Differences Between Permanent, Temporary and Contract Work

Differences Between Permanent, Temporary and Contract Work

Broadly speaking, there are three categories: permanent, temporary and contract work. Temporary and contract assignments often use interchangeable language and your Change consultant will be able to guide you through the differences, making you completely aware of the working status of each. The significant differentiator in a contract is your own “employment status” with a client/employer.  

Where you work for an organisation as a permanent member of staff (or are contracted for a fixed period of time on their payroll) or work through Change where we pay you directly, then you will be subject to National Insurance and income tax. The ruling rates and bandings of current UK income tax and National insurance can be found on GovUK, at Income Tax and National Insurance 


Clients require a member of staff who will work with them on a permanent employment contract. This also includes fixed term contracts (where you will be contracted through the client/employer's payroll). For permanent positions, you will be eligible for full employee benefits offered by the client/employer. This can vary for fixed-term contracts (which will be determined by the employer). You will continue to be PAYE (for HMRC purposes).  


Clients require a member of staff to work with them on a flexible basis. Typically, these assignments will be for a fixed term and cover increases in workload, illness cover or maternity/paternity cover. You will have a contract of services (through Change) for an agreed hourly or daily rate, which will cover the time you work and you will be entitled to holidays of up to 28 days per annum, based on the amount of time that you work. You will continue to be PAYE (for HMRC purposes).  

Agency Worker Regulations that came into effect in 2011 also give temporary workers eligibility to qualify for equal treatment after 12 weeks in the same job with the same end client, which, in broad terms, gives entitlement to the same basic terms and conditions of “comparable” work in the same workplace. Full details on Agency Worker Regulations can be found at Agency Workers Your Rights. Additionally, pension auto-enrolment legislation entitles you pension contributions defined under the legislation for the qualifying period of your temporary assignment. Full details on pension auto-enrolment can be found at What is auto-enrolment?  


Your legal working status will need to be reflective of the nature of the contract/assignment and “contracting/payment vehicle” to ensure that you are adhering to the appropriate taxation and legislatory requirements.   Change will inform you of the working requirements of each assignment. However, we will never advise you on legal status – you should always take advice from a professional advisor if you are in doubt.  

An umbrella company acts as your employer, and you will work through a contract of employment with that umbrella company. Rather than Change paying you directly, Change will pay the umbrella company, who in turn, will then pay you. Dependent on the nature of the work, you may be eligible to reclaim certain expenses applicable to your contract (as advised by the umbrella company) that will reduce your tax obligation.  

For certain assignments, as advised by your professional advisor, working through a private limited company may be appropriate. Details can be found at Limited Company Formation. If you set up a limited company you will have certain legal obligations. Your professional advisor will advise you of these and further details on these can be found at Running a Limited Company. IR35 UK tax legislation is designed to ensure appropriate rates and levels of taxation and National Insurance are applied to work carried out. Details can be found at: Tax IR35 

If you are in any doubt with regard to your working status, please contact a professional advisor.

Looking for a position in any one of the above fields? Change Recruitment offer a host of positions. Check out our jobs board for more information; or for a confidential conversation about your next career role, please contact Change.

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