Contracting - Pros Vs Cons
Discussion
I am looking for work and have been offered a two year contracting position by an recruitment consultant. Its for a technical role with some project management. Daily rate is around £310.
I have never contracted before and dont really know what the going rate is. Calculating the daily rate upwards, gives around £75k per year.
How much would i need to set aside for the taxman, holiday, sick pay, pension etc?
Any tips for contracting?
All advice appreciated.
I have never contracted before and dont really know what the going rate is. Calculating the daily rate upwards, gives around £75k per year.
How much would i need to set aside for the taxman, holiday, sick pay, pension etc?
Any tips for contracting?
All advice appreciated.
220 days normally gives enough allowance for sick and good amount of holiday days. - So £310 equates to £68k per year (gross)
Worse case tax will be around 30% (assuming no other earnings, pension contributions etc) I would expect a decent accountant with contracting experience will be able to half this (at this salary level) plus net off some expenses.
Other watch outs are accountancy costs, having to do qtly vat returns, business bank account, ltd co set up, insurance etc etc
At this level it may be worth going for some kind of umbrella company that will do most of the above for you (however your tax rate will be at least that of a full time employee (30% at this level, plus admin fees)
2 years is a long contract ,watch out for ir35
If you go for low salary and payment via dividends you need to consider "mortgage, finance application" that you may be likely to make during the period.
Tread carefully with the low tax schemes, most of them are borderline if not illegal.
Lastly remember you are no longer an employee (of the company you provide services for) you are a supplier, no redundancy, TUPE rights, expect late payment and I would expect one weeks notice.
http://www.contractoruk.com/
Worse case tax will be around 30% (assuming no other earnings, pension contributions etc) I would expect a decent accountant with contracting experience will be able to half this (at this salary level) plus net off some expenses.
Other watch outs are accountancy costs, having to do qtly vat returns, business bank account, ltd co set up, insurance etc etc
At this level it may be worth going for some kind of umbrella company that will do most of the above for you (however your tax rate will be at least that of a full time employee (30% at this level, plus admin fees)
2 years is a long contract ,watch out for ir35
If you go for low salary and payment via dividends you need to consider "mortgage, finance application" that you may be likely to make during the period.
Tread carefully with the low tax schemes, most of them are borderline if not illegal.
Lastly remember you are no longer an employee (of the company you provide services for) you are a supplier, no redundancy, TUPE rights, expect late payment and I would expect one weeks notice.
http://www.contractoruk.com/
Edited by qureshia on Saturday 9th February 22:50
Ray Singh said:
I am looking for work and have been offered a two year contracting position by an recruitment consultant. Its for a technical role with some project management. Daily rate is around £310.
No you've not, at best you've been offered a one month contract that may run for two years, possibly even a one week contract that may run for two years.Go to the Professional Contractor's Group and read their guide to contracting. If you decide to do it, then join the PCG. If you get yourself set up properly as a Ltd company, make sure your contract is correctly drafted, and don't take the piss with your salary, then you should be able to avoid IR35 concerns.
I don't like working through umbrella companies, it really isn't much harder to do it all yourself, and it's less risky in my view. I know contractors who have been stitched up by their umbrella companies failing.
I've been contracting as an independent consultant for 6 years now. I wouldn't willingly go back to being a permie.
I don't like working through umbrella companies, it really isn't much harder to do it all yourself, and it's less risky in my view. I know contractors who have been stitched up by their umbrella companies failing.
I've been contracting as an independent consultant for 6 years now. I wouldn't willingly go back to being a permie.
Pretty much as above, find a good accountant (drop me a line if want details of mine), save some cash for possible gaps. When your contract is coming to end start looking, have Jobserve job alerts set-up. Never ever trust recruitment types, a contract isn't your until the day you start. Don't have an expectation you need to know lots more than permanent people, you don't. Do a good job, don't burn any bridges.
