Contractors - You still think it is worth it?

Contractors - You still think it is worth it?

Author
Discussion

HannsG

Original Poster:

3,045 posts

134 months

Monday 25th September 2017
quotequote all
Hi,

moved into contracting this year and love the cash.

However, seems to be a lot of seasoned contractors moaning that its not worth it anymore and their own accountants are saying go permie.

I get the IR35 debate. Keep hearing different things though. Some saying it will come in blanket wide into private sector.

Also heard of many contractors have HMRC chase them for taxes etc.

Whats your opinion on this?

Thanks

nbetts

1,455 posts

229 months

Monday 25th September 2017
quotequote all
HannsG said:
Hi,

moved into contracting this year and love the cash.

However, seems to be a lot of seasoned contractors moaning that its not worth it anymore and their own accountants are saying go permie.

I get the IR35 debate. Keep hearing different things though. Some saying it will come in blanket wide into private sector.

Also heard of many contractors have HMRC chase them for taxes etc.

Whats your opinion on this?

Thanks
To cut a long story short - you may just marginally be better off working for yourself - maybe/perhaps.

I have been doing it for twenty years and I am not certain I am better off at all when all things are considered.

XJ75

436 posts

140 months

Monday 25th September 2017
quotequote all
Depends on the difference between perm salary and contractor day rate, which is largely dependent on the industry.

In my industry (IT within Investment Banking), the difference is pretty substantial and even if I was inside IR35 I'd still be better off contracting.

When I compare on a gross basis, even assuming a 10% bonus, 10% pension and about £2k worth of other benefits, the equivalent perm package still works out £30k less and that assumes that as a contractor I take 5 weeks holiday, which I never do.

I don't even think the case for perm job security is valid any more. Most big cost cutting drives result in perm redundancies with firms preferring to keep hold of contractors to remain "tactical".

pherlopolus

2,088 posts

158 months

Monday 25th September 2017
quotequote all
Yes smile

But then I didn't do it just for the money.

I get to work on projects I wouldn't as a permie, I rarely only have 5 weeks off a year, and there just isn't the employers needing my skills local to home.

anonymous-user

54 months

Monday 25th September 2017
quotequote all
My own opinion is most definitely yes. It's a mindset. I enjoy taking the time out to travel, spend with family, hobbies etc and if at the end of the year I make the same as I did permie then I am way more than quids in because no value can be placed on time.

Some people plan their life for retirement, why? Enjoy life now.

I also improve my skill set by self funded study so that also helps.

deckster

9,630 posts

255 months

Monday 25th September 2017
quotequote all
If you're contracting purely for the money, you're doing it wrong in my book. Sure, you can earn at a decent level - particularly when you're young and perhaps the permie roles aren't paying so well - but in reality it's much more about freedom from the greasy ladder, getting away from office politics and the tyranny of the annual review, and being able to plan your life around more than just work. So yeah, 'is it worth it' needs to take into account much more than the number that goes onto your tax return at the end of the year.

BIG MOLE

161 posts

127 months

Tuesday 26th September 2017
quotequote all
I am a Mechanical Engineer and have been working as a contractor since 2008, mainly design/CAD with a small amount of R&D. I can only speak for what I have experienced in my industry.

I occasionally talk to permies who have been contractors who say they aren’t really much worse off than when they were contracting. My reply to this is “you must have been doing it wrong then”.

A staff mechanical design engineer (not senior or lead) in my location (south coast) will be doing well to earn 40K. Most places don’t have tons of perks (Bupa etc.) and only give around 25 days holiday/year.

Anybody wanting to climb the ladder is going to have to do a few extra hours most weeks and probably take on more responsibility before the get a promotion and (small) pay rise.

In the last few years my net income from contracting would require a salary of around 100k. Last year was a bit less but this year will be a bit more.

For this all I am doing is turning up at a client’s site and designing what they tell me to do. I have very little responsibility other than my own specific workload. I don’t have to manage others. I don’t have to fly off at a moment’s notice to visit the client. I don’t have to be nice to bellends because I am thinking about safeguarding my position within the company. I just sit there, messing around with CAD concepts, getting paid at least double what the bloke on the next desk is and much more than the Engineering Manager.

Yes I do a few more hours than standard, but I get paid for everyone of them. Yes I find myself working away from home a fair bit, but I quite like the change of scene and it means I can live very close to the client in the week so my average amount of commuting over a week is similar to most people. I also get to work hours that suit me. At the moment I am averaging around 45 hrs/week but I do it over 4 days so I get a 3 day weekend.

The biggest downside is no holiday pay or sick pay. I probably take of as much/more time as most staff but rarely whole weeks, usually long weekends. In 8-9 years of contracting I have only really needed a couple of days of through sickness, although I will admit that there have been a couple of times where if I were staff I would have called in.

