still pressures but they are different to those of the employed where what your boss thinks of you as a person can often be the driving force for your career rather than your skill. Managers often don’t see contractors as such a threat to their empire.
  • Heck, it’s just more interesting and exciting and again if you don’t like it what have you lost?

And now some downsides . . .

As you will see, this is a fairly impressive list of positives, but it’s only fair to point out a few of the negatives as well. Some of these include:

  • Contractors are responsible for finding their own work and making sure that the money keeps coming in.
  • You will also be responsible for negotiating your own payment terms and working conditions, which is something that you may not be familiar with in the early days (if you use a recruitment agent to find your contract they will usually be able to help here)
  • Contractors are responsible for managing their own finances – for example, things like tax, VAT and national insurance contributions – which may initially seem like a daunting prospect, however, any good accountant or tax specialist will be able to help reduce your stress levels.
  • Even in a buoyant market, there is always a level of uncertainty about where the next contract is coming from. This is no different to being an employee and worrying about redundancy (however the extra redundancy payment as an employee can be very handy).
  • At some point, you will have to decide whether to set up a limited company or trade through an umbrella company, and this can be confusing. To find out more about the pros and cons of each, please visit our page on limited companies vs umbrella companies for more information. Whichever route you choose, there will be paperwork to do and forms to fill in. This can be daunting until you know what you are doing, typically it actually only takes about 15 – 20 minutes per month administration to run your own limited company.
  • Contractors don’t get the same benefits and ‘perks’ that permanent employees receive. There is no sick pay and no holiday pay, so it’s vital you manage your finances to cover for these times.
  • Not having traditional ‘colleagues’ can be lonely if you are used to this environment. There are a lot of things you will have to deal with alone, which is why it is important to build up a good support network of experts around you who can help you to manage all aspects of your business effectively.
  • Contractors can be the first to be laid off in a downturn however this is often balanced by the fact that in poor economic conditions companies tend to not hire employees due to ‘headcount freezes’ so turn to contractors to fulfil the available roles. As a contractor, you always have the freedom, the enthusiasm and the processes in place to get straight out there and find the next contract!

If you have decided to become a contractor, click on the below link to view our free, quick and easy to read becoming a contractor resource:

  Becoming a Contractor

If you have any questions about contracting or would like any further advice please contact our New Business Team on 01442 275789 or email

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