Same job as contractor. Niche R&D skillset. Asking for too much?

[HummingMantis]

Hi all,

I have read through the intro sections and can't find anything really related to my specific situation.

I will be changing from permie to contractor at the same company soon. I'm moving away, they want to keep me but avoid setting a precedent for working from home for permies. I have a niche skill-set in R&D. My employers have left me to propose the terms and I want to make sure I'm not being unreasonable. My current package is £45k inc. bonus plus some share options.

I will continue my job more or less identically except as a contractor. I am going to negotiate a ~33hour 4 day week: that was already possibly on the cards. I'm aiming for £35-40 per hour.

I don't think I can avoid IR35. I'm leaning towards using an umbrella company.
I'll request that they continue to provide a PC and software licenses since I can't claim them as expenses (~11k worth…).

I'm keen to make this work because it is an interesting gig and I value the flexibility of a 4 day week quite highly. Do you think I'm asking for too much, too little, about right?

£35 is a small increase for them including employer's NI
£40 seems like a pretty big increase for them


Some estimated numbers for cost to employers and take home pay ignoring expenses, pension etc.:

43k salary +2k bonus = 45k → 33,400 take home

35 per hour 37.5h weeks = 58k → 36,500 take home
40 per hour 37.5h weeks = 66k → 40,700 take home

35 per hour 33h weeks = 51k → 33k take home
40 per hour 33k weeks = 58k → 36500 take home

Thanks for your time!

[cojak]

The 'right' rate is whatever the agent/client is prepared to pay, so ask it and find out.

And think carefully as to whether you are caught by IR35 or not as umbrella companies WILL NOT pay for your computer and software, they are simply vehicles which allow for tax and NI to be paid to HMRC and removes the business administrative burden from you.

Just because you are niche does not mean that you IR35 caught (unless your ex-employer is your first client as a contractor).

[mudskipper]

Just because you are niche does not mean that you IR35 caught (unless your ex-employer is your first client as a contractor).

That's the point of the post!


OP, way too low - holiday pay, sick pay, redundancy pay, pensions, training, staff parties, lack of job security etc. You should be going for at least £400 a day as a contractor.

[pr1]

Just because you are niche does not mean that you IR35 caught (unless your ex-employer is your first client as a contractor).

I will be changing from permie to contractor at the same company soon.

...

remember at the moment they (your employer/client) are paying the employers NI on your salary at the moment so they're actually forking out more like 50k-60k/year on you (plus probably other benefits like full pay sick pay? holiday pay? training etc) so don't short change yourself on getting a fair rate

[northernladuk]

Is it possible to see if this type of role goes out to contract with other clients?

[LondonManc]

I was advised to divide salary by 100 to give your day rate

Is it possible to see if thiabtypenofnrole goes out to contract with other clients?

[Contreras]

I'm keen to make this work because it is an interesting gig and I value the flexibility of a 4 day week quite highly. Do you think I'm asking for too much, too little, about right?

I think you need to raise your sights to £450 pd.

For WFH I'd shoot for a day rate rather than hourly, but there are pro's and con's to this.

I wouldn't chase the 4-day thing as attractive as it sounds. Agree on core hours when you guarantee to be available and leave enough slack in there to get the flexibility you want. Outside core hours you manage your own time but endeavour to remain contactable.

If you're any good then WFH, without office distractions, you can achieve same as anyone on-site + 50% or more. So I would drop the explicit request for a 33 hr week and instead market yourself as being prepared for 10 hr+ days, within a flexible framework as above.

- You can get what you want but without having to take a hit on the rate to achieve it.

[northernladuk]

You definitely sound like you are in a strong position but no one is irreplaceable. You've now given them option to bin you without notice so don't feel you can roll them over with no fallout. There is a balance somewhere.

[WordIsBond]

Your numbers here are way, way too low.

It costs the following for them to employ you.
1. Salary.
2. Employer's NI.
3. Share options.
4. Benefits they provide all employees (including pension, if they haven't been they will be under AE).
5. Provision of hardware.
6. Provision of working space.
7. Employment rights.
8. HR costs (payroll, training, etc).

All except the last three should be pretty easy to approximately quantify. #6 is hard, because they may have spare office capacity, or they may be nearing their limits, but it is worth something to them. #7 is also hard to quantify -- what does it cost them to guarantee your employment rights are properly respected? Something, but what? Hard to know. #8 is similar. How much really does it cost the payroll dept to handle you along with everyone else? Not much, but something. What about training? That cost may be easy to figure.

Try to put a number on all those things. That's how much you have been costing them.

Will it change your value to them to have you be off-site? How much? Will you be worth 10% less, 20%, 10% more? Adjust the figure you've calculated by that number. Sounds like you are reducing hours? Adjust the figure again. That is about the price they should be thinking.

Look at the take home compensation you've had, including share options. Adjust by what you save on the commute, if you are WFH now. Adjust for reduced hours. That's about the take home you should be looking for, at a minimum. Look at the benefits you had. Which will you buy, and what will they cost you? Adjust accordingly. Which benefits won't you buy? Did they have any value to you at all? If so, you've lost something, even if you aren't going to buy them. Adjust accordingly. Was this stuff provided to you tax-free, and now you'll have to pay for them out of taxed income? Adjust your number again.

Tax, occasional hardware purchases, umbrella / accountancy costs, travel if you are ever going to have to go in to the client, extra utility costs in the home, anything else. Adjust your number. Add another 5% for the things you forgot. Add another amount for the risk that you have that they decide to dump you and you don't have employment rights any longer. You' are the only one who knows how great that risk is, but it isn't nothing. After all that is figured in, you have the number YOU should be thinking about.

Now, you have your number and their number. Hopefully their number is higher than yours. If so, you've got some room to negotiate. Anyway, start at the highest of those two numbers. If their number is lower, they still want to keep you around, so they may be willing to pay more than they have been to make sure that happens. So don't be quick to settle for a cut in your income, even if their number is lower.

Hourly is much better than daily with WFH, as noted above. And one of the big benefits of WFH is flexibility, so don't rush into a specified work week.

Yes, you are IR35 caught. And if the client doesn't want employees working from home, then control is always going to be an issue. If you think you might pick up the occasional extra (non-IR35) work from other clients, it still might be worth going limited company. If you are basically going to just continue to be an employee under another guise and only work for this company, that's what umbrellas are for. Good luck.

[meridian]

And don't forget to factor in any delays in payment from the client. Going direct? Don't expect to be paid for up to 90 days (3 months) after doing the work, by the time your working month finishes, you invoice, and their purchasing department deigns to pay the invoice.