For millions of people, contracting has become a way of life. However, even though many people are now enjoying the benefits of being a contractor, others still hesitate to make the leap from permanent employment due to concerns or misconceptions surrounding this subject. As contractor accountants, we have helped many individuals achieve their contracting goals over the years – and, now, we aim to help you gain a deeper understanding of what is stopping you from finally embracing contracting.
Some of the most common misconceptions – which we intend to debunk – about being a contractor include:
My Skills Will Quickly Become Outdated
This is a common myth shared by many people thinking about leaving permanent employment. They believe that, after a brief period of time (for example, a year), their skills will become outdated and redundant. While this can be true of some contractors, the same can be said of employees who don’t spend time developing their skillset. If you believe your skills will become irrelevant, make sure to keep updating them and learning new things – this way, you don’t have to worry about lagging behind when it comes to finding work.
You should always develop your skills in order to remain marketable and competitive in your industry. However, contract employment is not the right situation to work on developing your skills; employers are looking for someone who can hit the ground running and is already an expert. This is the reason businesses want to hire contractors instead of spending time and money training someone or having to hire a permanent employee with the necessary skills for the job. Contracting is not for individuals looking to start out in a new industry, but you can certainly use it to get better at what you do and to take your skills to new heights.
I Don’t Have Transferable Skills
It’s certainly true that some skills may not translate well when it comes to contracting. Generally speaking, however, even though many people don’t believe their skills are marketable, there are always some ways to utilise your skills as a contractor. Be it covering for an employee on maternity leave or applying your high-demand niche skills to a specific job, there are always assignments that require a contractor’s help.
However, it’s also important to note that being ‘too niche’ can be detrimental. You may be the expert in a specific software, for instance, but if no one else uses that software, then your skills may not be marketable – retraining is not only crucial but also possible, so you shouldn’t let this hold you back from achieving your career goals.
There’s a Lack of Job Security
For many individuals, contracting is the next logical step in their career. They view it as a way to better control their professional development, to improve their work/life balance and to experience new things. However, for some, contracting doesn’t equal job security – on the contrary, they fear that leaving their permanent job will lead to unemployment and are hesitant to start working for themselves as a result. While it’s true that you’ll have to find your own assignments, more and more businesses are looking to hire contractors in order to take advantage of their skills.
There Aren’t Enough Jobs to Go Around
At the start of 2018, there were 5.7 million private sector businesses in the UK, with SMEs accounting for 99.9% and this figure doesn’t show any sign of stopping. The number of companies without employees has grown by 82% between 2000 and 2018, which is a clear indicator that more and more people are leaving traditional employment behind and starting their own businesses. In 2018, 1.77 million professionals were full-time contractors, contributing a huge £119 billion to the economy.
A misconception that can actually keep people away from contracting is the belief that there are no jobs out there (or not enough to thrive). While it’s understandable why you’d think this way – mainly because leaving permanent employment is such a difficult and important decision – the truth is that businesses are always looking to hire someone with the right skills.
A report by IT Contractors UK has revealed that certain skills are always in demand, including those in engineering, technology consultancy and design. The report also discusses how a contractor based in London can charge up to £300 an hour for their skills; while in other areas of the country this hourly rate is lower, it’s still a staggering figure, often over £100.
Being a contractor isn’t a passable fashion – contractors strengthen the UK economy and are here to stay. If you’ve been going back and forth on the decision of becoming one, browse job boards, research any potential skills shortage in your industry and figure out how much you could be earning. Being prepared can put your mind at ease as well and help you gain a deeper understanding of where your skills will be the most useful (and, therefore, the most in demand).
I’ll Have no Work/Life Balance
Many professionals become contractors in order to have more of a balance when it comes to life outside of work.
When you’re first starting out, you’ll likely have to put in a lot of time and effort in order to get your business off the ground. This could be anything, from spending many hours searching for new clients to spending time marketing your services and skills on social media (you can read more about how this on our article “How Contractors and Locums Can Make the Most of Social Media“). Because you have to do most of it yourself, it can be a time-consuming task in the beginning.
However, once you’re more established and/or have a consistent stream of clients, you’ll have the chance to relax the number of hours you work. You may even decide to work all year round but take a whole month off during summer to finally go on that family holiday. It’s up to you; the beauty of being a contractor is that you can choose to have periods with a reduced workload and enjoy your personal and family life more.
