A contractor is a highly skilled contingent worker who delivers knowledge based services to their clients on a project by project basis. The key aspects of contractors are:
- Highly skilled knowledge-based workers
- Providing knowledge-based services on a contingent/temporary basis
- Delivering specialist skills on a project by project basis
- Hired under a business-to-business contract for services
- Nanobusinesses, trading as limited companies or using umbrella companies.
- Not employed by their clients, but are employed by their own company
- Contract direct with clients or use recruitment agencies to find work
- Found in most sectors, including IT, engineering, oil and gas, construction, finance, media and marketing and management.
Knowledge workers who call themselves contractors, or contract workers, will generally deliver their services full-time for a single client on a single specific project. Many use recruitment agencies to find assignments – in some sectors such as IT, as many as 90% of contractors work via an agency.
Crucially, contractors are not employees. They operate with a contract for services, just like any other small business service provider. Employees have a contract of service, and there is a ‘master servant’ relationship with their employer that contractors don’t have.
Contractors are distinct from freelancers, temps and consultants
Focusing on a single contract with a single client on a project that may last many months or even years differentiates contractors from other types of contingent worker. Contractors also usually charge on a time basis, rather than a fixed-price for each project.
A freelancer normally works for multiple clients simultaneously, quite often delivering different kinds of services on both small and large projects. They often work on a fixed-price basis, and may work for the same client for years, or just for an hour.
Temps are typically not knowledge workers, although they are by no means unskilled. They normally work on a time charged basis but for short, sometimes even one day assignments.
Consultants are differentiated from contract workers because they generally advise their clients on how something should be done, rather than delivering/implementing the services like contractors do.
Knowledge workers who call themselves contractors, or contract workers, will generally deliver their services full-time for a single client on a single specific project
Interims and locums
Interims and locums have their own meanings – some can refer to contractors but others do not. Interims are contractors who work in a senior leadership capacity within an organisation, often referred to as interim managers or interim executives.
A locum usually means some form of health and social care worker, such as a doctor, physiotherapist or social worker. A locum can operate like a contractor, such as a social worker working on a single six month contract for a local authority to cover maternity leave.
A locum GP might work across twenty different GP practices in an area, spending a day in one to cover sickness, or a week in another to cover for holidays, following a similar work pattern to a freelancer.
Contractors are technically not self-employed
Self-employed is the catch-all phrase used to describe anyone who is not employed. It can be interpreted as someone who works as a self-employed sole trader, or simply as someone who works for themselves.
Technically, contractors are not self-employed, although they do work for themselves. Contractors trading via a limited company, which is also known as a personal service company (PSC), are employed by their own limited company.
Umbrella company contractors are also not self-employed. They are employed by the umbrella company, or professional employment services provider. They do have a contract for service with the umbrella company, and enjoy full employment rights.
Independent professionals
Independent professional, or iPro, is a phrase also used to describe contractors. Contractors are in fact a subset of the independent professional category, as are freelancers, locums, interims, consultants, portfolio workers and many of the self-employed.
The phrase independent professional is more widely used outside of the UK in the rest of Europe to describe highly skilled knowledge workers, particularly those from the professions such as solicitors, doctors, architects and engineers.
Contractors work in IT, engineering, oil and gas and finance
You will find contractors operating in virtually any industry, but most work in these industry sectors:
- IT and computing
- Engineering and construction
- Oil and gas and energy
- Finance, accounting and law
- Management, HR, media and marketing.
As part of the UK’s flexible workforce, contractors make a huge contribution to the country’s economy and enable UK-based clients to be more innovative and more competitive in a global marketplace.