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Could weak pay growth encourage more people to work as contractors?

Paystream News

Kerry Hull

Tuesday 27th Feb, 2018

Is the current pay growth landscape likely to lead to more people becoming limited company contractors?

New data has highlighted a reduction in wage growth across the UK, and this slowdown in pay increases may be prompting more people to switch from permanent work to working as a contractor.

According to the latest labour market figures from the Office for National Statistics (ONS), average wages in comparison to inflation fell by 0.5 per cent between September and November last year and, as a result, many people are still having to tighten their belts, despite widespread reports of the UK's resurgent economy in recent months.

This comes at a time of record levels of employment across the country - the ONS revealed that UK unemployment fell by 3,000 to 1.44 million during this time - but with growing pressure on pay packets for many of those in work, it could now mean many look outside of the traditional nine-to-five to bolster their earnings.

People looking for greater control

According to Stewart Butler, sales director at shipping solutions business World Options, this reduction in real-terms pay could be the catalyst for a rapid rise in the number of individuals working for themselves in the capacity of limited company contractors or freelancers.

He argued that the increased flexibility on offer for those who become limited company contractors could be a major driving force in making 2018 the year when self-employment blossoms even further in the UK.

"Self-employment puts workers back in control of their wages and provides a fresh opportunity for people to do something they are really passionate about," Mr Butler stated.

"We have already seen a huge rise in the number of people approaching us about starting up their own business and I wouldn't be surprised if we witness record levels of self-employment in 2018."

Indeed, World Options has seen this process in action, with the company witnessing a 56 per cent increase in enquiries for its own franchising options in January 2018 in comparison to December last year.

Individuals can set their own pay

One of the major attractions for people considering whether or not to take the leap to become a personal service company contractor is the ability to improve their work-life balance and ensure they are receiving what they perceive to be the correct level of remuneration for their skills and time.

Limited company contractors have the opportunity to charge precisely what they want for their services, and without the limiting factor of overheads and other large expenses that many companies will incur, they can often do this at a very attractive rate to prospective clients.

Mr Butler concluded: "For those who have done all the research and found the right option for them, self-employment can be incredibly rewarding and more financially lucrative than other career paths, while providing the best possible work-life balance."

Overall, the stagnant level of wage growth that is currently being witnessed across many industries in the UK could be just the push that many people need to make a change and embrace becoming a limited company contractor this year.