It may be possible to start contracting without having to work a large number of hours initially; for example, have you thought about outsourcing the financial side of your business? Having to do your accounts – and, in many cases, having to learn it all from scratch – can prevent you from focusing on your company or business. You can also start lining up potential clients even before you leave your permanent job. This way, when you decide to make the leap, you’ll already have a client base and won’t have to spend a lot of time hunting for assignments.
I Won’t Have Any Benefits
While it’s true that you won’t receive certain benefits, such as holidays or sick pay, from an employer, you’ll be your own boss, meaning you can get all the benefits that suit you. With health insurance, you’ll be protected in case of a prolonged illness, for example, while you’re also free to go on holiday whenever you wish – if you’re in the middle of a contract, however, you should discuss your leave with your client.
You’ll also have certain tax benefits. If you’re not caught by IR35, you will be able to draw most of the profit from your company in the form of dividends. Because you can charge more, you can also receive higher wages; you can also deduct your expenses.
I’m Too Old (or Too Young) to Start Contracting
This is a common misconception as well. You may think you’re too young to have the necessary skills to start contracting or, on the other hand, that you’re too old and businesses won’t want to hire you. However, the truth is that you shouldn’t let age become a barrier.
As a younger contractor, you may have acquired skills that are in high demand and low supply, for instance, meaning you are immediately more valuable than someone with more years of experience but who lack the necessary skills for a particular job. If you’re an older contractor, you can play to your strengths and use skills honed by many years of experience and knowledge.
In the end, it’s your skills that will make you stand out – and make employers take notice – so, ensure that they’re up-to-date and relevant.
I Won’t Make More Money
Some people believe that their income as a contractor would be lower as the one they have as a permanent employer. However, this is not the case; after all, it’s important to consider that you’ll be able to take on several assignments at once, which will certainly boost your wages. In addition, if your skills are in high demand, you’re likely able to earn a lot more than other employees. You may be able to claim some business costs and expenses that are incurred during a contract as well.
Use our contractor tax calculator to calculate your take-home pay.
It’s Too Complicated to Become a Contractor
Erroneously, many individuals believe that becoming a contractor is too difficult and time-consuming. However, while setting up your own limited company does require a little more paperwork, contracting through an umbrella company doesn’t; umbrella companies take care of everything for you, from handling your income tax obligations to ensuring you’re making the right National Insurance contributions. You can read our article on “How do Umbrella Companies Work for Contractors?” to learn more.
If you’re still unsure if contracting is for you, then operating through an umbrella company is the best solution – you can learn the basics of contracting, gain more experience and confidence, and figure out whether this is the life for you without having to create your own company. If you do decide to set up a limited company, we’re here to help too. At Gorilla Accounting, we offer an accounting package designed to meet your bookkeeping needs, no matter which industry or sector you operate in.
I’ll Have to Accept Any Contract
When you’re starting out as a contractor, you may feel like you need to accept everything that comes your way, even the boring assignments you don’t want to do. However, it’s your prerogative, as a contractor, to refuse any contracts you don’t like. If you are continuously training and evolving your skills, you will be able to find interesting work. You are allowed to be selective in the contracts you take on; in fact, we advise that you choose only the ones you feel are best suited for your skillset, instead of feeling like you have to accept everything.
It’s Too Much of a Hassle to Deal with Finances
Many people hesitate to pursue contracting because they don’t want to handle the financial side of things. If this is the case for you, you can rest assured that just because you become a contractor doesn’t mean you need to suddenly become an accountant as well. On the contrary, this is how Gorilla Accounting can help.
We’ll handle all the accountancy hassle associated with the contracting world so that you can focus only on running your business. You can also expect same-day responses, unlimited support (via face-to-face meetings, phone, emails and Skype), a dedicated accountant and, of course, a team that is not only experienced but also friendly and proactive. And, with our FreeAgent bookkeeping software, you have access to a huge array of services in real time as well, from assistance with HMRC records checks to the preparation of Companies House Confirmation statements.
At Gorilla Accounting, we offer our substantial years of expertise to contractors and freelancers operating through a Limited Company, so you can count on us to help you build and expand your business.