myChemE

Clients often employ process engineers on short term contracts, for labour flexibility - usually via agencies.
Going into freelance work has many advantages but it is not a decision to be taken lightly.  This article provides some advice on contracting for engineers.

A lot of work for process engineers (or chemical engineers) is project based, where workloads can change dramatically with time.  Consequently, clients often employ process engineers on short term contracts, for labour flexibility.  The engineer trades loss of employee rights (e.g. job security, sickness benefits, paid holiday, company pension) for higher remuneration.

In comparison, to permanent employment, moving into contract or freelance work can be lucrative.  In addition, contracting offers greater freedom, with the chance to work on a range of projects - there is little excuse to become bored!  However, the decision to go into contracting is not to be taken lightly.  In general, contract work is best suited to experienced engineers who have no wish to move into management positions and who are able to accept a lower level of security of income.  This article provides some advice for process engineers considering the move into contracting in the UK, as well as some useful sources of information.

Spare Cash

Contracting is less secure than permanent employment.  Typically clients only need to give one weeks notice - and there is no redundancy pay.  In addition, as there is no sick pay, contractors have to keep enough cash available to cover periods of ill health.  The PCG Guide recommends that contractors keep a fund sufficient to last for six months in an easy access savings account.  Of course, contracting gives the opportunity for greater earning power, which should be used to build up a 'rainy day' account.  If you can afford to save, you can't afford to work contract.

Insurances

As well as rainy day money, contractors should consider the need for insurance.  Key areas where insurances should be considered:

• Sickness cover - whilst savings can be used to cover bouts of minor illness, how would you survive if you were off long term sick?
• Life Insurance - Life insurance is normally provided for permanent employees as part of their company pension.  This is obviously not provided for contractors and, if required, should be purchased separately.
• Professional Insurances - For some clients, professional insurances (professional indemnity / third party liability) are required - this should be clearly stated in the contract.  In addition, if the contractor is required (or decides) to provide a substitute, Employers Liability Insurance is needed.  The PCG website gives a list of insurance brokers providing professional insurances to contractors. 

It is worth shopping around, as many brokers are set up for IT professionals rather than engineers - they can be reluctant to quote upon hearing certain terms such as 'offshore', 'petrochemical' and nuclear'.  Typical costs are in the region of £500 - £600 per year - but this can be treated as a business expense (see tax issues below).

Pensions

Contractors don't get a company pension and need to make their own private arrangements.  Often this involves setting up your own private pension, however, some contractors use other investments, including through an ISA and 'buy to let' properties.  Advice on pensions is outside the scope of this website (and outside of our expertise) - it is recommended that you speak to a professional.