Contract V Permanent 

Ah the 10 million dollar question, the one we get asked about all the time and the one that causes so much deliberation among IT professionals – especially the permanent candidates that have never contracted before.

I’ve just been having this exact conversation with Kevin, who has been in permanent employment for the last 15 years, but is very keen on one of our contract positions.  “so what would you recommend Colin”?   Well unfortunately, this is a question only you can answer Kevin.  But maybe this will help?

So why do people contract?

• More money – and in some cases, much more money!
• You can maximise your earnings in accordance with tax guidelines from HRMC.
• Flexibility – No long term ties, you can pretty much work when you want and you only need to work to one weeks’ notice.
• Interesting variety –  who knows what the next job will be and when you’ve had enough of it, just move on!
• Freedom! You are your own boss (ok, so you may have to work for other people, but only on your terms).
• Camaraderie  – contractors meet a lot of other contractors and some become lifelong friends.  They start to recommend you when they get other contracts and so the contractor network can become very powerful.

It all sounds great doesn’t it!  So surely that’s what we should all be doing?   Well not necessarily.   There are also a number of down sides that need to be considered:

• No Job security!  In Kevin’s case, this was a big deal.   He’d never really had to worry about where the next job was coming from.  If he went contracting and it only lasted 3 months, could he afford to not earn for a month or two, or longer until the next position comes along?
• Is there the demand?  If you are a PHP or .net developer,  Great.  You’re in high demand and if you’re also in London, then you can feel reasonably secure that the next contract is around the corner.  But what if you’re a support engineer, or installation engineer where there are plenty of candidates also vying for a contract position.  Now you’re having to compete for every contract and because there’s plenty of competition the rate gets knocked down.  Suddenly, it’s less attractive – insecure and you’re not a great deal better off for it.
•  Location – we’ve touched on this already but it’s a major factor that if you live in London or Manchester then chances are that you’ll be pretty busy with requirements.  But if you live in Daventry or Stoke, there is likely to be significantly less demand.   You might need to be open to travel or staying away in the week which many contractors have to do.
• Not Feeling part of the team.   This is something that we hear on a regular basis and so something to give real consideration too.  We’re not talking about benefits and the financials etc, but actually belonging somewhere and being involved in the successes and the feel good factor that goes along with it.   You are the “hired help” and it can be a lonely position to be in.  Now I must stress that this is not always the case and we have an equal amount of contractors who are very well looked after and really do feel part of the team.  But do consider this as you will almost certainly feel like this at some points of your contracting life.
• Financial Commitments.   We all have bills to pay and so any gap in earning has to be considered and planned for.  But aside from that, how do mortgage companies view the status of a contractor who has worked for 6 months and then not for 3 months, and then for 3 months again etc.   If you are planning on moving or remortgaging in the near / medium future, it may well be something to look into and talk to your mortgage or financial adviser about to see how you could be affected.
• IR35.  This has affected the contract market massively in the last few years.  Is the contract inside or outside – ie are you paying PAYE or the more traditional charging as a Ltd company and p paying yourself dividends at a much lower tax rate.  These days, 90% of contracts are inside.  But that doesn’t necessarily rule it out as pay rates have gone up massively to compensate in many areas.

And so Kevin has gone away to consider his position.   It’s a big step for him as he would be leaving a permanent position and so the decision has to be very carefully considered.    But for candidates that have been made redundant or out of work for other reasons, then perhaps there’s nothing to lose and let’s face it, if you don’t like it then you can stop and look for a permanent position.

But if can be a difficult decision for a contractor who is perhaps considering a permanent position.  Often changes in circumstances dictate the need for job security.  A new baby, a new wife, wanting to buy a house etc.   But how will you cope with the restraints of a permanent position?  Will it feel claustrophobic or will you enjoy the comfort of the safe and familiar offerings of the permanent position?

In the end, it’s only you and your circumstance and ambition that can decide, but I hope this email goes some way to helping you to make that decision.    If you need to talk it through, feel free to contact me, but also there are contractor groups on linked in and perhaps talking to people who are already doing it can be the best source of advise and insight that you can get.