Why use a Contractor Management Company?

I don't see why I should use a Contractor Management company - surely I can just set up my own company and get paid through that. I'll do all the administration myself. I've got some spare time on the weekends - how hard can it be?
Contractor Taxation Vocabulary: 

We get asked this question alot and it boils down to three things:

  1. MONEY
  2. TIME
  3. RISK


Contractor Management Companies save you money. They understand the tax law better than you and are able to structure their services accordingly. They know all the loopholes and possibilities in terms of assessing and filing your taxes. They also operate under costs of scale - because they run invoices and process expenses and tax returns for thousands of contractors the cost of delivery is lower. This is reflected in their charges. They also save you money on a bunch of related services as they have great purchasing power for insurance, mobile phones, broadband, banking, car & equipment purchase / leasing, health care, gym membership, professional affiliations, training and development, etc.

Also very few contractors actually take the time to work out how much their own spare time is worth. If your employer is paying you by the hour doesn't it make sense to work out where your time is most productively spent? Its an interesting exercise we recommend to everyone. If you want some help - you can use our rough guide here : http://spreadsheets.google.com/ccc?key=rIwbwARMrVtpRnI_RHL3dYg

When you calculate how much money it costs to run your own company:

  • Timesheets, Invoicing, Collecting payment, Chasing late payments.
  • Collating, Recording and Processing Expenses.
  • Calculating, Recording, Filing and Paying Payroll tax and Social Deductions (National Insurance, Social Dues, Medicare Levy, etc). 
  • Calculating dividends or extra disbursements from the company, deducting tax, preparing dividend statements.
  • Bank reconciliation.
  • Calculation of value added tax VAT / Sales Tax / GST
  • Preparing annual accounts.
  • How much does your accountant charge per year? Your book keeper?
  • How much do you spend on insurance? On accounting software?
  • Have you ever had penalties for late or incorrect returns? Had sleepless nights worrying about it? Had trouble getting your accounts prepared in time?


Some people like to do all their own administration. They get a thrill from tracking down each last dollar and cent. They get a flush of satisfaction when they have reconciled their annual bank statements. But most people have an intense dislike of these same activities. For most people its a chore and a burden.

Because they aren't professionals, because it's not their main task it tends to take them longer and be more agonising than for a professional to do it.

I'll give you an example. If your car was broken would you try to fix it yourself or get a mechanic to do it? Its just a piece of machinery - its unlikely that you don't have the physical ability to fix it. All you need to do is get a repair manual, work through the car methodically until you isolate the problem and then get the necessary parts for the repair. But imagine how much time and effort it will take for you to do that as opposed to a skilled mechanic who fixes 10 of them a day? How much is that time worth to you?

How will you spend all the free time that you get from not doing your own administration?


Contractor Management Companies reduce your risk in terms of tax and employment compliance. For sure there are some companies that violate the rules in offering impossible returns - but if you select your provider carefully then you actually get the assurance of a solution approved by the tax authorities. And to back that up you will also have the full protection and support of that organisation if there is a problem.

We had a number of contractors who over a period of months received letters from the Inland Revenue asking them to give more detail about their tax returns. Its a standard automated process and happens to a certain number of people every year. The CMC the contractors were being paid through handled all the communication through their in-house compliance team. Instead of talking to the individuals - the tax office was dealing with a tax lawyer backed by a QC representing a structure approved by the Inland Revenue. As you can imagine, the individual contractors never heard from the tax inspectors.

Would you have that same confidence if your personal company was audited? What resources could you call on to help you? The job seeking piggy was audited a few years ago and foolishly represented itself in the early stages. It was a big mistake. Lets go back to our broken car example - let's say you did get it working yourself but then get inspected by the traffic police. Are you sure your repair kept the car roadworthy? Who's responsible if you accidentally damaged the exhaust and its in violation of the emissions?

Its a big risk to take with your finances.