First contract, what's my day rate?

[malvolio]

Eh? Number of work days in a year is 221, assuming 5 weeks holiday, 10 bank holidays and 5 days sick. Even at £400 pd, that equates to £88,400. Subtract 2k for accountancy, another 2k for expenses and you have 84k, comfortably beating 77k perm. That is without considering any tax savings open to the contractor. But it also assumes that accommodation costs are not too excessive.

You're entirely correct about expenses impacting the headline daily rate, but your numbers much too pessimistic IMO. For £600 per day, the same above calculation yields about 128k per annum.

Except you're missing a heap of stuff, including the whole point. What about PAYE, NI, CT deductions, pension contributions, war chest saving, and tax planning meaning leaving money in the company? What if you don't work 221 days (and what's sick days?): I'm pretty good but over 20 years I've actually worked about 15 of them and I doubt I'm untypical.

And which bit of pessimistic approximation are you having problems with?

The idea is to demonstrate that it's not all sweetness and light and a new Porsche every other year. A dose of harsh reality is sometimes necessary.

[unixman]

Except you're missing a heap of stuff, including the whole point. What about PAYE, NI, CT deductions, pension contributions, war chest saving, and tax planning meaning leaving money in the company?

Most of those affect permies to a similar degree, and vary from individual to individual, depending on circumstances. Contractors pay very roughly the same income tax as permies, largely due to the effect of CT. Ltd company contractors can save on NI, but I left that out of the calculation.

What if you don't work 221 days

This is a good point. The 77k permy working 12 months would win financially over the 400 p/d contractor working 10 months. However, the contractor has enjoyed 2 months off. If the contractor works 11 months, it might be a rough draw. Bench time varies widely across individuals, and also affects permies to some small degree, so it is difficult to generalize.

(and what's sick days?): I'm pretty good but over 20 years I've actually worked about 15 of them and I doubt I'm untypical.

Congratulations on your good health.

And which bit of pessimistic approximation are you having problems with?

The idea is to demonstrate that it's not all sweetness and light and a new Porsche every other year. A dose of harsh reality is sometimes necessary.

I understand you want to make a demonstration, but massive exaggeration and inaccuracy doesn't help, and certainly isn't "harsh reality".

[TheFaQQer]

Eh? Number of work days in a year is 221, assuming 5 weeks holiday, 10 bank holidays and 5 days sick. Even at £400 pd, that equates to £88,400. Subtract 2k for accountancy, another 2k for expenses and you have 84k, comfortably beating 77k perm. That is without considering any tax savings open to the contractor. But it also assumes that accommodation costs are not too excessive.

You're entirely correct about expenses impacting the headline daily rate, but your numbers much too pessimistic IMO. For £600 per day, the same above calculation yields about 128k per annum.

£84k before you pay for anything else.

Is £2k a reasonable figure for expenses? It depends on the work that you do and where you need to be to do that work - in one year, my travel and subsistence was over £30k on it's own. Looking at my last year's accounts my expenses outside pension, salary and tax were £12k. I work from home the vast, vast majority of the time and have occasional travel to client site (max 25 days a year) and I still spent £6k on travel.

Your £2k for expenses is much too optimistic IMHO only.

[malvolio]

Most of those affect permies to a similar degree, and vary from individual to individual, depending on circumstances. Contractors pay very roughly the same income tax as permies, largely due to the effect of CT. Ltd company contractors can save on NI, but I left that out of the calculation.

No they don't. There is a pension contribution from salary, I've had to fund the whole thing. I pay tax at the same rates on my personal income but I've also paid Employers and Employees NICs on that income as well as 20 CT on the balance of MyCo's earnings. I don't get SSP. I don't get training or personnel support for any disputes. Permies don't have to pay for accountancy support, liability insurances, health care and various other more minor expenses. You can't ignore these costs, they are a fundamental point of the estimate of what gross company income you need to match a given permanent employment's net salary.

...snip...

I understand you want to make a demonstration, but massive exaggeration and inaccuracy doesn't help, and certainly isn't "harsh reality".

It's not an exaggeration, it's the result of a detailed and verified analysis of the costs involved, aimed (originally) at trying to develop a consistent comparison of Cost of Employment against Cost of Contractors (which showed, incidentally, that we are about 15% cheaper, long term than using an employee). It is at the pessimistic end of the equation but that is deliberate. If you want to weaken the whole point of the exercise by ignoring a lot of invisible overheads then that's your opinion but your version is not helping the potential contractor make a reasoned decision.

