5 Key Considerations Before Becoming a Contractor

In recent years, more people have moved away from traditional employment to become self-employed contractors. The appeal is clear such as greater control over your career, flexibility, and potentially higher earnings.

However, contracting comes with challenges, and it’s important to weigh up the pros and cons before making the leap. Here are five key factors to consider:

 

1. Job Security vs. Flexibility

As an employee, you’re protected by employment laws, ensuring rights such as redundancy pay, sick leave, and unfair dismissal protections. Contractors, however, forfeit these rights and are often the first to lose work when demand drops.

On the flip side, contracting gives you full control over your hours, workload, and career progression.  The better you manage your projects, the more you can earn.

 

2. Earnings & Payment Terms

Contractors typically earn higher rates than employees doing the same job, as employers don’t have to cover holiday pay, sick leave, or PRSI contributions.

However, unlike employees who receive a regular salary, contractors are treated like suppliers meaning payment delays can be an issue. Late payments can cause cash flow problems, so it’s crucial to have a financial buffer and clear payment terms in place.

 

3. Travel & Work Opportunities

Contracting can open doors to international opportunities, especially in industries with skill shortages. Short term contracts abroad can be financially rewarding.

However, if local work is scarce, you may need to travel further than expected, which can be challenging if you have family commitments.

 

4. Social Welfare & PRSI Contributions

Employees pay Class A PRSI, which entitles them to benefits like jobseeker’s allowance and disability payments. Contractors pay Class S PRSI, which offers fewer benefits which can mean no entitlement to jobseeker’s benefit if work dries up.

It’s worth considering income protection insurance to safeguard against unexpected financial difficulties.

 

5. Tax & Administration

Employees have their tax deducted at source by their employer, making tax compliance straightforward. Contractors, however, must register for income tax and potentially VAT, payroll taxes and Relevant Contracts Tax.

Missing tax deadlines can lead to penalties, and Revenue has increased audits of contractors in recent years. If you decide to operate through a limited company, you’ll also need to file annual returns with the Companies Registration Office.

 

We Can Help

Contracting can be highly rewarding, but it requires careful planning. Having an accountant who understands the industry can help you navigate tax, compliance, and financial management while ensuring you avoid the common pitfalls. Contact us today to book an initial consultation with your accountant.

 

 

 

Last updated: 16th July 2025