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Perm vs Freelance

In this week’s feature Jonathan Lindon, MD of Source, explains the pros and cons of freelance contracting and permanent employment, leaving it up to you to decide which suits your lifestyle.

If you work as a PAYE freelancer you will work on the books of the recruitment agencies or the employer. They pay you as you will be employed by them. They pay your national insurance and income tax contributions. You can accrue holiday pay or have it added to your day/hourly rate.

Pro's of a permanent job

Cons of a permanent job

If you work limited through an umbrella company, they pay you. They take a small percentage of your earnings for their troubles of looking after your tax and paperwork. There are lots of umbrella companies - some good, some bad - so make sure you do your research and get recommendations.

If you are the director of your own limited company you will need to get legal advice as you look after your own paperwork and tax which can be complicated to understand (it may be better to engage the services of an accountant for this). You have to register your limited company with companies house and choose the registered company name and trading name if you decide that they will be different. You will be given a registration number, certificate of incorporation and proof of directorship which you need to look after. A secretary will need to be nominated too.

Sole traders were common place but are decreasing in numbers as they struggle to legitimately work through recruitment agencies or direct. They aren't trading solely through a recruitment agency so will have to work PAYE or set themselves up as a limited company. When working direct the sole trader would need to demonstrate a unique skill set, ideally not represented in the companies that they do work for.

Pros of freelancing

Cons of freelancing

The current marketplace

The freelance market has its ups and downs. The winter months can be very quiet and the summer months can be very busy. We tend to see a trend every year where many permanent people leave their jobs to go freelance at the beginning of the summer, then go back to permanent jobs at the end of season.

The summer months normally means there is work around but it also means there are many freelancers around to cover most requirements. Another reason why the freelance market increases at this time is to cover people when they are away on holiday and agencies not committing to hiring perm people due to talk of the economic climate.

Jonathan Lindon
30th April 2009

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