The Project Foundry began with a simple mantra: Plan. Execute. Deliver. We aim to keep it simple. We believe that project management doesn’t need to be challenging or complicated. In fact, the power of simplicity is key to project success.
Keeping it simple makes things easier for our customers, so we will continue to promote it. Simplicity, clarity, and honesty apply to our services, our publications, our people and our company. It’s who we are. To allow us to offer ultimate flexibility, we have a flexible workforce. A high percentage of our workforce, work on a contract basis, and we work most time and time again.
The Project Foundry has built a community of contractors who work with us, want to work with us or will work with us again in the future, so that we ensure our people’s quality matches our values and ethos.
Contracting is now common in nearly all business sectors and provides many benefits to the parties involved. Our clients get access to specialist skills as-needed, while as a contractor you will generally get a far greater financial reward and independence than in the traditional employee structure.
There are two main ways to operate as a contractor, either through an Umbrella Company or your own PLC. There are multiple factors to consider when deciding what the right option for you is. We recommend you get advice from a specialist firm or accountant before making a final decision.
The following article is a how-to guide on what you need to get set up as a contractor, the benefits of working for yourself and the financial gains you can expect. We have a high volume of contract positions, and would love to add you to The Project Foundry Community.
Advantages of Contracting
Contracting has many advantages, and what the biggest advantages are depends on what is important to the contractor. We have listed a few of our top ones below:
Due to the short-term nature of the work, most employers are prepared to pay higher rates to contractors than to employees. The employer benefits through savings in holiday pay, sick pay, redundancy, etc. and passes these savings on to the contractor.
Contractors can benefit from much greater tax planning and pension planning options through running your own business. Also, with tax not being deducted at source from your income, you can earn extra interest income. If you work as a contractor and set up your own limited company, there are more tax advantages, although more expensive to initially set up ~€300 it can be advantageous. In addition, tax not being deducted at source from your income, you can earn extra interest income.
Experience and New Challenges
Contractors have the flexibility to change jobs regularly without the formality of notice and without associated stigmas attached ‘job-hopping’. This means you can gain exposure to multiple industries and different and appealing types of projects. Many contractors enjoy this variety, as it continuously challenges them.
Working in different companies and industries with different tools, approaches, and methodologies increases your skillset and makes you more marketable.
The satisfaction and independence of being self-employed, in some cases choosing where you work from and the times you work. Sometimes, this will mean you can work from remote locations and travel as you work, or working from home.
As a contractor, you are not fixed to set annual leave, as you would be in a permanent role. You have the freedom to take extended holidays between contracts and additional annual leave in contract. You don’t get paid for leave, but the higher daily rate allows for this.
Disadvantages of Contracting
Like the advantages, contracting also has disadvantages. What these are again depends on what is important to an individual. Once you are aware of the ins and outs of contracting, the disadvantages can be offset by the many advantages. We have listed some of the most common ones below:
Additional paperwork and tracking are required as you run your own business. This, however, can be easily managed by third parties who provide the setup, maintenance, invoicing and management of your company. It is also tax-deductible. We are glad to recommend some excellent companies who provide this service to our teams.
Holiday and Sick Pay
You receive no remuneration for periods when you are sick or on holidays and not working. Annualised salaries for contractors are based on an average working year of 230 days, which accounts for holidays and bank holidays taken. Good money management will ensure you have money put aside for these periods.
It is tempting, but make sure you don’t see a huge non-taxed sum in your account and spend it. Ensuring you have enough money to pay the tax when it falls due and for times when you are seeking your next contract is critical.
As a contractor, you don’t have the same rights as permanent employees, and are not entitled to the same wage increases, redundancy payments, etc. You are however paid significantly more. If you negotiate, your contract will have a notice period that they must give if your contract is finishing earlier.
You have fewer opportunities for career development as a contractor and most of the time would need to be a permanent employee to have a clear career path. However, you can gain huge experience contracting and move into different positions. You can also upskill yourself through courses and qualifications, which are often tax-deductible.
Setting Up as a Contractor
This can be completed in a day or two depending on the route you choose to take, but is a critical step as you cannot work as a contractor without doing this. You also need to be set up correctly so that you can be paid as a contract. Beware that managing your own taxes can be tricky so it’s a good idea to partner with an umbrella service, or at the least, speak to a competent accountant so that you have all the information you need.
This is generally the starting point for most contractors, and some choose to remain contracting in this way and never set up their own company. It is especially effective for individuals on a low contracting rate and/or those who will contract for a short period.
A contractor can become an employee of the umbrella company run by a third party (usually an agency). You submit timesheets to the umbrella, and they invoice the end client for completed work. You will then be paid as a PAYE employee through the umbrella. In most cases, there will be a fee for this, and it depends on your contractual agreement. The advantages are that this approach avoids the administration & taxation tasks of running your own Company. The Umbrella Company will ensure all tax obligations are complied with as well as ensuring that you are covered for standard workplace insurances.
You will still reap financial rewards from this option, but not to the same extent a Private Limited Company will allow.
Private Limited Company
A Private Limited Company, also known as a PLC, is the option most career contractors choose. It is a superb option to get the most out of the tax benefits. In addition, it can build a brand and reputation.
Professional contractors tend to earn significantly more than their permanent peers. Partnering with tax advisors or a specialist contracting service agency who specialise in professional contracting will help you optimise tax efficiencies.
This is the best option for those who want control of their finances, to build revenue in the company and have longer-term gains. For anyone starting out contracting for the first time we usually recommend using an Umbrella Company initially as it is a more simple setup and as you progress your career as a contractor, you can then look to set up a private limited company.
Get a signed contract
Whether you are going through an agency, professional services firm or directly with a client, always make sure you get a signed contract from them after they offer you the position. This is a contract for the provision of services, and you want to know what is agreed, especially if you are leaving a contract with a potential extension pending for another active contract.
Read the Contract
This might seem like common sense but read the contract from front to back. When you use a contracting service provider, they will generally review the contract and give you advice, but you should always read it carefully yourself. Make sure you are happy with all the terms you are signing up to. Companies work differently, and if you have queries, raise them before signing.
Keep a Copy
Ensure you and any service provider you use have the most recent and final contracts and keep them on file for reference.
Is Contracting right for you?
If you are excited by having independence and flexibility in when, how and where you work then it is an option you should consider. Most of our contract team have been doing this for most of their careers and wouldn’t choose to be permanent employees, others choose to contract for a couple of years to gain experience faster.
Contracting is an increasingly popular way of working, as employees become more focused on work-life balance and increased control of their employment. For others, it gives them new challenges more often, keeping them interested and motivated, rather than working in a BAU environment.
To help you decide if contracting is a great option for you, we would love to discuss how The Project Foundry supports their contracting team. You will be part of our team should you choose to take a role with us and have senior team members to provide guidance throughout your contract, we hold community events, monthly conference calls for all of us to keep in touch, consistent communication and we love our team to get involved in building our business. We aim to create a community that you will feel part of while having all the benefits of contracting.
If you would like to hear more, contact email@example.com or call on 01-4452218.