Cutting-induced plasticity can lead to elevated uncertainties in residual stress measurements made by the contour method. In this study plasticity-induced stress errors are numerically evaluated for a benchmark edge-welded beam to understand the underlying mechanism. Welding and cutting are sequentially simulated by finite element models which have been validated by previous experimental results. It is found that a cutting direction normal to the symmetry plane of the residual stress distribution can lead to a substantially asymmetrical back-calculated stress distribution, owing to cutting-induced plasticity. In general, the stresses at sample edges are most susceptible to error, particularly when the sample is restrained during cutting. Inadequate clamping (far from the plane of cut) can lead to highly concentrated plastic deformation in local regions, and consequently the back-calculated stresses have exceptionally high values and gradients at these locations. Furthermore, the overall stress distribution is skewed towards the end-of-cut side. Adequate clamping (close to the plane of cut) minimises errors in back-calculated stress which becomes insensitive to the cutting direction. For minimal constraint (i.e. solely preventing rigid body motion), the plastic deformation is relatively smoothly distributed, and an optimal cutting direction (i.e. cutting from the base material towards the weld region in a direction that falls within the residual stress symmetry plane) is identified by evaluating the magnitude of stress errors. These findings suggest that cutting process information is important for the evaluation of potential plasticity induced errors in contour method results, and that the cutting direction and clamping strategy can be optimised with an understanding of their effects on plasticity and hence the back calculated stresses.