Common challenges facing contractors – Financial, accounting and others… Part 1

1. Administration – if you are using a PAYE Umbrella solution this isn’t going to be such an issue. Providing information to your Umbrella service on your private pension as well as a few other big ticket items is all there is. Your main admin will centre around providing your time-sheet to your umbrella service and your agency on a weekly or monthly basis. But as it provides you with your money this will feel like admin that’s really worthwhile. On the other hand, if you have a limited company solution there will be a lot more admin involved – especially on the expenses front. You will need to ensure you keep copies of all the allowable receipts, compile and provide them to you Umbrella service on a monthly basis. This may take quite some time every month.

2. No paid holidays, no paid sick leave – Normally, in your permanent employment you have a minimum of 4 weeks holiday a year as well as public holidays and are entitled to take a certain amount of paid sick days per year. As a freelancer you don’t have any such entitlements – if you are on sick leave OR if you take time off you miss out on your day rate for each day you are not working. As a result, you need to be conscious of this when negotiating your day rate – plan for at least 6 weeks off per year between sick days, public holidays and holidays.

3. Time between contracts – it’s all very well being a contractor in a boom market when you can have more than 1 offer at a time and there is the potential to move seamlessly from 1 contract to another. There are periods when like 2008-2009 the market tightens and there are more contractors than contracts! In that instance, it is important to up-skill through relevant training and work your network hard to get a new contract. At any rate, contractors need to realise that there will be fallow times and to budget according – put aside 10% of income into a fund for such a scenario if you have a limited company. If you are using a PAYE Umbrella solution you will be paying employers insurance so you will be entitled to social welfare for periods between contracts.

About the author: Kevin Deasy