Contract to permie Salary Worth it ????

[newcontract]

Hi all, long time lurker first time poster here, with a burning question...

I am currently on a 500/day contract with high chances of getting extended over a few years and also being offered 90k/yr in a similar role as permie.

More specific details:
Contract role:
- walk commutable
- 9-5 most days
- old tech

Permie role:
- car commutable (30mins)
- 9-7+ often
- cutting edge tech


Talking about cash aspect only:
I have read a lot of posts here which suggest 90k/yr > 500/day, however the numbers just don't work out in my head.

I am thinking, in a best case scenario for the permie job:
- 5 weeks holiday (worth ~ 9k - but cant take the money)
- 12% pension (worth ~10k)
- bonus 3-4% (worth ~3k)
- private medical (worth ~2k)

all of that totals up to around £114k gross for the perm job.


with the contract role, based on 236 working days a year, it comes to 118k, and I would pay considerably less income tax?

What am I missing here?

appreciate your opinions (and ideally with numbers)!

[northernladuk]

Have a dig through some of the other posts we've had trying to work this out and see if there are any factors you haven't considered?

https://www.google.co.uk/search?q=co...hrome&ie=UTF-8

IMO the 236 days is a bit on the high side for a start.
Sick pay?

IMO it's not all about the direct cash comparison. There are many soft points to think about. Permie gig might be commutable, not all contract ones are, no bench time, ability to learn. Not sure a comparison to the pound is really the best basis for a decision.

[MrMarkyMark]

Just a general comment, someone I know went in for a similar deal, previously on £550 PD.
Around 97K basic, I believe.

He said he has never felt so short of money.

He also has a 3 month notice period factored in now too.

[LondonManc]

260 week day in a year
8 public holidays
25 days holiday (because we're comparing like-for-like)
5 sick days (again, being honest with yourself and not having to drag yourself in for a day rate for a fairer comparison)
2 more days for funerals, emergencies, etc.
You're at 220, which is assuming that you're in a contract all year, no bench time.

That's 110k

There are also no bonus, promotion or training opportunities in contracting. No redundancy after two years like there is with employment. You're forgetting what the good bits of being a perm were.

I'd be inclined to accept 100k but be keen to know what the promotion route was. That's just me though; if I was to go back perm, I'd want to climb the corporate ladder.

[AndrewK]

260 week day in a year
8 public holidays
25 days holiday (because we're comparing like-for-like)
5 sick days (again, being honest with yourself and not having to drag yourself in for a day rate for a fairer comparison)
2 more days for funerals, emergencies, etc.
You're at 220, which is assuming that you're in a contract all year, no bench time.

That's 110k

There are also no bonus, promotion or training opportunities in contracting. No redundancy after two years like there is with employment. You're forgetting what the good bits of being a perm were.

I'd be inclined to accept 100k but be keen to know what the promotion route was. That's just me though; if I was to go back perm, I'd want to climb the corporate ladder.

In your calculations, you remove holidays and sick days from contract and in his he adds to perm. You should either one or another, but not both.

At the end of day, even if we take your calculations, with LTD he should get 78% take home, which is not too difficult to achieve ~ 85k or 7.15k per month. In case or perm - 4.9k, that is 50% less of disposable income. But again, he could move a lot of perm salary to pension to avoid 40% tax, but in that case, he will have even less disposable income. Main problem with perm – high taxes.

[TheFaQQer]

with LTD he should get 78% take home

Invoice £118000
Corporation tax £23600
Net £94400

How do you get to 78% take home?

[AndrewK]

Invoice £118000
Corporation tax £23600
Net £94400

How do you get to 78% take home?

You should ask your accountant .
You do have expenses? Travel, mobile, office equipment etc. Plus you salary is expense before corp tax. Plus dividends to your family and all other small tweaks. I am not even talking that all gadgets are VAT free (for business purpose).

All that doesn't exist in perm role.

[TheFaQQer]

You should ask your accountant .
You do have expenses? Travel, mobile, office equipment etc. Plus you salary is expense before corp tax. Plus dividends to your family and all other small tweaks. I am not even talking that all gadgets are VAT free (for business purpose).

All that doesn't exist in perm role.

Ah, OK.

So, you take off your £11k salary first. That leaves you with £107k. How does spending money on office equipment come into any equation for whether you are better off or not? It isn't your "take home" unless you are looking to use your company assets for personal use, in which case you need to account for the benefit in kind on that - either way, it's not cash in your pocket in any way shape or form.

Travel as a business expense is hardly "take home" in your pocket, is it? If you are using that as part of your take home then you're doing something really wrong. Or alternatively, that year that the consultancy I worked at put me up in the Hilton for 150 nights and paid for 30+ round trip tickets to get to client site my salary was actually huge! Wow, I've never looked at it that way before - I wasn't an underpaid permie, I just didn't appreciate that the business expenses that the company paid should have been considered as part of my package

You pay your wife £5k in dividends (falling to £2k) next year tax free. That saves a tiny amount of money. You now pay dividend tax on the rest of your money.

You have nowhere near 78% take home, which is what you claim.

[AndrewK]

Ah, OK.

So, you take off your £11k salary first. That leaves you with £107k. How does spending money on office equipment come into any equation for whether you are better off or not? It isn't your "take home" unless you are looking to use your company assets for personal use, in which case you need to account for the benefit in kind on that - either way, it's not cash in your pocket in any way shape or form.

You pay your wife £5k in dividends (falling to £2k) next year tax free. That saves a tiny amount of money. You now pay dividend tax on the rest of your money.

You have nowhere near 78% take home, which is what you claim.

Cool. Just for case of simplicity I will say, last year i paid 15% to HMRC from my all income. No any avoidance, just expenses, pension, dividends. And draw whatever conclusion you want. I am not even mentioning fact, that you could invest those money via another company and offset losses (if you decide you need a backup plan).

[LondonManc]

In your calculations, you remove holidays and sick days from contract and in his he adds to perm. You should either one or another, but not both.

At the end of day, even if we take your calculations, with LTD he should get 78% take home, which is not too difficult to achieve ~ 85k or 7.15k per month. In case or perm - 4.9k, that is 50% less of disposable income. But again, he could move a lot of perm salary to pension to avoid 40% tax, but in that case, he will have even less disposable income. Main problem with perm – high taxes.

I was more demonstrating that 236 is an unreasonable number to use for billing days if you're trying to compare with permanent days worked.

That's without considering expenses v zero expenses and other factors.