Is It Better To Be A Contractor Or An Employee?

If you had the option between being a contractor or an employee, what would you choose?

There are benefits and disadvantages either way. This list will give you a sense of what is attractive about either option. You may find yourself naturally drawn to one or the other.

Benefits Of Being An Employee

Here are some of the reasons you might want to be an employee:

 

  • You can get holiday pay – at least four weeks of paid leave every year.
  • You can get sick leave – at least five paid days off each year.
  • You can get bereavement leave – let’s hope you don’t need it, but if you do, you are entitled to being paid for taking time off for a bereavement.
  • You can get parental leave – up to 18 weeks of which can be paid.
  • Your employer takes care of paying your income tax on your behalf.
  • You don’t necessarily have to go out and find new work – that is usually something your employer takes care of.
  • Other than during a 90-day trial period, your employment can’t be terminated without fair cause – that is, you must have been underperforming or have misbehaved, or your role must become redundant, and your employer must carry out a fair process before dismissing you.
  • You can raise a personal grievance against your employer if you’ve been treated unfairly.

 

In short, you have various protections that should give you a better chance to remain employed for longer. But it does come at the cost of having less freedom.

Benefits Of Being A Contractor

The key advantages of being a contractor are:

  • You can write off some of your expenses against your business – which may prove to be tax efficient for you.
  • You have more freedom to improve your lot – you might decide to raise your rates or take on as much extra work as you can.
  • You are not bound to any particular person or business (but the downside is that they can generally terminate your services much more freely too).

 

As you can see, contractors usually have a great deal more freedom to operate, but the flipside is that you must find work, as well as take care of your own tax, ACC, and administration – all of which come with hidden costs.

CONCLUSION

Do you want to run your own business? That comes with greater risk and responsibility, but like many things in life, the greater the risk, the greater the upside. The benefits of running your own show can be tremendous.

On the other hand, the law affords a great deal of protection and entitlements to those are employed. Sure, you may not have as much influence over how much you get paid for your work, but the benefits are significant.

What’s most attractive about either option for you?