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…
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.
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.
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.
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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