A company may hire a contractor or employee to perform the same tasks, but many differences exist between these two work arrangements.
If you are currently looking for oil and gas chemical engineering jobs, you might be wondering whether contracting or employment is the right route for you.
As with most things in life, when it comes to the age old argument of contracting versus employment, there are positives and negatives on both sides.
From pay structure to tax requirements, it’s important to be mindful of these factors when deciding which type of work arrangement is better suited to your career.
So, if you’re in the market for new opportunities and aren’t sure which route is best for you, we’ve outlined the key differences and benefits of each below.
Contractors versus freelancers: at a glance
Also known as a ‘freelancer’ or ‘independent worker’, a contractor is a self-employed individual who is hired to complete work for a client within a specified timeframe.
A contractor may conduct work for one company or multiple companies simultaneously. Additionally, subcontracting work to other professionals allows contractors to take on more projects.
Employment, on the other hand, tends to indicate more permanency: a company hires an employee to perform a specific role under a full-time or part-time contract.
In turn, the company is financially obligated to the hired individual – coordinating the employee’s salary, tax contributions, holiday pay and more, depending on the contract’s stated benefits. Benefits may include pension contributions, medical insurance and company share options.
An individual may be both an employee and a contractor. Many people conduct contract work as a secondary job as a way to earn extra income.
In fact, contract work has become increasingly popular, with around 4.24 million self-employed workers in the UK in 2023, up from 3.2 million in December 2000.
Technology advancements have likely contributed to this rise; video calling applications and accounting software, for example, have made freelance work more accessible.
The key differences between contracting and employment explained
1. Flexibility
Without a doubt, one of the biggest benefits of contracting is that contractors have more flexibility than employees. Employers can lawfully dictate employee work hours and holidays, while contractors have the freedom to choose their own.
With wellbeing becoming increasingly important to many people, an improved work-life balance is a catalyst for many people opting to commence contract work – freeing up more time to spend with family/friends or indulge in hobbies.
2. Workers’ rights
However, despite the flexibility contract roles offer, with greater financial security, employment remains a popular avenue. Under UK law, employees have protection from certain rights that do not apply to contractors. These include:
statutory sick pay
statutory maternity, paternity, and adoption pay and leave
statutory shared parental pay and leave
minimum notice periods
protection against unfair dismissal
the right to request flexible working
time off for emergencies
redundancy pay
Without this protection, contractors must be financially savvy – accounting for periods away from work (both expected and unexpected) and future-proofing other financial plans, such as their pension.
Contractors, therefore, are generally considered high risk when applying for financial support from banks and other institutions – meaning that employees are more likely to receive more favourable interest rates on long-term loans, such as mortgages.
3. Pay
Employees negotiate pay at the start of their contract. Payment is then made via Pay as You Earn (PAYE), a system in which tax and national insurance contributions are also deducted. An individual’s tax code will determine what percentage of their income this will be.
Another appeal of contract work is that contractors are free to determine their own fees, reflecting their skill set and experience. Often this is higher than what could be earned under an employment contract.
In fact, in the UK, it is estimated that contractors earn up to 50% more than employees in similar positions.
4. Tax
Finally, the biggest headache for all contractors: tax. Unlike employees, contractors are wholly responsible for paying their Income Tax and National Insurance contributions.
To do so, they must complete a self-assessment to HM Revenue and Customs (HMRC) annually which will indicate how much an individual owes.
It’s also important to notes that any individual who engages in contract work must submit a self-assessment, even if they also pay tax via PAYE as an employer.
5. Financial security
Due to the points raised above, it makes sense that one of the biggest issues that often influences someone’s decisions to work in an employed or contract role is that of job secruity.
Certain industries benefit from government schemes that can help boost financial security for contract workers.
The Construction Industry Scheme (CIS), for example, enables contractors to pay a subcontractor’s national insurance contributions directly to HMRC. These contributions are deducted from the subcontractor’s pay.
So, what’s best for you?
In summary, whilst both work arrangements have advantages, if you are currently looking for oil and gas chemical engineering jobs, the right choice for you will ultimately come down to your unique situation and career stage.
While more risk-prone, contractors have greater flexibility and the potential to earn a higher income than employees. Employment, however, may be more suitable for those seeking workers’ rights protection and improved job security.
Find your dream oil and gas engineering job with Orion Group
Curious to know more about contracting versus employment or explore the next step in your career? Get in touch with your closest Orion Group office today or upload your CV here to be the first to find out about our latest oil and gas chemical engineering jobs.
