Decisions facing a New Contractor
Many people that become contractors fall into it. They may be looking for a job through a recruitment agency and the only positions available are temporary contracts. Others it is a long term career choice. In some sectors it is the norms i.e. medical (locums), oil and gas, IT Contractors etc.
For those that aren't used to contracting the decisions can be confusing and complex.
Firstly do I really want to be a contractor?
One way of looking at it is that in the current economic environment is any job safe long term? A new employer even if offering a full time permanent position could make your role redundant for no reason within the first 12 months. It is also easier to find employment while working. Future employers do not look favourably on people who haven't worked for a period of time. Gaining additional experience is also beneficial.
There are also other considerations like company benefits you may miss out on i.e. health and pensions.
How do I want to get paid?
As a new contractor you may assume you get paid gross what you have earned and pay tax annually through your tax return. This however isn't the case.
Your agency will normally give you 3 options: They will pay you after deducting PAYE and national insurance, they will recommend you join an umbrella company and become their employee (some agencies insist on which umbrella company you have to use or will give you a preferred supplier list (PSL) of umbrella companies you can use. Some also have approved supplier list (ASL) which are people you can use but that they don't recommend) or thirdly if are considering contracting long term you may look for the most tax efficient way of working and decide to trade through your own limited company.
At PayMatters we can perform a free tax calculation for these 3 options and discuss what each option entails.
Please feel free to give us a call to discuss these options on 0800 121 6513.