Podcast Ep 118: Jimmy Sheehan from Contracting Plus reveals how workers in the project economy are earning more than their salaried counterparts.
Highly-skilled professional contractors play an essential role in supporting innovation and entrepreneurship across many industries in Ireland. But up until recently their input has been unacknowledged, often dismissed as the work of freelancers or contractors.
That changed this year when Trinity Business School published the first research of its kind into the working lives of professional contractors, many of whom earn more than one and a half times the earnings of equivalent PAYE employees.
“Contractors typically earn more than 50% more than an employee in the same position”
Ireland’s Project Economy 2022, an annual report by Trinity Business School and Contracting PLUS, found that high-skilled independent contractors earn more than equivalent employees and those working in the project economy earn 73% more than similar occupation employees. Female independent contractors achieve and average of €519 per day and male contractors secure an average of €579 per day.
High-skilled independent contractors working in the gig economy earn an average of 56% more than equivalent occupation employees.
The survey also reveals that independent contractors are upbeat about business prospects for the medium term with positive freelance sector and Irish economy confidence indices scores. A total of 73% of contractors expect their sector to perform better over the next 3-5 years than currently. Just 6% expect it to perform less well. In terms of the Irish economy, 76% of independent contractors expect it to perform better in 2022 than 2021. Just 7% expect it to perform worse.
How the project economy supports the real economy
ThinkBusiness spoke to Jimmy Sheehan, an accountant by profession and the founder and managing director of Contracting PLUS, a business that delivers compliant accountancy services to professional contractors. Established in 2002 by Sheehan, the business is at the forefront of technology with its own software enabling contractors to access their accounts 24/7 online and from their smartphones. As well as tax advice, it helps contractors to find the best vehicle to establish themselves as businesses in their own right, either through umbrella and PAYE umbrella companies or managing the transition to becoming a personal limited company.
Asked if he felt the pandemic and the move to remote working has actually encouraged more people with professional skills to go solo, so to speak, and offer their skills as contractors or on a freelance basis.
“I think it has probably brought it to the forefront. People have worked at home as contractors and freelancers for many years or worked from client offices. The research we did with Trinity Business School is the first research of its kind in Ireland because the ‘project economy’ broadly refers to the type of work carried out by independent, self-employed professionals. People might refer to themselves as contractors, or freelancers or consultants, but the common thread throughout all of that is that these people are highly-educated, typically to degree-level or above, and are in the service industry by which I mean they are generating income through their professional skills or knowledge and are working on a contract basis or service basis for as long as a client or company needs you.”
Sheehan is essentially describing the scores of project managers, lawyers, journalists, software developers, designers, architects, accountants and all kinds of people with critical domain experience and expertise whose services are invaluable to a multitude of firms but on a basis that is advantageous for both contractor and client.
“The older you get in the project economy, the more you can earn”
“There’s no doubt working from home has made this way of working more attractive. I think that people who are getting to work from home are beginning to realise that consultants, contractors and freelancers have been doing this for a long time.
“Yes, there’s an element of risk involved because there is no guarantee that the same company won’t give you a contract the next time around. But that’s actually factored into how much they earn. The report itself shows that contractors typically earn more than 50% more than an employee in the same position.
“We are talking about highly-skilled contractors, 86% of whom are at a bachelor’s degree or higher. These are well paid contractors for whom the average rate across all the industry was €565 per day.
“It is potentially a riskier way of working as there’s no guarantee of where your next contract is coming from, but that premium is built into how much you earn on a daily or project-by-project basis.”
He noted that while consultants and contractors have typically thrived in areas like project management, finance and technology, a growing area is the field of pharmaceuticals and medical devices. “There are people involved in project management across all industries and in such areas as manufacturing and logistics with contracts lasting typically six to 12 months.”
So what are the motivations that encourage people to become consultants or contractors. Is it the money, being their own boss or the flexibility?
“There’s no one size fits all answer because people have different motivations. Certainly money is a big factor, it’s a great way to earn more money because the premiums that are paid. It can certainly be a healthy premium in markets where there is a skills shortage.
“But there’s also the office politics that people want to get away from; they just want to do the work they enjoy doing and switch off at the weekends and not worry about the political dance. It could be the flexibility. It could be the ability to work with different companies and gain new skills, new experiences. The more companies you work with the more processes you learn and the bigger your network becomes. So these are all really positive things.”
An interesting facet of the project economy is that experience pays. “The older you get in the project economy, the more you can earn. It’s not just in terms of your actual day rate but also in terms of your annual equivalent earnings. Even as you go into your 60s you earn more per day. Typically a lot of people in their 30s are in the contracting world. The oldest respondent to the report was 85 and still working while the youngest was 24. The median age of contractors in Ireland is well into their 40s.”
Another eye-opener in the report was the length of gigs in this specialised gig economy. “Much of the work they do is niche and the researchers found that 85% of all survey respondents were working on longer-term contracts, with just 15% working on what could be called shorter-term tasks or gigs.”
From the point of view of businesses, the ability to take on freelance consultants or contractors frees them up from PAYE/PRSI costs is one practicality, but crucially it is the ability to tap into rare skillsets or plug skill shortages that makes the project economy so critical.
Sheehan believes the project economy is a vital component of the overall economy.
“Professor Andrew Burke was the lead researcher on Ireland’s Project Economy and his research elsewhere in the UK and Europe found that at least 11% of the overall workforce in companies is contingent on contractors. Those companies that use contractors actually generate more profit, grow faster and create more employment because the success of what began as a project requires full-time employees to maintain and manage that project, while the contractor moves onto the next company or project.”
He added that contractors help to fill peaks and troughs in the labour market.
“The research proves that contractors and freelancers are needed in the economy because they actually help generate net employment growth across the board.”