Sunday 22 September 2019

Contract workers must be aware of the potential pitfalls they face

Clearing your desk of administrative tasks can allow you to focus on developing your business to its full potential

Having too much work to do can leave you going round in circles. (Stock image)
Having too much work to do can leave you going round in circles. (Stock image)

Alan O'Neill

As the world continues to change and competition increases, businesses need to manage their cost base very carefully. One of the biggest costs for most businesses is payroll. The service sectors (particularly retail and hospitality) have managed to cope by employing flexible workers. They employ permanent part-timers on a reduced number of hours per week to suit busy trading times and temporary workers to accommodate seasonal swings.

This trend is also evident in other sectors such as IT and finance. Many of my clients engage contractors (the contingent workforce) for specific projects. Such engagements usually have start and end dates agreed up-front. The organisation might not want to employ that contractor on a permanent basis, as they cannot guarantee work beyond the life of the project. It often suits the contractor also as they can flex their work commitments around the project, their families, their travel and other lifestyle choices.

Employees in fixed employment usually have all of the entitlements of being a paid employee, such as guaranteed salary (relatively speaking), pension, health cover, career progression, etc.

An employee also has the benefit of being kept compliant from a tax perspective as the employer is bound to take care of all that. A contractor however, is responsible for their own affairs.

Typical pitfalls for self-employed contractors:

• They often operate in the wrong structure.

• Many contractors and consultants still operate as sole traders - a trading vehicle which gives them no protection, compared to a limited company.

• Public liability, employer liability and professional indemnity insurances are overlooked.

• They don't embrace the importance of income protection policies. A contractor doesn't have the same social welfare entitlements as an employee. It is a tax-deductible expense and can possibly pay up to 75pc of normal monthly earnings.

• They wait too late to put a pension in place. Saving €500 a month over 30 years is better than saving €1,000 per month in a rushed 15 years.

• The contractor often earns money, then spends it. They don't consider the benefits (and tax efficiency) of beginning to create wealth through efficient use of their limited company.

• Not keeping the right records - contractors tend to be so busy that they often don't consider their legitimate business-related expenses.

• Failing to consider the unknowns when establishing project durations. This runs the risk of over-runs and disputes with client over cost, or over-pricing to the point of being uncompetitive in the first place.

• They fail to focus on growing their business beyond the next project.


Founded in 2002, Contracting Plus is an accountancy practice specialising in support for contractors.

With 4,000 clients, they provide a full suite of services to help contractors become fully compliant in self-employed status.

They help them to determine the most efficient tax structure based on their expected earnings and contract duration.

Now headed up by Jimmy Sheehan, the company manages all accounting, tax, pension and expense requirements for contracting clients.

Contracting Plus supports many sectors where a contingent workforce has become the norm, such as IT, engineering, pharma, medical, locum, construction, education, admin, creatives and many more.


Commercial director Jimmy Sheehan offered this advice to contractors: "As a contractor, you need to maximise the opportunity to build your business pipeline and your wealth from early on. It just makes sense to free yourself up from all of the admin duties described above, so you can concentrate on business development.

"Have trusted financial advisers to help plan effectively for retirement and to maintain financial records. Get a good solicitor to ensure the contracts are still relevant with new legislation (eg, GDPR). All of these advisers' costs are tax deductible."

When you are assured that your admin is taken care of, consider these ideas for growing your business.

1. Network: Build a peer group you can call on to ensure you never let a client down. When the workload is too big, or if you get sick, you can call on fellow professionals to help you finish the job. You may need to share the revenue but you keep a client happy. It also helps you to get additional work and possibly to hear of roles not openly advertised.

2. Ongoing education: Become the subject matter expert in your sector. Continuous education and training can be funded through the limited company as a business expense.

3. Rotate on projects: Moving around and working with different companies on different projects with different groups will serve to expand your network.

It also ensures you upskill as you will undoubtedly gain exposure to new ways of doing things, new problems to solve, new technologies, systems and processes.

4. Collaborate with others: By teaming up with peers, you can put yourself forward for contracts you'd love to work on but could not achieve on your own. Sharing the risk means sharing the reward but that reward might be well worth it.


Contracting is also a growing area for two distinct demographics. One is the over 50s who may want more flexibility in their lives and have a lot of experience to offer.

The other is women who are returning to the workforce after rearing families, who choose to work remotely or around school runs.

Regardless of the motivation or circumstances driving the decision, clearing your desk of admin to allow you to focus on business development is essential.

  • Alan O’Neill is managing director of Kara Change Management, specialists in strategy, culture and people development. Go to if you’d like help with your business. Business advice questions for Alan can be sent to

(Sean Gallagher is on leave.)

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