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26 Oct 12 Recruitment Trends

Contracting vs Permanent Employment: The Pros and Cons

 

pros cons

 

As a recruiter in the IT / Digital Media space, I’m often asked for advice from candidates considering a move into contract employment. Ultimately, this decision always comes down to personal choice and suitability of the individuals circumstances, but I thought it would be useful to write a short blog on a few areas to think about when considering contracting vs permanent employment.

 

Pros of Contracting (potential negatives of permanent roles)


1. Flexibility

Contracting can provide a degree of independence which many enjoy. You can be your own boss and take on projects when and where you choose, often allowing gaps between contracts for travel, training or personal hobbies / commitments.

 

2. Variety

Many people feel they get bored, stale or too comfortable working with one company for an extended period. Contracting offers the possibility to work for several companies and even different industries.

 

3. Financial

As a contractor you should expect to be paid a significantly higher basic pay, but this obviously comes without the benefits package that is enjoyed by permanent employees. It’s the norm for contractors to earn between 1.5 times to twice the basic pay that a perm equivalent might expect. This would depend on a number of variables including contract duration, the specific industry / market conditions etc.

 

4. Lack of Corporate Politics

Not everybody feels the need to climb the corporate ladder to further their career. As a contractor you can often be spared much of the corporate politics and focus on the project that you have been hired to help succeed.

 

5. Building Your Business Network

By changing your workplace on a regular basis, you quickly build the number of people who have first-hand experience of your work and therefore your business network can grow at an exponential rate.

 

Cons of Contracting (positives for remaining a permanent employee)


1. Lack of Security

Looking for a job is almost a full time job in itself! As a contractor you have to be prepared to regularly do this (in many cases, contractors are continually searching for the next project) and the consequence of not managing this properly, or a change in market conditions, is often gaps between contracts with no money coming in.

 

2. Additional Headaches

As a contractor you will either need to set up and manage your own limited company or employ an umbrella company to do this for you. Whilst this should not be an overly onerous or expensive task, it is something else that needs to be considered.

 

3. Lack of Training

As a contractor there will rarely be the opportunities for training and development which would be open to permanent employees – as a contractor the expectation is usually that you will do this in your own time at your own expense, which can lead to a lack of career progression.

 

4. No Additional Benefits

As previously mentioned, contractors will expect to receive a higher basic rate of remuneration, but then will have to make their own provision for pension, healthcare and life assurance, and will often not receive any annual or project based bonus which a permanent employee might.

 

5. Higher Expectations to Perform

Permanent employees are normally afforded a longer period of time to settle into a new role, but the expectation of a contractor is normally that they would need to hit the ground running and be effective from day 1. Make sure you know your specialist area well enough to be able to do this.

 

6. Difficult to Return to Permanent Work

Once you have chosen to pursue contract work, it’s often then quite difficult to go back to permanent employment if you need or want to for personal reasons or are forced to by market conditions. Employers are often reticent to take on ex-contractors for the fear that they will get bored in a longer term role, or that the reasons that made the candidate go contracting in the first place may reappear if personal circumstances or market conditions change.

 

There is one instance where I do generally give fairly firm advice; junior candidates are in my opinion, better to stay with permanent employment for the first few years of their careers. The average career lasts in excess of 40 years – you have plenty of time to go contracting later down the road should you wish, but it’s my strong belief that the formative years of your career should be in a good permanent environment – one which provides the training and support structure for you to not only hone your technical skills, but also to develop confidence, discipline, business acumen and communication skills, all of which will be needed if you are to take on contract positions.

 

October 2012 – the Current State of the Market


In recent years there has been a strong demand for talented IT folk within the area in which I specialise (Digital Media). This has led to many professionals “taking advantage” of this market and going contracting. Currently, the market is very competitive in the contracting world (ie lots of good candidates competing for relatively few jobs) whereas the opposite is true in the permanent world (very few good candidates competing for lots of jobs). This is Economics at its base level – supply vs. demand and has led to contractors rates going down in many areas and permanent salaries going up. This fluctuation in the permanent / contract market conditions tends to be cyclical and this too is something that should be taken into account before potentially making the leap into contracting. My advice here would be to speak to recruiters who specialise in the area you work in for the best up to date helicopter view of the state of the market. Feel free to call myself or any of my colleagues at Burns Sheehan should you wish to discuss the latest market trends.

 

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by Mat

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