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Contracting vs Permanent - Who has it better?

This truly is a question for the ages. Is life sweeter for independent contractors with higher earning potential and an increased work-life flexibility; or does job security and a bounty of benefits make permanent employment the more attractive proposition?
 
It’s no secret that the number of IT contractors in the UK is rising; jumping from 76,972 in 2010 to 119,617 in 2016 [1] at a percentage rate almost twice that of full time employment growth - with these figures still growing, assisted by technological advances and changing attitudes towards flexible working.
 
However life as a contractor is not without risk. A lack of job security, stability and employee benefits such as pensions, holiday pay and healthcare can easily make a permanent position the more appealing proposition. With this in-mind here are some pro’s and con’s when considering which direction to pursue;
 
 
Contracting | Pro’s & Con’s
 
To start with, let’s address the elephant in the room - earning potential. In any article you’ll read on this subject, typically the number 1 advantage highlighted is the ability to make more money. Whilst there’s no denying contractors will in general, benefit from higher incomes, it’s important to keep in-mind how circumstantial this can be. For example a career/salary breakdown could look like:-
 
In this example both person A and B start their careers employed at a financial institution. A few years in person A decides to become a contractor, specialising in one specific niche, working at Director level and achieving a significant salary rise. Person B remains with the company and eventually progresses to Director level, but is on a lower salary rate in comparison.
 
Over the following years person A continues to work as a contractor remaining at Associate Director level given their subject specialism and expertise. In contrast person B becomes an integral part of their company and rises up the career ladder, all the way to C-Level; with a salary now greatly bettering person B’s.
 
This is an incredibly generalist viewpoint so should be taken with a pinch of salt; however it serves to highlight that whilst contracting offers many monetary advantages, it’s not always the route to long term financial success. 
 
So what other advantages are there to contracting?
 
Often people are drawn to contract work due to its flexibility; something that’s particularly true for women in technology roles, with the number of female IT contractors increasing from 9-14% in the past 6 years [2]. Contractors can often determine hours of work and their location making contract work as-much a lifestyle choice as a career decision. Levels of flexibility will vary depending on jobs taken, however the option to pick and choose projects rather than being directed can be very appealing.
 
On that point, working as a contractor can open the door to projects and new technologies not usually accessed by staff in similar permanent roles; given the common view of contractors being experts in their chosen fields.
 
The downsides?
 
Being a contractor can be very tough, particularly in competitive markets where it’s not unusual to go without guaranteed income for a prolonged period of time - something true of even the best technology professionals. This adds to earlier comments on contracting being both a lifestyle and career choice; as financial risk for a single person with few outgoings will be very different compared to a person with a house and children to pay for.
 
This risk is usually linked with job security, however mindsets towards the stability of contracting are changing as more people pursue a career in this direction. Again, personal circumstances will determine the level of stability risk presented - with many contractors working with the same company for years.
 
As a contractor, generally you won’t be integrated into a company to the same level as permanent employees. This can be both a pro and con, as on the one hand you’re kept outside of office politics but on the other you may struggle to establish longevity with an organisation.
 
Lastly, unlike permanent employees, all working costs will usually sit with you the contractor. So no company pay when you’re sick or on holiday, no company pension, no company car or healthcare scheme and no training and development funding. There’s also more administration required which can be time consuming, and it’s likely you’ll need to hire or work alongside an accountant to ensure tax compliance.
 
In Summary;
 
Pro’s
-          Financially rewarding
-          Flexible working options
-          Able to specialise in preferred technologies
-          Usually self-managed and personally responsible
-          Can be involved in new projects and the latest technologies
 
Con’s
-          Commonly less job security and financial stability
-          Not always a guaranteed income
-          Self-funded - training, admin, benefits etc.
-          Can be affected a highly competitive market
-          No entitlement to company employee benefits
 
 
 
Permanent Employment | Pro’s & Con’s
 
Most people at the start of their careers, will join companies as permanent employees. For some it’s the continuation of a structured environment that appeals, coming directly from the stability modern education provides. In other cases the drive to secure full time employment will be based on a preference towards working with a particular organisation; ‘dream job’ aspirations.
 
The scope for quickly moving up the career ladder is significantly larger as a permanent employee. Being part of a company's established culture, day-in, day-out for years instead of just months, enables IT professionals to grow meaningful relationships and present their full range of skills as they develop. Role longevity also shows commitment to a company, further improving the likelihood of career progression.
 
Alongside this, full time employees often get to take advantage of business perks and benefits unavailable to contractors, which can occasional outweigh the often increased pay rates contractors receive. Common benefits include pension schemes, health schemes, company car schemes, childcare support, educational funding and sickness/holiday pay.
 
The disadvantage?
 
In some circumstances permanent roles can become too comfortable or stagnant; with exciting new projects going to specialist contractors and full time employees remaining on the same tasks long term with little variation. In some cases this can lead to stunted development, with less access to learning new skills and technologies.
 
There is also the question of flexibility, given that most permanent employees are tied to set working hours with no choice over their location. This however, is changing with the rise of ‘remote’ and advances in Cloud-based software that are encouraging even the largest institutions to investigate more flexible options for staff.
 
In Summary;
 
Pro’s
-          Various employee benefits
-          Increased likelihood of job security
-          More stable and guaranteed financial returns
-          Meaningful relationships with colleagues
-          Scope for quick career progression
 
Con’s
-          Potential for stunted skills development
-          Limited earning potential compared to contractors in similar roles
-          Reduced access to new projects and technologies
-          Less flexible in general
-          Can lack in variation and stagnate
 
 
 
Conclusion
 
Going back to the original question of who has it better, the answer is simple - neither and both.
 
Lifestyle, career aspirations, financial commitments, these will all determine whether permanent or contract working is the better fit, and these will vary from person to person. If you’re still trying to determine which option to pursue think about what you want and what you need, not just short term, but 5, 10, 20 years from now.
 
At Caspian One our recruiters secure both contract and permanent roles for professionals in FinTech, with an insider’s understanding of exactly how different permanent and contract roles are in this market.
 
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[1 & 2] http://www.contractoruk.com/news/0013147boom_it_contractor_numbers.html