Understanding contracting jargon

You might not realise it, but gone are the days that terms such as ‘employee’ and ‘contractor’ have held much value, especially in a world that is constantly seeking for new ways to fulfill business needs without resorting to conventional permanent hiring of a staff body.

It might sound bizarre, but with ‘employees’ costing employers increasing amounts of money, what with anticipated pension benefits, sickness and holiday pay and additional perks such as healthcare schemes, it is becoming increasingly common for companies to seek out individuals that can be hired on an ad hoc basis. Not only does this keep internal costs down, it can also help to keep ‘contractors’ competitive and hungry for work. It’s a cynical world we live in isn’t it? There are more reasons at play than just financial ones, however.

Though minimising employment risk is a major consideration when taking on a self-employed expert, another rationale for favouring this over a permanent member of staff is the gap in knowledge that is frequently being demonstrated. When you think about it in these terms, it makes a bit more sense, as self-employed ‘contractors’ naturally have to remain ahead of the game and at the forefront of their industry to ensure regular work, whereas a permanent ‘employee’ will be guaranteed a wage packet, regardless of experience of knowledge. This has the effect of making those self-employed entrepreneurs far more motivated to stay current and makes them a far more coveted resource.

Though the rationale is understandable, it’s important to remember that both ‘contractors’ and ‘employees’ are simply means to one end; completing a task within a designated timeframe and budget. So whichever can guarantee a better job, with fewer conditions will always be favoured over the other. The question is, which would you rather be? You might think you know which option has better benefits, but as April draws ever nearer, the lines are becoming blurred.

While contractors have always been able to claim travel expenses when working away from home, this may soon be coming to an end, while employees will be able to claim back reasonable expenses. All of a sudden the future seems a little less clear cut, doesn’t it and we all know what is to blame don’t we? The dreaded IR35 initiative, which has still to be confirmed or denied as being up for dramatic change in 2016, but we will come to that in another blog!

While the flexibility that contracting offers is certainly a draw for many people, the lack of guaranteed income, sick pay or benefits is most definitely a downside. Similarly, permanent employment might be a good way to guarantee an income, but it offers little in the way of autonomy and flexibility, meaning that everyone has a compromise to make. The real issue is, which category do you want to fall into and which will best suit you, your family and your lifestyle? Even more importantly, it’s time that we stopped judging people solely on their employment statuses and started recognising the hard work they do instead. Perhaps if taxation were based on effort and results, we would see a very different workforce emerge!

Article: PayGroup PLC