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What employee benefits do contractors not get?

There are some important differences when comparing the situations of contractors versus permanent employees, as can be seen in the table below.

The contractor may get paid a larger sum, but the permanent employee enjoys a range of benefits that have a hidden cost to the employer.

At a glance, it does not appear to greatly favour the contractor. But in the key categories of pay, hours, holidays and tax, being a contractor can far outweigh all the other benefits combined.

How do contractor benefits compare to employee benefits?

As they are not employed by the client, contractors receive no employee benefits. The contractor’s increased pay should be enough to cover these benefits. It also means contractors get to choose the benefits they want, whereas many employees find themselves paying tax on benefits that they may not particularly want or need.

Providing some financial cover for periods of sickness is a sensible approach, and not an expensive one, for a contractor to take. Alternatively, contractors can take out private medical insurance either personally or through their limited company.

Employee Contractor
1 Salary every month Yes No
2 Minimal risk of not being paid Yes No
3 Protection against unlawful deductions Yes No
4 Profit share/share options/Bonus Yes No
5 Pension contributions Yes No
6 Social security contributions by employer Yes No
7 Private health and dental Yes No
8 Company vehicle Yes No
9 Death in service insurance Yes No
10 Season ticket loan Yes No
11 Training and development Yes No
12 Paid holiday + bank holidays Yes No
13 Compassionate leave Yes No
14 Sick pay Yes No
15 Maternity / Paternity / Adoption leave Yes No
16 Maternity / Paternity / Adoption pay Yes No
17 Statutory minimum notice period Yes No
18 Redundancy pay Yes No
19 Rights preventing unfair dismissal Yes No
20 Maximum hours (Working Time Directive) Yes No
21 Job seeker allowance between jobs Yes No
22 Freedom to contract (status cannot be overruled) Yes No
23 Subsidies: canteens, firms products, etc Yes No
24 Pay rises Yes No
25 Relocation assistance / expenses Yes No
26 Clothing, work tools, mobile phone etc Yes No
27 Company leisure events Yes No
28 Mental health / wellbeing support Yes No

Extra expenses a contractor has that an employee does not

  • Accountant / Tax advisor / Legal
  • Marketing: website / business cards
  • Equipment: Mobile / computers / etc
  • Business insurance
  • Personal insurance: Life cover + Illness cover
  • Office space away from family home
  • Enforced rate cuts / market fluctuations
  • Debt collectors for late payment

Extra overheads for contractors that employees do not have

  • Deal with business regulations
  • Keep financial records for HMRC
  • Book keeping / filing taxes
  • Unpaid time spent looking for next job
  • Unpaid time due to enforced furloughs
  • Cost of own training

Any further suggestions?

If you have any suggestions for other benefits that can be added to this list then please let us know.

Published: 01 January 2020

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