Day rate vs permanent salary?

[cheadle hulme]

Just been offered a role as an assistant vice president with an investment bank. Salary now been discussed and its not quite where I expected it to be.

My background is as a management accountant in financial services, specialising in high volume reconciliations and control reporting.

I currently work as a contractor on a ltd company basis. I charge, say £100 per day. I have previously worked on the assumption that 200 days multiplied by your day rate gives an approximation of annualised salary.

In this instance I would be expecting £20k per annum, but the offered salary is half that.

Its a great role, and I have no aversion to going back on PAYE. There will be pension, bonus etc as well.

BUT, half the salary? Anyone else have views on converting day rates to perm salaries?

[craigjm]

The basic assumption in most organisations is that permanent employees work 220 days a year when you take into account annual leave, weekends and bank holidays. If I was looking at permanent jobs then headline salary is what I look at. Day rates tend to be paid to contractors and therefore are higher to compensate for the "insecurity" and the lack of additional benefits like sick pay etc.

[Piersman2]

craigjm said:

The basic assumption in most organisations is that permanent employees work 220 days a year when you take into account annual leave, weekends and bank holidays. If I was looking at permanent jobs then headline salary is what I look at. Day rates tend to be paid to contractors and therefore are higher to compensate for the "insecurity" and the lack of additional benefits like sick pay etc.

This. Which is why I've been contract for over 20 years now.

The permies can have the holidays and sick pay... and the half money that goes with it.

To the OP, as above, you will not find a staff pay rate that equalises to the 220 day rule for a similar job. Although half seems a little low, about 2/3rds I would have thought.

Shows how much of an overhead a staff position carries compared to a contractor. That 1/3rd is the bit the employer has to keep in the bank for all the staff perks and liabilities that don't apply to a contractor.

[craigjm]

Agreed. The "on costs" of an employee are generally around 30%

[Olivera]

What you have been offered doesn't sound particularly attractive. If you're in demand as as contractor then don't even consider it.

[NorthernBoy]

cheadle hulme said:

Just been offered a role as an assistant vice president with an investment bank. Salary now been discussed and its not quite where I expected it to be.

My background is as a management accountant in financial services, specialising in high volume reconciliations and control reporting.

I currently work as a contractor on a ltd company basis. I charge, say £100 per day. I have previously worked on the assumption that 200 days multiplied by your day rate gives an approximation of annualised salary.

In this instance I would be expecting £20k per annum, but the offered salary is half that.

Its a great role, and I have no aversion to going back on PAYE. There will be pension, bonus etc as well.

BUT, half the salary? Anyone else have views on converting day rates to perm salaries?

Something sounds very wrong with those numbers. A graduate fresh out of college at Analyst level can expect to start on £40,000 a year, and to go up reasonably sharpish from there. AVP is not a grade that existed when I was on my way up, but associates can expect a good step up from analysts, and VPs in support roles should be on £80k+

I've never heard of anyone in a bank being paid £10,000. Even out interns who come in for the summer and contribute close to nothing get around £30k pro-rata.

Are you sure that there's not been some sort of misunderstanding?

[Piersman2]

NorthernBoy said:

Something sounds very wrong with those numbers. A graduate fresh out of college at Analyst level can expect to start on £40,000 a year, and to go up reasonably sharpish from there. AVP is not a grade that existed when I was on my way up, but associates can expect a good step up from analysts, and VPs in support roles should be on £80k+

I've never heard of anyone in a bank being paid £10,000. Even out interns who come in for the summer and contribute close to nothing get around £30k pro-rata.

Are you sure that there's not been some sort of misunderstanding?

You're a permie aren't you?

The numbers in the OP were purely indicative, as he pointed out.

[randlemarcus]

NorthernBoy said:

Something sounds very wrong with those numbers. A graduate fresh out of college at Analyst level can expect to start on £40,000 a year, and to go up reasonably sharpish from there. AVP is not a grade that existed when I was on my way up, but associates can expect a good step up from analysts, and VPs in support roles should be on £80k+

I've never heard of anyone in a bank being paid £10,000. Even out interns who come in for the summer and contribute close to nothing get around £30k pro-rata.

Are you sure that there's not been some sort of misunderstanding?

Perhaps the whoosh parrot distracted you from the rather nice way of not actually discussing vulgar actual numbers?

[deckster]

cheadle hulme said:

Just been offered a role as an assistant vice president with an investment bank. Salary now been discussed and its not quite where I expected it to be.

My background is as a management accountant in financial services, specialising in high volume reconciliations and control reporting.

I currently work as a contractor on a ltd company basis. I charge, say £100 per day. I have previously worked on the assumption that 200 days multiplied by your day rate gives an approximation of annualised salary.

In this instance I would be expecting £20k per annum, but the offered salary is half that.

Its a great role, and I have no aversion to going back on PAYE. There will be pension, bonus etc as well.

BUT, half the salary? Anyone else have views on converting day rates to perm salaries?

The rule of thumb I have seen work well is 1000x your hourly rate would be a top-end permie salary for the same role. So taking your £100/day gives an annual salary of £12.5k, not too far off the £10k you have been offered. Add pension, bonus etc. and you're pretty much there. Doesn't sound too shabby to me.

Expecting to get anything like 200x day rate as a permie is, quite rightly, cloud cuckoo land.

[NorthernBoy]

randlemarcus said:

Perhaps the whoosh parrot distracted you from the rather nice way of not actually discussing vulgar actual numbers?

Oh yes, sorry, it was an example, not actual stats.

In that case, some actual numbers would be very helpful. For one thing, the fixed salary will not contain a bonus element, and even at AVP level, that could well be as much again as the salary was.

