Greater flexibility over your working hours, the ability to dictate your own work and higher earning potential are just some of the many attractions to contracting. However despite all these pulls there are some common concerns that contractors face when choosing to follow this path.
Here we have outlined the 4 most common concerns along with our advice on how to tackle them.
IR35 legislation was brought in to tackle the issue of disguised employment which applies to contractors who are working for a client through an intermediary. With HMRC increasing their activity on IR35 compliance, it is now more important than ever for a contractor to be confident that they are working in the correct way. This is because if a contractor falls inside IR35 they are required to pay the same tax and NI as a permanent employee. So if a contractor is working through a limited company and is found to be inside IR35 they will be expected to pay back any unpaid taxes, plus penalties.
The easiest way to get peace of mind on your IR35 status is to ask an expert, such as PayStream, to carry out an IR35 review on your circumstances and they will provide their expert opinion as to your level of risk.
Periods in between contracts
Securing that next contract will always play on a contractors mind. Inevitably there will be periods of time where you will be in-between contracts, which can be daunting when you don't have a steady flow of income coming in.
Aside from always having a proactive approach when it comes to securing your next contract, which includes networking and sending numerous applications well before your current contract ends, you should always ensure you have a 'rainy day' fund set aside for these unpredictable periods.
Similar to permanent employment, there are many factors which can affect your pay rate, including your skill set, previous experience and your education.
However, when it comes to contractors the biggest influence, aside from those mentioned above, will be the industry you operate in alongside the client you are hired by. There are some industries that rely heavily on skilled contractors, whereas some do not and therefore it can be harder to demand higher rates.
As an umbrella or limited company contractor the key is to ensure that you continually update your skills set so that you stand out from the crowd. Alongside this, building up your contract negotiation skills is a sure fire way to sell yourself to prospective clients.
In a contractor's line of work, a client will usually rely whole heartedly on the contractor's advice and services. However every once in a while mistakes do happen and where a contractor is concerned, they can be held legally responsible.
The solution to this is to ensure that you have professional indemnity insurance cover which offers legal protection for contractors from such legal claims. Any reputable accountancy or payroll provider, such as PayStream, will provide this kind of cover, giving added peace of mind.
Although there are some concerns associated with the world of contracting there are always solutions to help avoid or solve them.