Contracting in the life sciences industry for beginners
What is contracting?
Contracting is when a skilled professional provides a service to a client organisation for an agreed period of time. Being a contractor means you are not seen as a permanent employee of the company, but independent or an employed consultant providing their skills to a client.
What are the benefits of contracting?
Now more than ever, flexibility is influencing our decision-making when it comes to our careers. One of the biggest benefits of contracting is the flexibility it offers. Contractors can often set their own schedules, work remotely or even work less hours, as long as you meet the project deadlines.
Contractors often charge higher rates than employees due to their specialized skills and expertise. Additionally, contractors don't have to pay payroll taxes, unemployment insurance, or other benefits, which means you get to keep a larger portion of their earnings.
As a contractor, you have more control over the work you do, the clients you work with, and the projects you take on. This can lead to greater job satisfaction and more fulfilling work.
Contractors often work on a project-by-project basis, which means you get to work on a variety of different projects and with different clients. This can help keep the work interesting and prevent boredom from setting in.
As a contractor, you are your own boss. You get to make your own decisions, set your own goals, and be responsible for your own success. This can be empowering and fulfilling for many people.
Contractors can often deduct business expenses on their taxes, which can lead to tax savings (Outside IR35 only).
What is IR35 and why is it important?
IR35 is a piece of tax legislation introduced by the UK government to combat tax avoidance by individuals who provide a service through a limited company, but who would be classified as employees if you were providing their services directly to the end client. The aim of IR35 is to ensure that these individuals, who are often referred to as "disguised employees", pay the same amount of tax and National Insurance contributions as regular employees. The legislation has been in place since 2000, but in April 2021, the government introduced new changes that shifted the responsibility for determining an individual's IR35 status from the individual to the end client. This means that the end client is responsible for assessing the IR35 status for the role and for deducting tax and National Insurance contributions at source if it does. The determination is made by the end client, in most cases, you will be inside IR35 meaning you will work through an Umbrella company. However, few roles are outside IR35 allowing you to work through a limited company.
What is an Umbrella company and how does it work?
An umbrella company provides employment services to contractors, freelancers and other self-employed individuals. When a contractor joins an umbrella company, you become an employee of the company (Employed Consultant), rather than working as a self-employed individual. This means that the umbrella company is responsible for processing the contractor's payroll, deducting taxes and National Insurance contributions. The contractor will typically submit timesheets or invoices to the umbrella company, which will then bill the contractor's clients and pay the contractor a salary. In exchange for these services, the umbrella company will charge the contractor a fee, which is typically a percentage of the contractor's earnings. The exact fee structure may vary between different umbrella companies. Overall, the key benefit of using an umbrella company is that it allows contractors to work for multiple clients while having the administrative burden of being an employer taken care of by a third party.
Holidays, pension and sick pay
Most umbrella companies offer their employees paid holiday entitlement, which is calculated as a percentage of your pay – and deducted from your hourly/daily rate.
Pension arrangements can vary depending on the umbrella company you are working with. Some umbrella companies offer their employees access to a workplace pension scheme, while others may require you to set up your own pension arrangement.
Sick pay arrangements can vary depending on the umbrella company you are working with. Some umbrella companies may offer their employees statutory sick pay in line with government guidelines, while others may offer an enhanced sick pay package.
Proclinical and Contracting
As you will be conducting your assignment through a fully compliant management company, Proclinical has provided a list of the management companies that we have audited to ensure you are compliant to use for your assignment.
• Employment: the management company will employ you for the duration of the assignment and satisfy the requirements of UK employment legislation and Agency Workers Regulations
• Income and statutory deductions: all income will be declared, and statutory deductions will be made at source to satisfy UK tax, social security and employment legislation
• Insurances: the management company has provided evidence of professional indemnity insurance providing specific cover for clinical, medical or regulatory assignment content
• Registration: the management company has provided confirmation that it is appropriately registered with the relevant authorities in the UK