Contracting Vs Permanent

For many people the decision to go contracting or stay as a permanent employee is difficult. You may be a permanent employee working alongside contractors, all of whom appear to have a nicer car then you. Conversely, you might be a contractor who is now looking for more security, has a family and needs to know the mortgage will be paid.

Let’s look at the facts:

Contracting, usually for a day or hourly rate, should receive a higher income then a permanent employee. By being a contractor you are accepting more risk as employment is not guaranteed. You are taking this risk away from the recruiting organisation and they should pay a premium for this. Typically a contractor is working under 1 week of notice and obviously there is no severance, pension or benefits to be paid to a contractor.

The pro’s and con’s can be summarised as follows:

Contracting

• Higher Risk
• Less Security
• No Benefits
• No Career Development
• Greater Flexibility
• Higher Income
• Broader Experience
  

Permanent

• Lower Income
• Less Flexibility
• Lower Risk, More Security
• Benefits i.e. pension, healthcare, car allowance
• Career Development
• Sense of Belonging

The difference therefore goes way beyond the financial. If you are an employee you do have more job security and you should hopefully feel that you are part of something. You should also see career progression and some investment in your development.

When contracting, no-one else will consider your career development and training needs. You must have the discipline to do this for yourself, so do set yourself training targets each year to make sure you keep one step ahead of the competition.

Over recent years I have seen many contractors earn great day rates without the worry of being without a contract. I do know people who have paid off their mortgages and others with second homes. The market has been good. In weaker economic conditions the contractor is the first to go so if you want to make the jump, the best place to be jumping today (given the current economic slowdown) is to full employment.

Independent financial advisors often say we should all have a minimum of 3 months salary saved. I’m no financial expert, but would suggest this should be at least 6 months for someone working as a contractor, and that doesn’t include saving for your end of year tax bill.