Do you earn more money as a contractor than as a full time employee? The answer is often yes, but there are things to keep in mind.
Many IT workers have the luxury of choosing between full time work or accepting contracting roles as a way to earn a higher hourly rate.
If you’re trying to figure out which road to go down, it’s helpful to know what the actual difference can be in terms of the numbers.
How Much More Per Hour Do Contractors Earn?
As a rule of thumb, independent contractors can often earn up to 30% more per hour than their full time employee counterparts in the IT industry.
To share an example, in the UK, the average Information Technology (IT) salary is listed as £49,625. According to glassdoor.co.uk, the national average salary for an IT Contractor is £65,913. The difference is more than 30%.
A position such as a Senior Data Analyst may pay an average of £47,807 per year, while a contract role may pay closer to £70,000.
In the USA, the average salary of an IT Contractor is $54,670 per year, while a full time employee may earn around $42,925. Again, the contractor will be earning over 30% more in terms of hourly pay.
For Australia, the average salary for a Senior Software Engineer is $142,052 per year, which is approximately $548 per day. Meanwhile, some contractor roles are advertised as paying up to $880 per day, which far exceeds the average amount a full time specialist would earn. For context, the cost of living in Australia is high, which is why the salaries seem quite different in comparison to the USA and UK.
Rates have risen over the last few years as skilled contractors are in such high demand. If you live outside of Australia, the UK or the USA, it doesn’t mean you can’t find a contract position and stay in your home country. In fact, there may be companies actively seeking offshore workers to support their endeavours.
Contract vs Full Time Pay: What to Keep in Mind
While a higher hourly rate as a contractor makes great sense on paper, it’s worth remembering the reason this type of work is paid more highly.
Firstly, there can be a gap between one contract ending and the other starting. If you’re raising a family or have a passion for travel, the break can be very welcome. Put the extra money you earn aside so you can afford to have time off or not feel rushed in the search for your next role.
Contractors often don’t qualify for sick or holiday pay. The additional hourly rate makes up for this but it will be up to you to keep funds aside so you have money if you’re unable to work.
You may also be expected to bring your own device and cover the cost of owning it as a contractor. This is a tax deductible expense but you’ll need to pay for the equipment up front.
Full time employees may stay with their employer due to incentives such as long service leave, shares in the business and health insurance. This balances out the lower pay rate.
One thing worth noting is how full time employment is no guarantee of job security in this day and age. 2023 is the year of ‘loud layoffs’ and the risk of permanent positions being made redundant. Some of these may be replaced by short term contract roles, which will put contractors even more in demand.
What Works for You?
With contractor rates being so high, it shouldn’t be difficult in 2023 for skilled workers who are great communicators to tap into a steady stream of opportunities. If you’re motivated by money, picking up back-to-back contracts is likely to see you come out on top financially.
If you are reliable, have in-demand skills and can be flexible in accordance with your employer’s needs you will find contracting work is definitely worth exploring.
Find out what employers want in an independent contractor – download Be the Contractor Employers Are Looking For here.