In addition, of course, there's a vast potential upside in the salaried job. We are in a downturn, still, in banking, but it should be quite easy to move up quite quickly to, and through, VP level, and that could well coincide with a recovery in overall pay levels.

[hungry_hog]

I've done some calculations here. I have put actual numbers in as I think it helps, and don't see why it's vulgar on a car forum where we discuss how much we pay for cars and all kinds of other stuff.

Contract
If you look at Senior Business Analyst roles - a "good" rate would be £60 per hour in the City
Based on an 8 hour day; £480 per day
Let's assume you work 10 months a year = 200 days
200 x 480 = 96,000
Via Ltd company - take home 75%
Take home: £72,000

Permie
Based on the 1000x rule (which I think is a solid one), salary of £60,000
Take home: £40,000

So, as the second poster said, as a contractor you almost double your money
You don't have to do appraisals or that other rubbish, or get involved in politics

I have also assumed 75% and 10 months, which are both conservative

So basically yes, switching from contract to permie entails a large pay cut. The above is based on my narrow experience of banking IT

Edited by hungry_hog on Wednesday 9th May 23:42

Edited by hungry_hog on Wednesday 9th May 23:44

[eliot]

Using the example above exactly, what income figure would a mortgage company lend against ? (not the 72k as i understand it, as i assume you are using dividends as payment)

[bigandclever]

I tend to use the broad-brush 'multiply hourly rate by 1000' to compare contractor rate to permie rate.

eliot said:

Using the example above exactly, what income figure would a mortgage company lend against ? (not the 72k as i understand it, as i assume you are using dividends as payment)

Some lenders will take day rate alone as the driving figure (Halifax did for me). So, for example, someone like contractormoney.com suggest a day rate of £60 would enable borrowings of £432000. Naturally all sorts of caveats apply.

[Olf]

My stats and a bit more info...

I did it a few years back - the conversion for me was about 1400x so adding the pension, shares, bonus and other stuff I felt I got a good deal - That was on the eve of the economic shock but it's all relative if the rate and salary offer were both on the high side.

Was it painful - well no not really because as a cautious contractor I only spent and took a third of what I earnt anyway, the rest stayed in the bank for a rainy day. I then used what was in the bank to sub myself substantially for two years softening the shock of the change and tiding me over till the share options and bonuses kicked in properly in the staff job. Would I go back - yes at the drop of a hat as soon as I don't enjoy the staff job, but until then the pension and trimmings are nice and I'm happy and I like being part of something bigger - but that's a character trait I suppose. I am almost sure I'll go contract again within the next 5 years if I don't feel the career gamble/opportunities are paying off because the world I work in offers very stable and high paid contractor work with short days and no weekends whereas the staff job is significantly more stressful.

Edited by Olf on Thursday 10th May 04:22

[cheadle hulme]

deckster said:

The rule of thumb I have seen work well is 1000x your hourly rate would be a top-end permie salary for the same role. So taking your £100/day gives an annual salary of £12.5k, not too far off the £10k you have been offered. Add pension, bonus etc. and you're pretty much there. Doesn't sound too shabby to me.

Expecting to get anything like 200x day rate as a permie is, quite rightly, cloud cuckoo land.

I agree, I wasn't expecting 200x day rate, its just that I had seen it previously bandied about.

1000x hourly rate as you say gives £12.5k, (assuming 8 hr days!!) so the base salary is effectively 20% lower than I might expect.

They're sending me a contract with the additional package details so I can mull it over.

This is for BoA Merril Lynch in Chester. They're moving as many middle office roles out of Canary Wharf as they can to reduce costs. Sounds like there will be plenty of opportunities, its just a big headline drop and the tax % is horrendous after being a Ltdco.

[mattnunn]

I've been contracting for 8 years, if I was to take a permie job in my industry I'd be looking at halving my take home.

It's not just the holidays and sick the company has to consider, pension liability is the big one for them I suspect, Employees NI, healthcare etc...

OP I'm sure you're aware that the failure of IR35 and recent high profile new items of public sector senior people working through Ltd companies has forced a mood of change in whitehall and from what I understand new dictats will prevent anyone with a longterm "strategic" interest in a company will have to be PAYE in future.

Luckilly I'm just a trained chimp.

[Grey Ghost]

cheadle hulme said:

This is for BoA Merril Lynch in Chester. They're moving as many middle office roles out of Canary Wharf as they can to reduce costs.

This is why the role is not paying the level you feel it should. The bank is looking to cut costs whilst maintaining it's structure regarding job descriptions and responsibility levels. A while ago one of the other big American banks moved a whole raft of jos up to Manchester and the AVP and VP roles they were looking to fill had salary ranges at least 35% lower than London rates.

[UpTheIron]

cheadle hulme said:

This is for BoA Merril Lynch in Chester. They're moving as many middle office roles out of Canary Wharf as they can to reduce costs. Sounds like there will be plenty of opportunities, its just a big headline drop and the tax % is horrendous after being a Ltdco.

Where do you want to work? Chase the money in the City, or have (almost certainly) a better quality of life? Being 20% down doesn't sound so bad if you can afford it - I'll bet you get that time back on reduced commutes... not that simple though as I know (contractor, live Hertfordshire, currently work in Manchester!)

[98elise]

For what its worth, my contract rate is just under double my permi salary (assuming fully employed).

Once you take into account all the permie extra's its about 50% higher.

Take out a few months of unemployment, and its much less.

[98elise]

For what its worth, my contract rate is just under double my permi salary (assuming fully employed).

Once you take into account all the permie extra's its about 50% higher.

Take out a few months of unemployment, and its much less.