Contractor versus Employed

It's the most interesting question you can have asked when working in my industry, and there is no correct answer:


It is likely that you are probably unaware of the meaning of the question, as was I when I first started applying for jobs.  It took a few weeks for me to see the whole picture, with both sides of the argument, and to see the positives and negatives of both, but before that it's probably best to describe what the difference is.

In the UK Engineering industry, and especially the Oil and Gas "scene' in Aberdeen, there are two sides to the business.  You are either a "Staffie" or a 'Contractor".  The difference is pretty simple at first; the staff member is a person contracted to the company, like a normal job, and is paid by the companies payroll team.  You Pay As You Earn (PAYE) tax, directly out of your wage, and you have the added benefits of being employed under a contract, with redundancy pay, protection against random firings, and get the benefits of having paid holidays.  

A contractor is the opposite.  They are essentially miniature companies that are hired by the over all company to work there.  Imagine BP asked Wood Group to design a platform; WG are considered the Engineering Contractor as BP has contracted the job out to them.  Then, WG employ various people to then do the work, by either filling the roles with staff members or by Contracting a contractor employee who actually isnot a person, but is billed to a company that they have set up.  Normally a limited company, they are one of the bare minimum shareholders, and pay them selves a modest wage, but take the rest of the income that the one person company makes as their own salary.

The reason for this is that the contractor can be charge inflated wages and sometimes the difference is around 40%-60% more than the similar staff member.  The problem with this is that they have no obligation to you - when you don't work you don't get paid, and when you are fired you get little notice and no severance.  It's a risk-benefit balance that is done.

In my field most engineers are contractors; at least, the older ones are.  They will implore you that this is the correct way to go about your life - my father is such a contractor.  However, that was during the boom.  If a bust in North Sea is coming (and will likely come) staff positions might be worthwhile.  And considering the drive to recruit staff graduates it might be the scene of some changes in the balance towards less contractors and more staff members.  Currently, I am unlikely to move to contractor status in the future.  I like the company I work for and the work I do there, and also like what I get paid.  So it's unlikely to change.

Also, the way that it works is a little problematic - because you are technically a company, yet working as a single person, you have to be careful to toe the line when it comes to tax.  You have to divide the money up correctly, pay your self correctly, act like a company essentially.  If you don't the taxman might take a keen interest in your money comings and goings, and worst of all will task you with proving that you are not avoiding paying tax (which, you are, of course, but through a legal loop hole that is pretty solid right now, but could shrink in the future, and has done in the past).  Ethically it is a grey area too.

This is the way that the UK is, and it's pretty annoying to get your head around.  It also breeds disloyalty to companies.  If you are not tied to a place you can easily get a few quid elsewhere off the bat and ship yourself there without any penalties.  It's a harsh game.  This disloaylty was exaplined by myself to a collague when enquiring about the potential for rivalary between the recently merged Wood Group and PSN; would the two companies really get along if they had been rivals before?

The answer is yes because most people who work for Wood Group probably have worked for PSN and vice versa in the past.  The nature of the business means that people "churn" all the time between jobs.  It means that you have little brand loyalty if you are not employed directly to the company.  In the US it's the exact opposite, and for a while I always wondered why it was that way, but this colleague came up with the answer - it is benefits.  In Canada's engineering industry there is around 30% more contractors to staff, which is similar to the UK, and the reason we supposed?

Universal Healthcare.

When you are working in the US you have such important insurance benefits tied to good jobs it is unlikely that you would jeapordise them for the thrill of an extra buck an hour.  In the UK and Canada, with free(ish) healthcare across the board for anyone, you have no reason to have good insurance cover when it comes to healthcare.  

So that's the difference between Contractor and Staff from my perspective right now.  In a few years it might change (and likely will).