Contracting is by no means unusual in IT and cybersecurity. There are plenty of reasons why those in these sectors choose this over employment, with increased earnings and flexibility among the key motivations.
However, it’s worth remembering that there are some genuine benefits to permanent roles that can certainly outweigh the financial boost of freelancing – especially with the IR35 changes coming in April 2020.
Here’s why a permanent role shouldn’t be ruled out.
IR35: a recap
The rollout of IR35 in the private sector in April is a good prompt for contractors to decide whether to go permanent. The changes will mean that many contractors will be deemed to act as an employee within an organisation, rather than a genuine freelancer, and as such, HMRC will be allowed to collect additional payment as a result.
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Before the new rules come into place, many companies are choosing to de-risk contractors by putting everyone inside IR35. Those who still want to be considered outside IR35 will either need to ensure that the agreements they have in place with contracting companies are watertight, consider making the move to a permanent role or risk looking for a new role in a heavily competitive market.
Is IR35 the end of contracting? For some, potentially. But it’s important to remember that a permanent position offers numerous advantages that contracting never will.
So, what are these advantages?
Benefits beyond pay
It’s no secret that contractors tend to command higher earnings than a company’s employees. They also often enjoy better tax conditions as they are viewed as a business: the majority of the candidates with whom we work will pay 40% tax as an employee, but around 20% as a contractor.
“Falling inside of IR35 legislation will increase contractor taxes to around 30%.”
For many, giving up company benefit packages is worth these tax benefits. However, falling inside of IR35 legislation will increase contractor taxes to around 30%, will just a 10% drop in tax payments without the other pros of being an employee be as appealing?
That 10% saving may seem like a lot, but it comes at the expense of benefits like holiday pay and sick pay, which can be worth their weight in gold. In some organisations, these company benefits may also include things like subsidised travel, gym membership, a company pension, life insurance and more – the cost of which could add up to far more than the 10% saved by becoming a contractor.
As well as the benefits listed in job specs, however, it’s worth taking a more holistic approach to understanding what you could gain from accepting a permanent role. A sense of security is a huge bonus, as well as access to training, learning and development that contractors would likely need to fund themselves.
But that’s not all. Taking on a permanent role will give you a sense of camaraderie – the feeling that you are part of the company. Typically, contractors are treated as just that, meaning that it may be harder to engage in the team ethics and overall culture of the business.
A better work-life balance
Feeling more like you’re actually part of a company can also improve your work-life balance. Most organisations seem to have realised that they need to do more to look after and retain staff, meaning that companies are focusing more than ever on making this balance happen.
“Many permanent employees are now able to enjoy a similar lifestyle to a contractor.”
We’re seeing an increase in flexible working, be this flexible hours or the ability to work from home. We’re seeing a rise in training and development. Essentially, many permanent employees are now able to enjoy a similar lifestyle to a contractor, but with more stability: without the risk involved in struggling to find the next contract.
A loss of certain work benefits for contractors
IR35 has been designed to prevent contractors from acting and being treated as employees: preventing workers from hiding under the banner of contracting. In most contracts, these staff are acting as employees, which means they will likely be deemed to be working inside of IR35.
As a result, we are expecting employers to remove some of the benefits that contractors currently enjoy. This could include low level benefits like free parking, discounts in the company canteen and free coffee – but also any more important benefits that contractors may currently be taking advantage of.
To contract or not to contract?
We’re by no means saying that the days of contracting are over – far from it. However, with IR35 rules coming into play in April, employers and contractors alike will need to ensure that boundaries are clearly defined to avoid falling foul of HMRC.
If you are currently contracting, you may have already decided that it’s still the way to go. If you haven’t yet read up on the intricacies of IR35, though, now’s the time – as you’ll likely find yourself forced to take on far more risk. It’s up to individual contractors to decide whether that risk is for them – or whether the benefits that come with being a permanent employee could be the way forward.
Not sure whether contracting or a permanent role is the best choice for you? Speak to one of our consultants.
