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Why do people choose to become contractors?

Paystream News

Kerry Hull

Monday 6th Jun, 2016

UK contractor numbers are increasing all the time. Figures from the Office for National Statistics show that 4.6 million people in the country are now self-employed, working as limited company contractors or freelancers, while many more are employed via agencies on temporary contracts.

So, with more and more people working as contractors - whether for themselves as limited company contractors or via an umbrella company - why are they choosing to work in this way? What are the benefits? And is contracting the new norm?

To get a foot in the door

A survey carried out by the Recruitment and Employment Confederation (REC) back in 2014 looked at the reasons why people chose to work through agencies or set up their own limited companies.

The report, entitled 'Flex Appeal: Why freelancers, contractors and agency workers choose to work in this way', led to the discovery that one of the main reasons people want to take on temporary contracts is to get a foot in the door in a new industry.

In total, 14 per cent of temporary workers said they wanted to work in this way to gain extra experience to develop their skills and enhance their CVs. This helps to put individuals in a position where they can confidently say they are able to add value to the businesses of prospective clients due to their superior skillsets.

To improve their work-life balance

However, it is getting the chance to strive for an improved work-life balance that is the reason most often cited by people considering working as contractors.

One-quarter of respondents to the REC poll said they became contractors to enjoy greater flexibility, while 11 per cent reported that they wanted to work on their own terms so they could spend time looking after their children as well. In addition, four per cent of those questioned became contractors so they could fit their professional life around looking after a family member.

What's more, 14 per cent of contractors and freelancers said taking on short-term projects allowed them to spend more time pursuing hobbies that they were passionate about - something that isn't always possible for busy, full-time workers.

Setting up and working through a limited company brings with it extra admin and paperwork that some contractors can find gets in the way of their ability to achieve the perfect work-life balance, but working with a specialist accountancy service such as PayStream's My PSC removes some of this burden. The service helps contractors run their own limited company by providing help and advice when needed. It provides access to a dedicated team of accountants that work on your behalf, and proactive tax advice and planning. It also provides access to book-keeping, including all statutory documents and weekly detailed management accounts, to name just a few features. By taking care of company admin tasks such as this, it allows contractors to spend more time developing their business and pursuing their passions.

Some temporary workers also said that they liked knowing they could leave their position at any time without the consequences of quitting a permanent role, again allowing them to gain greater control over their professional life.

To boost their earnings

For some workers, becoming a contractor presents the opportunity to boost their earnings.

Some 12 per cent of the temporary workers surveyed by the REC believed that working on a contract basis enabled them to earn more money than if they had the same role in a permanent capacity. This is because contractors are able to set their own pay rates, meaning those with higher skillsets or niche expertise can potentially charge more for their services.

Meanwhile, of the respondents who had worked via a temping agency in the past, 16 per cent were now earning £50,000 or more per year. This suggests that the valuable skills gained from contracting can prove lucrative in the future and that organisations value the experience temporary workers gain.

So they can semi-retire

There is a growing group of over-55s who are choosing to work as contractors rather than retire completely.

Statistics from the REC research show that almost one-third (31 per cent) of people aged 55 and over in the UK have worked as contractors, allowing them to continue to use the skills they have spent a lifetime developing, but on their own terms and at their own pace as they semi-retire.

An increasing number of businesses are looking to take on older workers on a temporary basis so they can gain access to their valuable skills as the national shortage continues, benefiting their operations and enabling over-55s to boost their earnings and save a greater sum of money for when they do eventually retire.

Because that's 'what people do now'

Georgios Nikolaidis of the Professional Contractors Group commented: "There has been a structural change in the labour market. Flexible work is here to stay."

Indeed, the REC survey shows that contracting is becoming more and more popular, with one-quarter (24 per cent) of Britain's workforce having worked on a temporary contract at one point.

Of these, almost half (43 per cent) say that they would temp again in the future, while 34 per cent would freelance and a further 29 per cent would consider setting up their own limited company one day.

Furthermore, nearly two-thirds (61 per cent) of past contractors now work full-time, once again demonstrating just how much businesses value the skills and experience of temporary workers.

When it comes to a gender divide among contractors, there is barely such a thing, with 52 per cent of these workers male and 48 per cent female. This shows that contracting can be for just about anyone, whether they are waiting for their next full-time role, want to earn more money, gain experience in a new area or simply achieve a better work-life balance.

With flexible and homeworking becoming increasingly popular, the number of people choosing to work in this way is only set to grow - and it's clear to see why so many opt to become contractors in modern Britain.

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