In short, contracting is still very much worth it in my industry if you have the right attitude and the right accountant.

Keep it to yourself though. We don’t want all and sundry doing it. Rates might go down.

bucksmanuk

2,311 posts

170 months

Tuesday 26th September 2017
quotequote all
If I was staff I would be on £55-60K. Salaries have not really risen in about 4 years- I don’t care what some turd in HR says.
To take home what I do, I would need to be on £107.8K p.a. according to Excel, and that’s with 5 weeks holiday a year, which I do take, 2 days sick and all the bank holidays. That’s also with a fairly hefty pension contribution as well.

With oil down (but climbing-ish), the rates are down. When oil returns it will be back to the good times of 2012/3 and its forecast £10/hr will go back on the rates.

Like Deckster says, no office politics, although you do get dragged into it, no annual review, “just sign the timesheet and pay the invoice sunshine”, and being able to pursue some patent ideas, run a better car - new Konis for it, pay the mortgage off 18 months off early, nicer holidays, … etc.… and £8k pa. going into alternative business ideas…

IR35 might not be so viciously applied as the HMG were hoping, as they have got some real disasters out there…

Being simplistic and ruthless… The only ones who don’t really do anything extra worthwhile in contracting are those who - it could be considered - aren’t quite as valuable on the open market as they were hoping. Some people have some very specialist skills which are valuable to their current company, maybe 1 or 2 competitors as well and no-one else.

There’s also a degree of risk in it, so zero financial backing i.e. no fat redundancy cheque in the bank which is what pushed most of us into it - then don’t do it.

Or do you have a total inability to work away from home due to family pressures, a demanding wife or girlfriend, or some all-encompassing hobby which is only local to you?

Are you psychologically capable of saving up a nest egg which will easily get you through 6 months off work? Some will always just want to piss their wages away every week- No matter how much they get paid.

Can you cope with dealing with the agencies every 6/12/24 months?

Last, but by no means least, there’s also the aspect of “have you actually got the balls to do it?”


EmilA

1,520 posts

157 months

Wednesday 27th September 2017
quotequote all
It's still worth it to me, I like the fact that I can get up and leave when I like and not get involved in the politics as others have said above. My take home for the last few years have been approximately 40% more than if I was in a perm role.

It also helped me move up the ladder quickly. I was once told to move from 1 role to another would take atleast 18 to 24 months as a permie. I left that company and walked into another company with the role "up the ladder" 1 month after I had that discussion with my then manager.

Olivera

7,131 posts

239 months

Wednesday 27th September 2017
quotequote all
It's still financially worth it (just), but the benefits have substantially diminished due to Flat Rate VAT and tax-free dividend amount changes.

John Laverick

1,992 posts

214 months

Wednesday 27th September 2017
quotequote all
BIG MOLE said:
I am a Mechanical Engineer and have been working as a contractor since 2008, mainly design/CAD with a small amount of R&D. I can only speak for what I have experienced in my industry.

I occasionally talk to permies who have been contractors who say they aren’t really much worse off than when they were contracting. My reply to this is “you must have been doing it wrong then”.

A staff mechanical design engineer (not senior or lead) in my location (south coast) will be doing well to earn 40K. Most places don’t have tons of perks (Bupa etc.) and only give around 25 days holiday/year.

Anybody wanting to climb the ladder is going to have to do a few extra hours most weeks and probably take on more responsibility before the get a promotion and (small) pay rise.

In the last few years my net income from contracting would require a salary of around 100k. Last year was a bit less but this year will be a bit more.

For this all I am doing is turning up at a client’s site and designing what they tell me to do. I have very little responsibility other than my own specific workload. I don’t have to manage others. I don’t have to fly off at a moment’s notice to visit the client. I don’t have to be nice to bellends because I am thinking about safeguarding my position within the company. I just sit there, messing around with CAD concepts, getting paid at least double what the bloke on the next desk is and much more than the Engineering Manager.

Yes I do a few more hours than standard, but I get paid for everyone of them. Yes I find myself working away from home a fair bit, but I quite like the change of scene and it means I can live very close to the client in the week so my average amount of commuting over a week is similar to most people. I also get to work hours that suit me. At the moment I am averaging around 45 hrs/week but I do it over 4 days so I get a 3 day weekend.

The biggest downside is no holiday pay or sick pay. I probably take of as much/more time as most staff but rarely whole weeks, usually long weekends. In 8-9 years of contracting I have only really needed a couple of days of through sickness, although I will admit that there have been a couple of times where if I were staff I would have called in.

In short, contracting is still very much worth it in my industry if you have the right attitude and the right accountant.

Keep it to yourself though. We don’t want all and sundry doing it. Rates might go down.
Absolutely identical situation to myself ... I'm also a mechanical engineer in the power industry and currently working in the North-East and I've been at it about 5 years.

