What Is The Difference Between Temporary Workers And Contractors?

May 23, 2019

Categorised in: IR35,

Both temporary workers and contractors work to the understanding that their time spent at a company is limited, either finishing at a fixed date or after a project has been completed. This can lead to these terms being used interchangeably.

However, defining your employment status is crucial for tax reasons and for staying compliant with IR35, and so we explain the distinguishable differences between temporary workers and contractors below.

Temporary Worker Definition

Temporary workers will work for a defined amount of time at a company with the assurance that the period of employment is not permanent. Typically, temporary workers will find their jobs through a recruitment agent, who will help with assigning work and payments. Temporary workers can work through a number of agencies at the same time.

Workers that benefit from temporary work are those that have other commitments and a temporary work schedule can fit around this due to its flexibility. Temporary work is also suited for those that are trying to decide the right career path, and so this type of work can open up many opportunities before they make this decision, such as making contacts and trying a range of different work settings.

Temporary workers word under the Direction, supervision and control of the client.

Contractor Definition

Contractors have more control over their work assignments than temporary workers. Contractors typically run their own business and due to their specialisms, contractors can generally ask for higher pay rates. Just like temporary workers, contractors can also find work through recruitment agencies.

Contractors can decide where they work, when they work and what hours they work. They provide their own equipment and do not receive the same benefits as their clients salaried employees.

A genuine contractor will, when assessed not fall under the IR35 rules and can therefore structure their income at their own risk and choice.

A contractor in some circumstances can be deemed as falling under IR35 and will have equivalent employers NI deductions made by its client from any payment due.

Temporary work pay under PAYE

Under a PAYE contract the worker will be paid basic pay plus holiday pay and the employer will be responsible for all payroll calculations and for payment of employers NI, employers pension and any other applicable employment costs.

Contractor pay – via umbrella company or agency or direct

A contractor will be paid a combined sum which will need to cover the contractors own time (usually a day or hourly rate) pay, employment related costs and any business overheads.  A contractor will also need to provide their own Public Liability insurance cover.

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