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To Contract or not to Contract?


Many actuaries, both fully qualified and those still studying, may at some stage in their career wonder whether to take a leap of faith and make the move into a contracting role or continue to play it safe in a permanent position. This blog article takes a good look at the pros and cons of each… 

 
Contracting: the good stuff


Working on a freelance basis brings a wealth of benefits, and not just the salary. Here are just a few:


Location, location…

Contracting offers the opportunity to work in a variety of cities and countries. This is perfect for the adventurous actuary who thrives on variety and wants to experience the spice of life within different companies and geographical locations.


Flexibility…

A key plus point for contracting is the ability to work flexibly, with some opportunity for home working and hours tailored to suit the contractor’s lifestyle. Longer breaks away from work are also possible in between contracts. Contractors are also not bound by the usual chains of permanent employment, operating with a far greater degree of autonomy including the choice of whether or not they would like to be involved in a particular project. 


Variety, the spice of life?...

Contracting will bring many opportunities for a diverse mix of project work, giving the actuarial contractor a good flavour of working within different areas. They can find their niche whilst building a plethora of skills which will be extremely appealing to prospective future employers, leading to more rapid career progression. In the same vein, a contractor working across a number of companies obtains a greater degree of networking, fostering wider opportunities to be recommended, head-hunted or re-hired in the future. Contractors also enjoy working with a range of different people across various firms as opposed to staying within the same company for years, which can often avoid being stuck in a rut – sometimes as the old saying goes ‘familiarity breeds contempt’.


Clickety clank…the money goes into the piggy bank

Perhaps the biggest attraction for most is the kind of salary increase that enables long exotic holidays, a dream home and brand new ride. As companies are relieved from the standard employer commitment packages of sickness cover, maternity/paternity pay and pension contributions, the contractor’s take home wage will almost always be higher than that of salaried employees. A contractor may also benefit from tax savings, operating as a limited company or under an umbrella company.


 

But is the contracting dream too good to be true?


Whilst a contractor can work flexibly, boost their skillset and earn an enviable wage, there are some potential setbacks, but whether or not these outweigh the benefits will largely depend on the individual’s circumstances, personality type and lifestyle. Here are a few drawbacks to contracting:


All work and no play (or sickness!)… 

A contractor does not have the luxury of a paid sick day - their bank balance also falls victim when they are unable to work. With contractors earning on average £600-1000 a day, having to take just one day off can seem catastrophic. A loved one getting married on a work day will cost the contracting actuary a whole lot more than just a new outfit and wedding gift! Projects will likely run until the end without holidays, particularly anything required at short notice. However, longer breaks than the standard fortnight (plus extra funds to foot the bill!) are possible once that project comes to a close. As every day a contractor does not work is completely unpaid, for some it makes this area a no-go. A very senior paid employee may earn a similar wage to a contractor whilst also benefiting from the additional sickness and holiday package, and this option is more appealing for some.


Lack of security… 

For a contractor, there is somewhat less job security than for salaried employees. The smart contractor will always plan ahead and make financial savings in the event of their project terminating earlier than planned and/or being unable to secure the next role immediately. Keeping up with requisite skillsets and staying abreast of new developments within the industry is essential to consistently remain an appealing candidate within the contracting market.


Paperchase

 As a contractor generally works either as a limited company or under an umbrella company there will be a certain amount of additional tax-related administration and red tape to deal with outside of working hours. For some this is not an issue but for others it can be off-putting.


A rolling stone… 

Contractors often work away from home, either commuting long distances or living out of a suitcase in a hotel room away from loved ones during the week. This lifestyle is certainly not for everybody. Hobbies or practical activities like cooking healthy meals and attending your usual gym or sports team etc may be sacrificed due to long commutes or hotel stays in unfamiliar cities. 


Goodbye, we’ll miss you

Contractors may find themselves having a leaving party every few months! Relationships with colleagues will be more transient, rather than spending years settled amidst the same faces. This variety can be a good thing in some circumstances, but when you are getting along with certain colleagues particularly well, for some personality types it can be a bit of a wrench when it soon comes time to leave. Constantly having to get to know new colleagues may also prove stressful for certain personalities.  


Pick me, pick me… 

A contractor will be applying for their next role far more often than a salaried employee who may remain in the same role for many years. For some people, the constant application and interview process may simply prove too stressful to make contracting worth their while.


Up and running… 

As a contractor, an actuary will be expected to pick things up rapidly, likely with less induction time and training than a permanent employee may enjoy. There is little time to be the ‘new person’ when contracting. Whilst this will not faze some, others may find it a little daunting.



So is contracting right for you?


Whether contracting is a suitable option for you or not will depend on character, lifestyle, personal circumstances and preferences. For some, contracting may work during a particular season of life but when circumstances change (for example a previously single person getting married and starting a family) a permanent role offering a greater level of job security becomes more appealing. For others, the instability, constant change and inability to take any paid time off could be a complete deal-breaker for undertaking contracting work. But for many actuaries, taking a consultancy role offers excitement, variety, affords an opportunity to rapidly develop skills, work flexibly, take longer periods of time off in between projects and earn a level of salary that leaves their salaried counterparts in the shade.


 

The taxman cometh…


Please note that in April 2020 new tax rules related to IR35 are due to come in which may make contracting a lot less tax efficient. We encourage you to discuss these rules with relevant agencies/companies/accountants before making the move to contracting as the impacts are currently unknown. Once further details are known for various companies we will update you on this website, so keep a lookout in the coming weeks and months.

 

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