I concur .... still very much worth it in our industry. The only issue is having to work away from home for the best contracts .... but if you can negotiate in travel time and a Friday off then happy days!

Derek Chevalier

3,942 posts

173 months

Wednesday 4th October 2017
quotequote all
XJ75 said:
Depends on the difference between perm salary and contractor day rate, which is largely dependent on the industry.

In my industry (IT within Investment Banking), the difference is pretty substantial and even if I was inside IR35 I'd still be better off contracting.
Depends in which area you are and how senior. Certainly a lot of my friends (D/ED) level were better off perm.

schmunk

4,399 posts

125 months

Wednesday 4th October 2017
quotequote all
bucksmanuk said:
If I was staff I would be on £55-60K. Salaries have not really risen in about 4 years- I don’t care what some turd in HR says.
To take home what I do, I would need to be on £107.8K p.a. according to Excel, and that’s with 5 weeks holiday a year, which I do take, 2 days sick and all the bank holidays. That’s also with a fairly hefty pension contribution as well.
That seems like quite a difference. What's your day rate to achieve that, out of interest?

pherlopolus

2,088 posts

158 months

Wednesday 4th October 2017
quotequote all
schmunk said:
That seems like quite a difference. What's your day rate to achieve that, out of interest?
I am in a similar position, about 400-450...

Autopilot

1,298 posts

184 months

Wednesday 4th October 2017
quotequote all
HannsG said:
Hi,

moved into contracting this year and love the cash.

However, seems to be a lot of seasoned contractors moaning that its not worth it anymore and their own accountants are saying go permie.

I get the IR35 debate. Keep hearing different things though. Some saying it will come in blanket wide into private sector.

Also heard of many contractors have HMRC chase them for taxes etc.

Whats your opinion on this?

Thanks
I've been contracting for around 13 years now. I moved in to it as I left a permanent job, took some time out and then every job I liked the sound of was contract so I just kept looking. I decided to take a contract as it would tie me over until I found a decent permanent role.

The penny finally dropped that the exciting sounding roles were contract as you're not doing the BAU stuff, you're either cutting edge or at least vaguely exciting and new hence why all the jobs I liked the sound of weren't permanent.

I love the fact that I'm not involved in managing people, getting involved in politics, I'm not managed and I feel free compared to some of the constraints some permies work within.

The money is obviously a lot better all the time you're working of course, but if you're any good, you'll normally find something.

My main benefits of being a contractor are.......Pension! I have the full amount going in to a private pension. It's one of the only tax breaks you'll get so use it. I tdoesn't just set you up for later, it maximises your tax efficiency now. Why give the money to the tax man when you can keep a chunk of it and put it in your pension. I have a company 'van' (Van being what the commercial vehicle was built for use as and is deemed to be so by HMRC). I bought this from the company account and the company pays for the running costs. I use it for personal use so incur a personal tax liability of about £670 a year for benefit in kind and the purchase of this is off set against corp tax so is bit of a no brainer to not have one....I have two large dogs so needed this vehicle anyway!

The main reason for being a contractor for me is the lifestyle. I don't have to work, I'm automatically allowed to do the work how I want and from where I want (flexibility is key, I do work on site a fair amount as it makes the job easier). I always have the option to quickly jump on to something new. I don't, as I tend to stay in fairly long contracts, but it's bit of a safety net if I want to go.

IR35 isn't really an issue. I'm self employed, my contract of engagement is for the provision of a specific outcome and not full of employment type waffle. I'm currently working in a Govt organisation and was there for 18 months before they changed it so the hiring organisation determined your employment status. It wasn't a problem. The aren't allowed to make blanket statements and deem everybody inside IR35, it has to be reviewed contractor by contractor so you can stand your ground. There was lots of scaremongering.....Guys Hospital and St Thomas, they made a blanket decision all contractors were in, so all contractors walked out by lunchtime, but once people understood what was going on, after all, the legislation never changed, just who decides your employment status, organisations cottoned on what happened if you annoyed the contractors.

I don't know any accountants who would have an opinion on contracting. They are accountants and look after finances, they aren't there to guide your career options and understand your contract arrangements. Yes, dividend tax, Flat rate VAT (which I don't know why people don't just opt out!), Dividend tax, yes, HMRC are squeezing more money out of you but the incomes between my contract role and my equivalent permie role aren't comparable, they're leagues apart. Just claiming expenses (and full VAT) saves me so much money. I'm not always near home, but I don't mind. I just work from home more the further away the contract and get a good balance.

HMRC chase everybody for taxes. If you do your self assessment, company annual return, vat return etc etc etc, what can they chase you for, it's all done!

RacerMDR

5,498 posts

210 months

Wednesday 4th October 2017
quotequote all
IT here - like everyone has said.

