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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 - promptly paid Yes No
2 Minimal risk of not being paid Yes No
3 Always provided and paid for work Yes No
4 Paid even if no work available Yes No
5 Protection against unlawful deductions Yes No
6 Profit share/share options/Bonus Yes No
7 Pension contributions / managed scheme Yes No
8 Social security contributions by employer Yes No
9 Private health and dental Yes No
10 Company vehicle Yes No
11 Death in service insurance Yes No
12 Season ticket loan Yes No
13 Training and development Yes No
14 Paid holiday + bank holidays Yes No
15 Statutory minimum leave Yes No
16 Compassionate leave Yes No
17 Sick pay Yes No
18 Maternity / Paternity / Adoption leave Yes No
19 Maternity / Paternity / Adoption pay Yes No
20 Statutory minimum notice period Yes No
21 Redundancy pay Yes No
22 Outplacement services Yes No
23 HR Support / Grievance protections Yes No
24 Rights preventing unfair dismissal Yes No
25 Maximum hours (Working Time Directive) Yes No
26 Job seeker allowance between jobs Yes No
27 Freedom to contract (status cannot be overruled) Yes No
28 Subsidies: canteens, firms products, etc Yes No
29 Work travel and accommodation expenses Yes No
30 Pay rises Yes No
31 Relocation assistance / expenses Yes No
32 Clothing, work tools, mobile phone etc Yes No
33 Company leisure events Yes No
34 Mental health / wellbeing support Yes No
35 Government support during pandemics Yes No
36 Tax payments and admin handled Yes No
37 Paid volunteering days Yes No
38 Golden hello / handshakes 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: 30 July 2020

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