I've been contracting in various guises for years, mostly home based now, wouldn't dream of permiedom.
I've been contracting in various guises for years, mostly home based now, wouldn't dream of permiedom.
How does the rate compare against what you currently earn? If you're on £20k this will be a decent lift. If on £50k + benefits then not so good a deal.
If you we're out of work for a period, would this cause you difficulties?
Where are you located? Are there other opportunities nearby if the worst happens?
Go in with your eyes open.
If you we're out of work for a period, would this cause you difficulties?
Where are you located? Are there other opportunities nearby if the worst happens?
Go in with your eyes open.
Are you forming a ltd company?
If not, I seem to remember hearing about a law change which required the agency to pay holiday and sick leave. Watch the consultants they are slippery characters and in my experience are generally similar to used car salesmen. I agree with the comment about the contract duration as well. One weeks notice can be quite unpleasant!
If not, I seem to remember hearing about a law change which required the agency to pay holiday and sick leave. Watch the consultants they are slippery characters and in my experience are generally similar to used car salesmen. I agree with the comment about the contract duration as well. One weeks notice can be quite unpleasant!
One of the main defences against IR35 issues that one needs to be able to demonstrate that one is not being treated as a normal employee. Having a very short notice period is useful in this regard, I ensure the client has a zero notice period to me for exactly this reason.
They can choose to stop buying my services any time they like, and don't have to provide any reason or justification for dong so.
They can choose to stop buying my services any time they like, and don't have to provide any reason or justification for dong so.
Bapple said:
Are you forming a ltd company?
If not, I seem to remember hearing about a law change which required the agency to pay holiday and sick leave. Watch the consultants they are slippery characters and in my experience are generally similar to used car salesmen. I agree with the comment about the contract duration as well. One weeks notice can be quite unpleasant!
If you're paye it's just an allowance that's held back from your dayrate/If not, I seem to remember hearing about a law change which required the agency to pay holiday and sick leave. Watch the consultants they are slippery characters and in my experience are generally similar to used car salesmen. I agree with the comment about the contract duration as well. One weeks notice can be quite unpleasant!
Anybody charging more than, say, £200/day (so pretty much any contractor) would be daft to go paye anyway.
I'll assume you're going down the Ltd company route in which case don't forget to register for VAT, add on VAT to any invoices and apply for the flat rate scheme.
£310 seems a bit low for a role with project management aspects to it - although I don't know what industry you're working in?
£310 seems a bit low for a role with project management aspects to it - although I don't know what industry you're working in?
Frio3535 said:
I'll assume you're going down the Ltd company route in which case don't forget to register for VAT, add on VAT to any invoices and apply for the flat rate scheme.
£310 seems a bit low for a role with project management aspects to it - although I don't know what industry you're working in?
I'd definately say it seems low, I'm just going into my second year as a Business Analyst and good roles are in the 400's. Project Managers will be on more than a BA.£310 seems a bit low for a role with project management aspects to it - although I don't know what industry you're working in?
I would only bank on 10 months earning, and anything else is a bonus. When I first started contracting it took me 2 months to pick up a job, and last it was 4 weeks.
Don't forget all the perks of full time employment...
Paid holiday
Paid sick
Pensions
Health insurance
Long term sickness pay
Death in service
Travel loans
Share options
Bonuses
Employment rights
Redundancy pay
Etc....
It soon adds up, and your daily rate needs to include for them. You also need to pay an accountant, + your various insurances etc. I also pay somone to do my admin (invoices, books etc)
On the plus side I like effectively getting all the above as a cash payment in my daily rate. I will never go back to permie, unless contract work dries up.
Oh and the single biggest advantage is that every penny that drops into your bank account every week/month you can go and spend! No saving for the tax man... easy finance (you're employed...) full NI contributions so Job Seakers if laid off and years towards yor state pension (note the new pension proposals for 2017 require 35 years contributions). It isn't as straight forward as paying less tax...
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