The benefits of contracting/freelance at a glance…

Why should you consider contracting? 

Contracting offers levels of flexibility and financial reward not generally available to those in permanent employment. You can choose the length of assignment and therefore, move between positions as often as you wish. In doing so you will gain valuable experience which will not only enable you to enhance your rates of pay, but move you faster towards your career goals. Indeed, contractors can earn over 50% more than their permanent equivalents.

How does contracting work in the UK?  

Agencies and clients are prohibited from paying individuals directly without deducting tax and national insurance. Contractors therefore tend to operate through one of two methods their own limited companies as a freelancer working towards deliverables on a defined work package (outside IR35) effectively becoming their own employer or via an umbrella company (inside IR35) where you become an employee of the umbrella company.  You can access our preferred supplier list of accredited umbrella companies here.

If you go the freelance route your company enters a contractual relationship with the agency who in turn have a contract with the client. Your company invoices the agency and payment is made reflecting either hours, days or project deliverables worked. The company as your employer makes onward payment to you either as salary or dividends. Structured correctly this can offer significant tax and national insurance savings increasing your disposable income.

There are any number of professional advisors who can help you get set up. Once everything is in place things will run smoothly month on month. Simply raise an invoice, attach your time sheet and await payment. There is a requirement to prepare annual accounts and various returns, but any good accountant can show you what needs to be done, or undertake these tasks on your behalf and for small companies the administrative burden has been vastly reduced in recent years.

If the contract offered falls inside IR35 the rewards are still higher than traditional permanent employment as hourly/daily rates are significantly higher to cover the additional tax and employment costs.  You become an ‘employee’ of the umbrella company who will ensure deductions are correctly applied.  You save the cost of running your own company, but still have the financial reward of increased pay rates. Contractors operating through umbrella companies are also covered by the Agency Workers Regulations which ensure parity with permanent employees.  They are entitled to holiday and sick pay; this is included in your pay rate, and you can opt to take this as pay.

What are the downsides of contracting? 

There is not the job security available to permanent employees, but fees are higher to compensate for this and most contracts contain some form of notice clause. Holiday and sick pay are not usual and there is no legal employment protection which is available to permanent employees but again the fees compensate for this. A well-conceived contract can limit your exposure from both a personal and tax viewpoint.

Why should I use an agency? 

Clients like to use a small number of agencies as we offer significant value to their recruitment process in the form of candidate selection, negotiation, contractual relations, and general administration. For this we charge the client a fee, so it costs you nothing. By maintaining relationships with the major players in your market, we can offer you a route into the client that you may not be able to get on your own. In addition, we can market your skills into clients who may not even know yet that they want you. We can do this by building trust with the client that any candidate we put forward will be up to the task.

Why Capital?

Capital has specialised in the professional engineering market for nearly 40 years and the Space sector for over 10 years and as such are a market leader in this niche. We know who is recruiting and when and can get your profile in front of a prospective client fast.

Our knowledge of the contracting market in the UK, Europe and the USA is second to none. We have all the answers you will ever need on what you need to do to get set up, and what you need to know to be a successful contractor in an ever-changing market or we know the right people to talk to you if we do not have the answer.

There can be a bewildering amount of tax and employment legislation to keep up with. Tax laws, IR35, Insurance, AWR, AUG in Germany. We ensure that we are always completely up to date with current legislation, and this is reflected in our tried and tested contracts.

We as an agency will find you a role, negotiate on your behalf and handle any problems that arise during the assignment and any extensions, either contractually or performance related. Most clients pay at least 30 days after an invoice is presented and currently many now pay after 90 days. Capital will always pay you within 10 working days of receiving your invoice and timesheet, usually within five working days. We are regulated by the Employment Agencies Act.