Have you ever considered taking a freelance / contract position? If not, I can understand why. Given the current climate, such a change would be considered by some as risky.
You’re in a secure permanent position. You need your regular income. Why take the chance or losing it? However, there are benefits to be had by working in freelance roles.
Contract workers get to move from company to company pretty regularly. Because of that, they get to work on many different kinds of projects, sometimes in different business sectors.
Contract Artists for example sometimes manage to switch back and forth between the video games and film industry with regularity if they wish. They never get tired of their job and are constantly challenged while keeping up to date with the latest techniques and technologies.
Contract workers can often work flexible hours around their lifestyle. Some companies even allow their freelance employees to work remotely from home.
Don’t fancy working five days a week, 48 weeks a year? No problem. Take a six month freelance position. Then take three months off work. Most Permanent workers can only dream of a three month break!
Pay can be very good for contract workers. Because they tend to be paid a daily rate instead of an annual salary, the rates tend to be higher.
Some people placed by our agency have earned almost as much in six months on vontract as they would have done in a year in the full-time job they have just left. As a freelancer, you will likely earn more money.
For someone who has never worked on a contract, the prospect of leaving the security of a full-time role can seem daunting and difficult. They have many questions. How do I do it? How do I pay my taxes? Can anyone help me?
It’s not as hard as it can appear. You get a contract position exactly the same way you got your current job. What comes next may seem tricky, but it comes down to one primary decision.
Umbrella vs Self-Employed
The big decision you will have to make is this one. Do I work for an Umbrella company, or myself? I’ll start with explaining an Umbrella company.
This is a firm who can employ you on a sub contract basis, while you actually work for another company. The Umbrella firm would pay your wages to you. They would pay your taxes to the government. They would be responsible for buying the necessary insurance you need. They would also be on hand to offer help and advice with other matters.
Obviously, they are a business and as such charge for their services. Below is an example of a pay breakdown based on working for an Umbrella versus working for your own Limited company:
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The alternative option is to create your own Limited Company. This is known as “Company Formation”. You can do this online in a matter of minutes and have your own business up and running in hours.
Again, you will have to decide on a few key pieces of information. Your company will need a “Registered Office”. This can be any UK address including your home address. By setting up your own firm, you have control of everything. You are company director, and every decision and responsibility lies with you.
You may be required to take out certain insurances such as Public Liability or Professional Indemnity. You will have to pay for these. Should you make any changes to your company, you will be responsible for informing Companies House. You will also need to complete an annual report for Companies House.
Lastly, you are responsible for your own “Corporation Tax Return”. This is sent with your annual accounts to Inland Revenue. You can get an accountant to sort this out for you, but of course, this costs money.
Is it Worth It?
That’s your opinion. For some people the lack of security along with the time and effort of either deciding on an Umbrella Company or going through the process of “Company Formation” outweigh the benefits of contracting.
For others, the process wasn’t that hard to begin with and as they have gone through it once, they are already set up for their next contract. There are lots of people contracting who wouldn’t go back to permanent.
Whether you consider it or not, it’s a viable option. And in today’s economy, can you afford not to consider it?