IT Careers: Permanent Vs Contract

by Heat Recruitment

With IT and technology being such an integral part of our modern lives it has inevitably created a wealth of business and job opportunities over the last couple of decades, which is only going to increase in the future. This wealth of work has only led on to a vast amounts of projects with either tight time constraints, need for expert specialist knowledge, short term requirements, or other necessary factors which has led to a big contract market.

Working as an IT recruitment consultant we often come across candidates who are considering going contracting or switching back to permanent work from contracting, but what are some of the reasons for contracting and the pros and cons of permanent v contract work:

Contract

  • Money – Probably the main draw to contracting is the chance to earn a higher salary than your permanent colleagues, charging a daily rate fee. It’s worth noting though this depends on how much regular work you are successfully securing. I speak to some contractors who say they would need for example at least £80k for a permanent job, but once they work out how many days a year they actually work and the lack of other benefits, pension, travel costs, gym, health etc it often works out far less than £80k. Of course there are also plenty who are earning the equivalent of extremely high perm salaries and more. The chance to earn lots of ££££ does really exist.
  • Freedom/flexibility – If you work in a sector where there is a high demand for your skill set, then you might have the luxury of being able to pick and choose what projects and where you want to work. In reality this is not always the case and plenty of contractors travel far and wide staying in hotels away from family and friends and occurring costly travel and accommodation fees.
  • VarietyOne of the great things about contracting is the chance to work on a variety of projects, at different companies, and meet new and interesting people all the time. The draw back to this is the lack of stability, always having to search for the next role, and perhaps not making lasting relationships. I also recently spoke to a very skilled contractor who is looking to go back too permanent as he misses working on projects from beginning to end and often ends up working on “just pieces of work”.

It’s also worth noting with contracting that is can be very hard to switch back to permanent work after being a contractor for some time. Lots of business won’t take the risk on permanently hiring a contractor as they feel they are a flight risk, however genuine the reasons may be.

Permanent

  • MoneyThough a lot of contractors do make very good money there are also plenty of skilled permanent employees who earn very good salaries who also reap the benefits of pensions, holiday pay, health, travel bonus, and other benefits.
  • Training and Career progressionA big positive (if in the right company) is the possibility to enhance your skills and knowledge through training and mentorship, which can lead on to progressing your career and reaching new levels. Unfortunately, lots of companies oversell there training and opportunities for progression and do not always show the same loyalty you have shown them. It’s very common now to see permanent employees switching jobs regularly and one of the main reason I hear is training and progression.
  • Stability and socialBeing in a permanent position obviously offers stability which ties in with the above points on training and career progression.  Stability can also be important for things like mortgage applications, and maybe also has the benefit of making lasting friendships amongst coworkers.
  • Projects/ProductsThough being permanent can offer the chance to work on projects from start to finish and depending on what your company do also work on a variety of projects, there are also plenty of permanent staff who find their jobs tedious and repetitive over time. This is because they find themselves working on the same things over and over again. How often to hear people say I’m looking for a new job because I fancy a change?!

Choosing being contract and permanent can often come down to what stage you are in your life and career. For example, a younger person looking to learn their trade and break on to the property ladder are probably going to be seeking permanent work.

So there are Pros and Cons for each, which have been there since the dawn of time…..but has the landscape shifted with the new legislation’s and tax changes for Contractors? Is this more apparent in government contracts compared to the private sector? And is this likely to change as well?

Just some of the “highlights” coming into effect in April 2017:

Dividend tax: The new dividend tax rate has been confirmed which means after your allowance of £5000 you will have to endure higher tax rates of 7.5% for basic rate taxpayers, 32.5% for higher rate taxpayers and 38.1% for additional rate taxpayers.

Travel and subsistence: This is being removed for temporary workers supplied through intermediaries (such as an umbrella company) who are subject to the Supervision, Direction or Control of any person. Also those of you classed as PSCs who are caught by IR35. As it stands currently those who are not caught by IR35 can continue to claim.

And so on to IR35 Legislation, how is that working for you? Have you taken one of the many IR35 tests online to see whether you fall in or out?

There is so much information out there on IR35, almost too much, but falling under the IR35 Legislation could have a massive impact on your income. In simple terms its aimed to identify those who are working as “disguised employees” and avoiding paying the tax that they should be. We recommend you take professional advice to avoid any unnecessary scrutiny

So let us know your thoughts, is this affecting your decision to move into the contractor market? Is it causing you to think about returning to a permanent role? We specialise in both the permanent and contract opportunities to both the Public and Private sectors and are yet to see any trends however it would be great to get your thoughts.

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