It's all about the flexibility of how you manage your money.

You are in control as a contractor, taking your future into your own hands and cutting out all the boring slow middle men.

In my role - I would need to get paid double the market rate for me to go permanent (based on the maths)

In reality for me to have to do the sort of st I'd have to do at the rank that would be worth me being paid the right amount............I would need 10 times to make me come in and deal with all the line management st

RizzoTheRat

25,155 posts

192 months

Wednesday 4th October 2017
quotequote all
Autopilot said:
IR35 isn't really an issue. I'm self employed, my contract of engagement is for the provision of a specific outcome and not full of employment type waffle. I'm currently working in a Govt organisation and was there for 18 months before they changed it so the hiring organisation determined your employment status. It wasn't a problem. The aren't allowed to make blanket statements and deem everybody inside IR35, it has to be reviewed contractor by contractor so you can stand your ground. There was lots of scaremongering.....Guys Hospital and St Thomas, they made a blanket decision all contractors were in, so all contractors walked out by lunchtime, but once people understood what was going on, after all, the legislation never changed, just who decides your employment status, organisations cottoned on what happened if you annoyed the contractors.
I guess that depends on the government department. My main customer when I was contracting, and significant customer of my current employers, hasn't got behind contractors on this at all and all the contractors I know working for them have moved on and they don't seem to be making any attempt to reassure them and get them back.

bigandclever

13,782 posts

238 months

Wednesday 4th October 2017
quotequote all
HannsG said:
However, seems to be a lot of seasoned contractors moaning that its not worth it anymore and their own accountants are saying go permie.
It's definitely getting less and less lucrative year on year (allowances being cut, taxes going up, etc), but it'll be a long time before it's "not worth it" if you're any good. I reckon I've been worse off every year for my 20 years of contracting, in one way or another laugh Thankfully I'm not (only) in it for the cash.

Off-shoring has been the biggest threat to me, not the taxman.

PurpleTurtle

6,983 posts

144 months

Wednesday 4th October 2017
quotequote all
I've been contracting with the same client for 19 years without a break. Understandably I am declaring myself inside IR35 - whichever way you slice it and dice it, I think if you've been somewhere that long it is very difficult not to argue that you are not a disguised employee. Just my opinion.

I am becoming less well-off each year thanks to Govt tinkiering, but it remains worth it in terms of hard cash. I am at a different part of the game now - I can hoover up to £40k pa off the top line of my company into my pension tax free, and draw 25% of that tax free at 55. That obviously has a positive benefit in reducing my higher-rate tax liability as much as possible. When I started out contracting at 25 pensions meant bugger all to me. At 45 it means a huge deal. It's about the only in-IR35 financial benefit I see worthwhile now.

Apart from the flexibility: I work to live, not live to work. Consequently my annual contract negotiation always involves me negotiating an annual hours figure which allows me 2-3 weeks more holiday than I could ever get as a permie. I know I'll get chucked out of Contractor Club for this, but it ain't always about the money! I also get a lot of flexibility working from home - if I deliver my projects on time and in budget they are happy, they don't really care how I achieve it. Thus in August this year I went to the client office one day of the month.

I was offered permie a couple of years ago but they were £5k adrift of my permie salary expectations. The hiring manager said personally I've no problem paying it you, but it puts you beyond the maximum salary for the job grade, so HR won't wear it .... it was then I was reminded that I've had two decades of not being involved in any kind of HR bullst, or being forced down a 'management' path - I am a techie - which sits perfectly fine with me.

Ditto someone else up the thread, my biggest threat has been Offshoring, but 5 years into my Client co engaging in that they are just about beginning to realise that if you pay peanuts you get monkeys .... and they are all of a sudden paying more than peanuts for it.

ETA: earlier this year I had a heart attack at 44. I was ready to go back to work after 10 days, but between them my Client Co and Agent weren't happy - they didn't want me dropping dead on their conscience, quite understandable. So I had three weeks off sick, nominally unpaid, which wasn't great financially, but we agreed that they are happy for me to book longer days over the course of the year to make up for it. We have this ridiculous situation where if I don't do my estimated hours for the year then they will lose the unused ones from the budget for next year. So, whilst this could have been a lot worse for me financially, the client have been very fair about it. My clinet co boss's boss did point out in the pub that I'd have got 3 months off on full pay as a minimum if I'd been a permie - how we laughed!

Edited by PurpleTurtle on Wednesday 4th October 16:33


Edited by PurpleTurtle on Wednesday 4th October 16:34

Derek Chevalier

3,942 posts

173 months

Wednesday 4th October 2017
quotequote all
Autopilot said:
My main benefits of being a contractor are.......Pension! I have the full amount going in to a private pension. It's one of the only tax breaks you'll get so use it.
Why can't you do that as a permie?