contract or perm?

[Du1point8]

Interesting situation has come up, my current employers have given me 2 options:

1) go perm

2) contract for 6 more months due to my situation and possibly go perm afterwards.

they reckon the perm package is as good as the contract package and asked me to write a figure down for my wage, obviously it cant be the same as what i get, but can someone explain the benefits as i dont yet see them in option 1 and will be going option 2 and taking the risk.

[JonRB]

Du1point8 said:

Interesting situation has come up, my current employers have given me 2 options:

bad IR35 attitude.

You need to do the sums for yourself, of course. A *very* rough rule of thumb has always been to take your hourly rate and to calculate the equivalent perm salary you multiply it by a thousand (so £50ph becomes £50k pa). But that seems a bit low to me.

Edit: Have a look at http://www.ir35calc.co.uk

Edit2: Seems the rough rule of thumb is now way off. That website says £50ph is equivalent to a perm of £87,114pa.

Edited by JonRB on Saturday 8th January 10:22

[worsy]

I think the x1000 rule supposedly takes into account time on the bench, sickness etc. I do think it low also even more so if you can operate under s660.

To the OP, IMO contracting is so much more than just how you are paid. For example I love the freedom that I can say no to any engagement, even if I choose not to.

For example consultants employed as a perm will generally be sent miles away from home returning late on a Friday, usually on the crap projects. I get to pick and choose.

I also enjoy the fact every new contract I am generally out of my comfort zone even if just learning a new clients processes and procedures. I like that buzz.

[Du1point8]

so the contract for 6 months and see if i get another one (they say no) and delay till september is winning then...

They obviously want me to stay and I want to finish the project but I like the freedom, didnt think it would be this hard to say no as i have been there for 18 months and Im now one of the key members (top 2) when it comes to solving anything and creating new solutions.

Im swaying to the 6 months and then looking else where for a position.

[Eric Mc]

If they want you to stay - they should keep you on as an employee.

Letting someone go as an employee and immediately rehiring them in a non-employee caopacity does not wash well with HMRC.

[Du1point8]

Im a contractor and they are offering full employee status, not the other way round just to make it clear.

[Eric Mc]

Nothing wrong withbn that. That is not an unusual situation.

It's your current status that could be a problem. How are your tax and NI affairs administered at the moment?

[Du1point8]

Eric Mc said:

Nothing wrong withbn that. That is not an unusual situation.

It's your current status that could be a problem. How are your tax and NI affairs administered at the moment?

how do you mean?

Im up to date with all tax, ni and paye...

[qureshia]

I have been a contractor and an employee (as well as hired many contractors & full time employees)

I normally work on a

Contractor day rate times 140 to establish equivalent basic full time salary (or times 160 to establish full package i.e. inc pension, car bonus etc)

So £300 a day would be equivalent to an employee earning £42k basic or £48k full package

In reality someone contracting on £300 a day would be lucky to earn circa £66k (after holidays, voids etc) the diff between £48k and £66k is better security, training, career progression etc

As you go further up the scale the multiples need to stretch a bit (higher multiples)

…unless security is a big issue for you (or you miss out on great benefits i.e. car, equity, bonus etc) I would think staying contracting means you earn far more…

..if you have been asked to suggest a figure...I suggest you come up with a big one

[Eric Mc]

Du1point8 said:

Eric Mc said:

Nothing wrong withbn that. That is not an unusual situation.

It's your current status that could be a problem. How are your tax and NI affairs administered at the moment?

how do you mean?

Im up to date with all tax, ni and paye...

Do you pay tax under the PAYE system?

If so, who administers that for you - the people you are actually working for or an agency of some sort?

[Du1point8]

Eric Mc said:

Du1point8 said:

Eric Mc said:

Nothing wrong withbn that. That is not an unusual situation.

It's your current status that could be a problem. How are your tax and NI affairs administered at the moment?

how do you mean?

Im up to date with all tax, ni and paye...

Do you pay tax under the PAYE system?

If so, who administers that for you - the people you are actually working for or an agency of some sort?

