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, so we explain the distinguishable differences between temporary workers and contractors below.


Temporary Worker Definition

Temporary employees 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. These will help them with assigning work and organising their PAYE payments through their Recruitment Agency Payroll System.

Workers that benefit from temporary work are those that tend to have other commitments and choose to have a  work schedule that can fit around their lives due to its flexibility. Temporary work is also suited for those that are trying to decide the right career path, and need to experience different roles and industries. Working through recruitment agencies can create job opportunities that allow them to ‘experience’ before they make this decision, allowing them to try a range of different job settings.

Temporary workers work under the direction, supervision, and control of the client, and are paid on a standard Pay As You Earn basis (PAYE) with standard income tax and NI deductions, workplace pension contribution deductions, and holiday pay is included.


Contractor Definition

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

Contractors can decide where, when, and what hours they work. They provide their own equipment and do not receive the same Employee Benefits as their client’s salaried workers.

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

In some circumstances, they can be deemed to fall under IR35 rules. This will give them equivalent employer’s NI deductions made by their client from any payment due.


Temporary work pay

Under a PAYE Contract, the worker will be paid basic pay plus holiday pay. The employer will be responsible for all recruitment agency payroll calculations and for employers’ NI and pension, as well as any other applicable employment costs.


Contractor pay

A contractor will be paid a combined sum which will need to cover the contractor’s own time (usually a day or hourly rate), employment related costs, and any business overheads.  A contractor will also need to provide their own Public Liability insurance cover, and depending on the method of payroll they may also have to pay a small fee for their payroll processing.


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