What is permalancing — and what are the pros and cons?

·Writer, Yahoo Finance UK


The number of self-employed people is on the rise. Photo: Getty
The number of self-employed people is on the rise. Photo: Getty

For many years, working your way up the same company and staying there for the duration of your career was normal. But times have changed. Not only is it common for employees to move more frequently between jobs, an increasing number of people are turning to self-employment.

More than 5 million people work for themselves and the number has been rising gradually since the financial crash just over a decade ago. And in today’s gig economy, another phenomenon is on the rise too.

Not quite freelancers, but not full-time employees - more people are now “permalancers” instead.

What is permalancing?

“The number of people moving towards self-employed status is on the rise and, naturally, so will the need for employers to adjust roles to reflect the changing modes of working and hiring – this is the premise of permalancing,” says Kate Palmer, associate director of advisory at Peninsula.

“It refers to a freelancer whose role within a company has turned into a full-time position because they are provided with a significant workload by one employer.”

While freelancers work with multiple clients on a project-to-project basis, permalancers tend to work for just one company that offers them regular work. Like freelancers, permalancers are paid for their work but don’t receive anything more – like paid annual leave.

Although they tend to work for one or two businesses, they’re not tied to any one company and can work elsewhere too. It’s a middle ground between complete self-employment and corporate working structures.

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“Permalancers take up contracts with various companies rather than selling in their work on a piecemeal basis, so instead of submitting an article and charging for it, you would have the security of a contract to fall back on,” says Jonathan Richards, CEO & founder of the HR firm Breathe. “This is what makes the concept so attractive, especially for those looking to pursue side projects and have the desire to fit their work around their life, not the other way around.”

What are the pros of permalancing?

It’s easy to see why more people than ever before are choosing permalancing. It offers freedom and flexibility and enables people to choose their own hours and location. And in an economy where even staff jobs aren’t always permanent, many are choosing autonomy over traditional job security. “This concept really speaks to those who favour the flexibility of freelancing, for example those with young families or who are averse to the traditional 9-5 working structure that many find comforting and stabilising,” Richards says.

Essentially, it boils down to personal preference. For those with entrepreneurial spirit, permalancing seems like a great idea.

“Being your own boss is a popular aspiration, so permalancing could act as the first step towards taking the training wheels off, so to speak, and going it alone into the realm of self-employment, which can be very daunting,” he adds. “Creating your own schedule and working in your own way definitely suits some people, and permalancing ensures a steady flow of income is guaranteed.”

Another key benefit is the possibility for an infinite potential income stream. Permalancing means you have the freedom to work for as many places as you want to for any amount of time.

“Usually, businesses won't insist on any conflict of interest clauses or non-compete agreements which means contractors have free rein over who they work for and how many hours they choose to do,” says Richards. “That of course will come with some tax implications, but if you imagine how much this could mean fiscally, it's no wonder people are starting to pursue permalancing as a lifestyle choice.”

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What are the cons of permalancing?

It’s not all plain sailing for permalancers, though. The unpredictable nature of the work will depend on each employer and what kind of terms are in the contracts they're issuing.

“It's a bit of a labour law loophole in many ways, so of course there's the downside that some companies might take advantage of workers,” Richard says. “Unlike full time staff, permalancers are not offered any perks or holiday benefits, but are often working similar hours and shifts.”

In some cases, working 25-30 hours a week can easily slide into full-time hours, which would then make it hard to fit in time for other contracts and still be productive. Although you get freedom when you are a freelancer, it also means you have to handle your own tax which can be a time-consuming burden. Insecurity is an issue, too - a freelancer can easily be replaced by another contractor.

“These permalance contracts can also give employers the power to end contracts at will, and deny work if they want, which can mean success isn't guaranteed. The financial drawbacks are worth bearing in mind, as companies can essentially hire full time workers without having to make any real commitments,” Richard adds.

Permalancers also don’t receive the same perks as full-time employees because of their self-employed status, such as pension contributions, paid annual leave or long-term guarantees.

“On both sides, it may be the case that care is taken when formulating contracts for these roles as the laws surrounding this area is still very much uncertain and employers may find that they are unsure what steps to take to negotiate the best contracts for the interest of their business,” Palmer says.

“Still, if employers go ahead due to the advantages permalancers present, they will need to keep in mind that the level of responsibility placed on a permalancer does not class them as full-on employees. Therefore, they are not entitled to additional rights than those afforded to self-employed people.”