How to become a Contractor

Thinking of becoming a contractor?

Becoming a contractor is a significant career choice that offers various benefits but also comes with specific considerations.

Here’s a summary of key points to consider before embarking on a contracting career:

What Is a Contractor?

A contractor provides specialized services to a company for a predetermined fee and duration.

There are numerous benefits associated with becoming a Contractor


Why Become a Contractor with PE Global?

PE Global collaborates with a diverse range of regional and international companies across sectors such as pharmaceuticals, oil & gas, biotechnology, IT, medical devices, financial services, construction, healthcare, and more.

Benefits of Becoming a Contractor:

  • Higher Earnings: Contractors often receive higher pay rates than permanent employees for their specialized skills.
  • Tax Efficiency: Contract work can offer tax advantages, with lower tax rates compared to permanent employment.
  • Independence: Contractors have the freedom to choose their projects and work independently.
  • Flexibility: The ability to change jobs regularly and adapt to different work environments.
  • No Company Politics: Contractors are usually not involved in internal company politics.
  • Self-Training: Contractors can select their own training, which is typically tax-deductible.
  • No Fixed Holidays: Contractors have the flexibility to determine their holiday schedule.

Cons of Becoming a Contractor:

  • No Holiday or Sick Pay: Contractors do not receive paid leave for holidays or sick days.
  • Administrative Responsibilities: If operating as a limited company, contractors must manage record-keeping for tax and VAT purposes.
  • Limited Job Security: Contract durations are typically short-term, ranging from 3 months to 1 year, with occasional gaps between contracts.
  • No Pay-Related Social Benefits: Contractors do not receive pay-related social insurance payments, such as sick pay or unemployment benefits (unless factored in through an umbrella company).
  • Costs: Setting up and managing a limited company may require hiring an accountant and incurring associated costs.

Options for Setting Up as a Contractor:

  • Umbrella Company: Ideal for short-term contracts or a quick setup without the need to establish a new limited company. Some administrative tasks, such as invoicing and VAT returns, are handled on your behalf. Umbrella companies charge a commission, typically up to 5% of earnings.
  • Limited Company: Suitable for long-term contractors. Requires at least two directors and shareholders, registration with the Companies Registration Office (CRO), annual accounts preparation, and management of various financial aspects. Hiring an accountant is often advisable.

Calculating Your Rate:  When calculating your daily or weekly rate, multiply your daily rate by 230 days (accounting for weekends, holidays, bank holidays, and personal days) to estimate your annual salary.

Becoming a Contractor offers financial advantages and greater autonomy but entails certain administrative responsibilities and job insecurity due to the contract-based nature of work. It’s crucial to assess these factors and consult with professionals, such as accountants, to make an informed decision about your contracting career.

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