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    Default How to convert an hourly contract rate to an approx salary?

    It's dumb question time again.

    Is there a rough but fair way to convert an hourly contract rate to an approx equivalent perm salary that anyone knows about?

    (I've had an offer and don't know if it makes sense financially).

    Cheers.

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    30 an hour <> 30k - Multiply the hour rate by 1000, and it's supposed to cover the invisible employee benefits like pensions and SSP as well as the taxation differential

    Very approximate though, actual answer depends on package details.
    Blog? What blog...?

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    Hourly rate x 1,500 = salary is a rough guide

    HTH
    Your advert could be here! For the low price of 1200 we are offering a unique opportunity to save yourself a fortune in NI contributions.

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    Quote Originally Posted by malvolio
    30 an hour <> 30k - Multiply the hour rate by 1000, and it's supposed to cover the invisible employee benefits like pensions and SSP as well as the taxation differential

    Very approximate though, actual answer depends on package details.
    Ta very much.

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    Quote Originally Posted by malvolio
    30 an hour <> 30k - Multiply the hour rate by 1000, and it's supposed to cover the invisible employee benefits like pensions and SSP as well as the taxation differential

    Very approximate though, actual answer depends on package details.
    Do you think that is something that HR use when doing a conversion. Do you have any evidence (not intending to come accross offensive in any way) that HR do use this formulae or something that yeilds similar results?

    Thanks,

    Chris

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    No, when you see the dead hand of Human Remains trying to cost a contractor post, they invariably take the average permie salary for that grade and convert that to an hourly rate. They ignore their own overhead factor (around 50% for most permies) and the additional expensesthe contractor carries that a permie doesn't. Hence an advert locally for a 10-year minimum experienced PM to deliver a 10m project for which they were offering 28 per hour...

    It's the same with short fixed-term contracts. Would you want to take on an interim managerial role for six months for 25k gross?

    HR shold not be in the loop, they should stick to dealing with personnel, not suppliers. Sadly, most business managers are not aware of that!
    Blog? What blog...?

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    Quote Originally Posted by abc
    It's dumb question time again.

    Is there a rough but fair way to convert an hourly contract rate to an approx equivalent perm salary that anyone knows about?

    (I've had an offer and don't know if it makes sense financially).

    Cheers.

    Make the following assumptions:

    a) Like a permie you want to be paid every week of the year even when you're off on holiday, on the bench or off sick, right? So that 52 weks a year.

    b) How many hours a week are you expected to work while you're on a gig? Let's say 37 hrs/week

    c) Your hourly rate as a contractor for arguments sake is 25/hr when youre on a gig.


    So, based on these 3 assumptions, you'd be working 52 x 37 = 1924 hours and
    1924 hours x 25/hr = 48,100 per annum. The last question to ask yourself is 'what is the lowest % of 48,100 am I willing to take at a permie role?'

    Can anyone see a flaw in this?

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    Quote Originally Posted by Kyajae
    Can anyone see a flaw in this?
    Well yes, you don't work 52 weeks a year.

    Based on 48 weeks per year, you're going to gross 37x25x48 = 44400 p.a. If you paid full PAYE on that, you'd have to deduct 12.9% employers NI = 38228, which is the equivalent permie salary ignoring any benefits, sick pay, and redudancy. And that's roughly 1500x your hourly rate.

    On the other hand, if you're outside IR35 you should be able to take home around 33000 of your 44000 (very roughly), and the equivalent permie salary that would get you that much take home pay is more like 50K (very very roughly).

    If you claim travelling expenses, then you can make that figure higher as you'd lose the tax relief on expenses as a permie.

    From the employers point of view, they'd have to pay the employers NI for the salary of 50K, so the actual cost to them is more like 57K. 57K/48 weeks /37 hours = 32 per hour.

    So you see, contractors are cheaper than permies.

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    Quote Originally Posted by VectraMan
    Well yes, you don't work 52 weeks a year.
    I see your point. However, permies get a minimum of 4 week paid holiday a year. Technically they work for 48 weeks a year but they recieve full pay whilst on holiday which is why I use the 52 week benchmark.

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