Nope my accountant.... the prospective employers pay the agency for services, who subcontract the work to my company who employ me.

[Olivera]

Take the contract option, then try and negotiate another contract when that ends

[T5R+]

May I ask, if someone pays a contractor (non IT related contracting) say £750/day are the PH collective suggesting a base salary of approx £110K and possibly >£130K as a package or is the view £150K as a base - latter seems high to me? Urine-takers note, day rate used is illustrative only.

OP the key is whether you like the freedom to pick and choose work partners plus periods when you work (versus take rest or vacation). Working permanently within one business may bring a degree of security but then there exists less freedom and autonomy. It is almost "horses for courses" and if rolling contract for x years, then temporary is surely the option.

[anonymous-user]

If it were me I would be looking at the other permies to see how happy they are in their jobs. Do you know what goes on in all those staff meetings that you don't get to go to?
I went from contractor to permie at the company I was at but at the time the contract market was about to take a downturn and some other personal factors made it a no-brainer.
Mike

[Du1point8]

MH said:

If it were me I would be looking at the other permies to see how happy they are in their jobs. Do you know what goes on in all those staff meetings that you don't get to go to?
I went from contractor to permie at the company I was at but at the time the contract market was about to take a downturn and some other personal factors made it a no-brainer.
Mike

cant make that assessment:

London office is:

2 contractors - both been there 18 months
La Boss - 14 months
1 BA - perm (3 months)
1 Technical Architect - perm (3 months)
1 Developer - starts in 5 weeks.

The 2 contractors have been there longer than anyone else (18 months a pop) we are the key players in London and no we arent going to hold them to ransom, other contractor got his 1 year extension but only works 4 days a week and he is happy with that.

So noone to ask that can assist with the kind of wages situation and the package as noone is a senior developer.

[BlueProp]

worsy said:

To the OP, IMO contracting is so much more than just how you are paid. For example I love the freedom that I can say no to any engagement, even if I choose not to.

I also enjoy the fact every new contract I am generally out of my comfort zone even if just learning a new clients processes and procedures. I like that buzz.

This is why I prefer the contract world, plus it's more tax-efficient. The downside is that I never want to take time off.

[anonymous-user]

Du1point8 said:

cant make that assessment:

London office is:

2 contractors - both been there 18 months
La Boss - 14 months
1 BA - perm (3 months)
1 Technical Architect - perm (3 months)
1 Developer - starts in 5 weeks.

The 2 contractors have been there longer than anyone else (18 months a pop) we are the key players in London and no we arent going to hold them to ransom, other contractor got his 1 year extension but only works 4 days a week and he is happy with that.

So noone to ask that can assist with the kind of wages situation and the package as noone is a senior developer.

Hhhmm, in that case (as long as the money is ok) I guess it's down to: do they have a plan for your software, what is the plan for your team, do they match where you see yourself heading long term and (most importantly in case it doesn't work out) will you be able to keep your skills up to date?

Mike

[Eric Mc]

Du1point8 said:

Eric Mc said:

Du1point8 said:

Eric Mc said:

Nothing wrong withbn that. That is not an unusual situation.

It's your current status that could be a problem. How are your tax and NI affairs administered at the moment?

how do you mean?

Im up to date with all tax, ni and paye...

Do you pay tax under the PAYE system?

If so, who administers that for you - the people you are actually working for or an agency of some sort?

Nope my accountant.... the prospective employers pay the agency for services, who subcontract the work to my company who employ me.

So, what is the tax advanatge for you?
Is IR35 an issue for you?

[Du1point8]

i pay corp tax after business expenses,

only need to take minimum divs

pay myself a decent wage.

only downside is that the company holds most of the money cause i refuse to take it out.

[Eric Mc]

Du1point8 said:

i pay corp tax after business expenses,

only need to take minimum divs

pay myself a decent wage.

only downside is that the company holds most of the money cause i refuse to take it out.

Sounds like a fairly sensible set up to be honest. Not taking the "p" with dividends does allay fears of HMRC wanting to poke their nose around your affairs.