£40k Perm = £40hr contract. HOW???

[ExitStrategist]

Hi,

I was interested by this statement by mcquiggd in this thread

"If you accept the approximate figure that to match a 40k permie salary you need to be on £40 an hour, Im doing much better than I could do contracting around here."

I would be interested to understand the figures behind this, or indeed if anyone strongly agrees or disagrees. Back in the day, before IR35, I left a £35k permie job for a £30/hr contract, and I was CONSIDERABLY better off, admittedly mostly because of the "low salary, high dividends" pre-IR35 setup.

I've been back permie for a few years now, and I know it's all changed, but even so, I still can't see how £40k/pa permie = £40/hr contract. Some flaky "back of a fag packet" calculations:

£40/hr for 8 hours a day, working just 40 weeks a year (so some allowance for hols/sick/B Hols), grosses £64k/pa.

Take off some of the permie benefits that a contractor has to pay for:
Private health £200/mth, pension £500/mth, various insurances £100/mth = £9600/pa.

Assuming you pay for the health and insurance from your 40% taxed income, that loses you another £2400.

Bung the accountant £2k ( a bit of a guess), makes a total of £14k/pa.

This leaves £50000 before tax, which is considerably more than £40000.
And surely there must be SOME accounting advantages left. Surely ....????

What am I missing?

Thanks,
ES.

[oraclesmith]

Bench time.

[ExitStrategist]

Short and to the point - thanks.
Yeah, I guess I was lucky last time. Started on a 3 month contract and was there for three years or so.

I know it's a "piece of string" question, but on average, in say a 5 year period, how long would people expect to be benched?

Thanks,
ES.

[rawly]

I had an agency contact me regarding a new position when my current contract finishes in a few months.

It was a permanent job at 40-45k. I emailed them back saying the job sounded interesting, but I wouldn't consider going back into permanent work.

They replied that the client would wait for me, and also do it over an 11 month contract on a 'pro-rata' basis.

I obviously told them to sod off! They must think I'd just dropped out the last rain shower. It proabably equated to about £22 an hour. Some clients have some funny ideas, it's so laughable.

[Bluebird]

I base my estimates on taking 2 months out a year - thats a combination of bench time & holidays etc.

I try and work contracts to finish end of june and restart early sept where possible

[tim123]

The 40K pa = 40pph is how it looks from the client pov.

It's now how it looks from the contractor's end. You should be much better off with 40ppp than 40K pa, because you don't spend money on things that an employer has to provide for his workers whether they want them or not (personally, I have no need of maternity pay).

tim

[Euro-commuter]

The 40K pa = 40pph is how it looks from the client pov.

It's now how it looks from the contractor's end. You should be much better off with 40ppp than 40K pa, because you don't spend money on things that an employer has to provide for his workers whether they want them or not.

Like Employer's NICs?