What do short-term contractors need to know about their finances?
Businesses and individuals who work regularly on short-term contracts have a lot to deal with. Trying to secure small jobs on a regular basis takes plenty of time and paperwork. Eating into a large chunk of their day. With that, there is plenty of potential for taking on tasks that many companies would turn their noses up at, but the financial aspects of being short-term contractors can seem rather more complicated. Some suppliers will offer supply terms of up to five years most though only offer three and some just the two years its best to have a clear understanding of what you’re getting yourself into first.
As much of this type of work may seem insecure, a handful of financial services are either restricted or, in extreme cases, off-limits. This may seem disheartening, but by knowing what products and services are available to you, short-term contractors can get the same financial provisions as everyone else, without ever having to miss out. It’s a case of shopping around and seeing what is available and accessible to you.
Extra cover and Insurance protection
One product that short-term contractors must look at is insurance. Presently, there are three types of insurance available – professional indemnity, public liability and employer’s liability. Any of these can offer some protection against liabilities such as injuries on your premises. Employers liability is the most important for any company who doesn’t work alone. As it protects you against the cost of compensation claims arising and any employer injury or illness sustained at work. It is a legal requirement if your business employs more one or more person. Regardless of how many years’ experience your company may have, there is always the chance anyone could make a mistake.
It’s only worth taking it out if a business has more than just one director or employee. For self-employed contractors, a professional indemnity makes the most sense, as it covers legal costs in some defences as well as compensation payable to your client to amend any mistakes that are made. Unlike other polices too only one premium needs to be paid to cover and the cover will last a lifetime.
Where short-term contractors are concerned, there may be a little more difficulty in applying for several types of loan. In the summer of 2016, contractors applying for buy-to-let mortgages were facing stricter affordability tests, needing more concrete proof that their income was sufficient to afford such a mortgage. It’s had a major knock on effect now and most people are struggling to avoid sustaining a mortgage.
Being eagle-eyed and spotting contractor-friendly mortgages is a must. Providers like Saffron Building Society have mortgages aimed at short-term contractors who may otherwise find it harder to be accepted for one. These are designed to be more flexible and will take into consideration day rates and long term prospects. To stand a good chance of getting approval for such a mortgage, securing enough work to meet each payment on time is the only thing to do to ensure good chance.
Keeping up to date
Knowing what they can and cannot apply for is a tricky task at the best of times for short-term contractors. Moving from one job to the next in a matter of weeks does involve a little more paperwork, but keeping on top of it will maximise the chances of being able to get insurance, loans, grants and the like sorted for yourself fast.
Calculating the average day rate paid over the course of each month is a must. It’s even more important to have work lined up, so that income is guaranteed to pay for an array of financial services. Keeping the same day rate for each job is useful too, as it makes doing the maths less of a chore and frees you up with more time to do other things.