Despite the many benefits of contracting over permanent employment, such as greater work freedom, the opportunity to be your own boss and potentially higher earnings, there are also risks that contractors open themselves up to.

But as with any risk there are ways to combat them, so here are the five most common concerns that are keeping contractors awake at night and what you can do to sleep easy.


IR35 affects all contractors who do not meet the Inland Revenue’s definition of ‘self-employment’, and was designed to stop contractors working as ‘disguised employees’, by taxing them at a rate similar to employment.

Contractors benefit from tax advantages, therefore if you are working as a contractor but with the same responsibilities, control and benefits as a permanent employee – you are not entitled a different tax regime and should declare yourself ‘inside’ IR35. You must make sure that both your contract and working practices reflect that you are working as an independent contractor and therefore ‘outside’ IR35. IR35 contract reviews are both highly recommended.

If you currently work as a contractor, are considering becoming a contractor or own a business that hires contractors, IR35 is something that you should be familiar with: What is IR35 and how does it apply to me?

Legal responsibilities

Contractors provide professional advice and services which their clients rely on, therefore if something goes wrong and it causes the client financial loss they have a legal right to claim against you.

No matter how much skill and care you carry out on a contract, there is always the potential for you to make a mistake. Not only this but clients may also allege contractors have made mistakes or breached their contract when they have not.

Professional indemnity insurance can protect contractors against such claims, and may cover  legal costs due to negligence, or compensation needed to pay to correct a mistake. Not only could professional indemnity insurance protect you and give you peace of mind, it also provides reassurance to your clients. In many contracts it is now often specified as a requirement. Hiscox Business Insurance for Contractors encorporates a tailored professional indemnity policy in order to offer the best level of protection to independent contractors.

Late payments

Unfortunately there are always going to be companies that pay late, but there are steps that contractors can put in place to make sure that they don’t get caught out by late, incomplete or non-payers.

Firstly, before you commit yourself to a contract you should perform a credit assessment of the client, recruitment and/or payroll company to ensure that the company can and will pay you for your services. You should also ensure that your invoice payment terms are confirmed and your documentation is always correct first time so not to give them an excuse to delay payment.

Payment reminder letters and final demands should then be sent if the payment becomes increasingly late. The last resort is a small claims court  action .

Bench time

Long periods of time ‘on the bench’, or without a contract, can be a scary thought for many contractors. Sometimes it simply won’t be possible to continue going straight from one contract to the next, and you may find that you will have weeks or possibly months in between contracts. Contractors should be very wary of this as it is certainly one of the biggest risks you take when heading out on your own. In order to tackle periods of bench time you should always be building up a war chest, keeping aside enough earnings to see you through any prolonged time without work.


As a contractor there are many different factors you may use to set your daily rate including your skillset, years of experience, how much you money you require to live on etc. However rates for contractors are ultimately down to the client, and will vary depending on which industry you are in. The best way to ensure you are achieving the rates you have set for yourself is to keep your current skillset as up-to-date as possible, embarking on training where necessary. You may also consider training for new skills to add to your portfolio where they are particularly high in demand and are fetching in higher rates.

For more information on all things contracting and more advice from Laura and her team, please visit ContractorUK.

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