Question

3. What are the advantages and disadvantages of contractual agreements?

Answer 1

A contract is a legally binding agreement that recognises and governs the rights and duties of the parties to the agreement. A contract is legally enforceable because it meets the requirements and approval of the law. An agreement typically involves the exchange of goods, services, money, or promises of any of those

ADVANTAGES -

1. Greater flexibility:

When we ask our clients what they love about contracting, the improved flexibility on offer always comes up. We’ve all heard how permanent employees struggle to balance their work and personal lives. If you're contracting, the company you work for is your client, not your employer, which creates a very different relationship. You'll have a lot more control over when and where you work, and you'll also have more scope to negotiate working conditions, hours and payment terms. You'll also be able to manage and plan your finances in a way that suits you and your lifestyle, and as your circumstances change your working life can be adapted accordingly.

2. Increased earnings:

Due to their specialist skills and the flexible nature of their work, contractors often earn considerably higher rates than those offered to permanent employees. You could also take home more of your earnings, as operating through a limited company affords you tax and wealth planning opportunities that are not usually available to employees, and you can often offset business expenses to further reduce your tax bill. This all adds up to more money in your pocket.  

3. More opportunities for development:

Many people find that their permanent role fails to provide the challenge or opportunity they’re looking for. Opportunities for employees depend on the success and direction of their employer, and this lack of control can cause frustration. As a contractor, moving contracts regularly and working with other professionals, you’ll get to experience new environments and learn new skills, and you'll have more control over the direction of your career. Changing roles more often exposes you to different company cultures, approaches and processes and helps you develop personally as well as professionally. As your career develops and your network grows, you'll be in higher demand, which in turn will increase your potential earnings and give you more autonomy and flexibility.  

4. More generally:

Many contractors tell us they enjoy the variety of working in many different places, they find it more interesting and exciting. Working abroad becomes easier, and comes with a whole host a new learning opportunities, which will again make you more attractive to potential clients. Many also say their clients see them differently, and they're treated differently. There is no doubt that becoming a contractor could transform your working life.

DISADVANTAGES-

1. Responsibility:

As a contractor, you sink or swim based on your own actions. It’s up to you to market your personal brand and source new contracts. Only you can make your business a success, and if it fails you only have yourself to blame. Some find it an exciting challenge to be going it alone, others find it stressful and isolating. Before you jump, you should consider which camp you’re in.

2. Uncertainty:

As a contractor, you’ll have no guarantee of further work when your current contract ends. If you’re satisfied there will be sufficient demand for your skills, then this shouldn't be much of a problem, as long as you can live with not knowing where you’ll be working from month to month. Again, many contractors find this exciting, and see it as a positive thing.

3. Downtime between contracts:

Contractors only get paid when they work, so you’ll need to make provision for time between contracts, when you won’t have any money coming in. You may find that you make enough money while you’re working to easily manage any downtime, and you may even look forward to it as a chance to undertake further training or take a well-earned holiday.

For many people, contracting is an attractive option and it’s easy to see why.