[tarbera]

Should I go for 450 or 500?

Hey All,

So i'm ready to go contracting and getting asked about my day rate.

While I know what I would like (as much as possible), i'm not sure what is reasonable and whether my first contract makes a difference or not?

My last perm gig was £77k (startup no bens) and calculator says that equates to about £350 per day. I would have thought that around 450-500 mark would have been appropriate (Or higher even).

The company I am talking about now wanted to recruit me as a lead developer for £85k perm.

Considering all of this, what is your gut day rate that would be appropriate. Should I go for 450 or 500?

I am aware I need to be careful..obviously I can't say I am open to rate discussion as they will use that. I would also like to think that if they like me but rate is too high they will say so?

Any guidance at all is appreciated.

Many thanks

Depends what Market (your competition +location + sector) will pay and your experience , My Agent for example is looking for London based Java guys for £650/day that he cant find. But has CV's from from 30 Dev Managers scrambling about looking for £250/300 roles

What are your skills?

ohh and remember if an Agents lips move they are lying

[mattfx]

OP to give you a real world situation I am facing right now:

I took my first contract in July last year. I was on 43k per year in permieland before this. I took a contract at a day rate of £220/day outside, assuming I could increase it to £250 upon extension. Upon extension I couldn't up the rate because I am not a sales person, and the recruiter is.

Then, in October there was a death in my family. I had to have 5 billable days off to sort it out. Over Christmas I also had to have 5 billable days off due to contractor furlough. Then, in addition, at the beginning of December I got a chest infection and had to have 7 billable days off.

Add that to a couple of random days off I've had here and there for actual holiday, and you're up to around 20 days off in a 3 month period, mostly enforced / not chosen, which I wasn't earning. Had I been a permie, that would've all been taken care of by my employer.

I was very lucky, I have a company I can undertake remote work for on the side which helped make up the shortfall who happened to need a project doing during the Xmas period, most people will not have this.

My contract is ending next week, I am not being extended (and neither do I want to be), everything was looking promising for an interview last week but I was second choice. Everything was looking sweet for another interview, but the funding for the role got pulled. My client asked if I could do a project at the end of my contract which I accepted and stopped looking, then they moved the goal posts with regard to date.

The above is relatively mild compared to some on here, who get in through the door of a new client only to find themselves being walked off site after 3 days because a PMO somewhere changed their mind in terms of resourcing, their timesheet never gets signed off and they don't even get paid for those days.

If you like the sound of the above and are more than happy coping with it (should read, your wife and kids are more than happy coping with it) by all means fill your boots.

[l35kee]

This is a good point. The 77k permy working 12 months would win financially over the 400 p/d contractor working 10 months. However, the contractor has enjoyed 2 months off. If the contractor works 11 months, it might be a rough draw. Bench time varies widely across individuals, and also affects permies to some small degree, so it is difficult to generalize.

Would they? £400 day rate can be a take home of at least £65k after tax over 10 months. Where as permie £77k is a take home of about £52k......... That's more than £10k difference. plus you get 2 months holiday.


I agree with your point against the other poster though. But needed to emphasise it more!

[l35kee]

Eh? Number of work days in a year is 221, assuming 5 weeks holiday, 10 bank holidays and 5 days sick. Even at £400 pd, that equates to £88,400. Subtract 2k for accountancy, another 2k for expenses and you have 84k, comfortably beating 77k perm. That is without considering any tax savings open to the contractor. But it also assumes that accommodation costs are not too excessive.

You're entirely correct about expenses impacting the headline daily rate, but your numbers much too pessimistic IMO. For £600 per day, the same above calculation yields about 128k per annum.

Subtracting £2k for expenses from your take home seems wrong... Most of the expenses I have, I'd have as a permie anyway, but I'd be paying for them out of my post-taxed income.

If the majority of my expenses are travel and food, I'd be paying for them myself, so if anything you ADD the expenses to your take home, not subtracting them surely.

[l35kee]

OP to give you a real world situation I am facing right now:

I took my first contract in July last year. I was on 43k per year in permieland before this. I took a contract at a day rate of £220/day outside, assuming I could increase it to £250 upon extension. Upon extension I couldn't up the rate because I am not a sales person, and the recruiter is.

Then, in October there was a death in my family. I had to have 5 billable days off to sort it out. Over Christmas I also had to have 5 billable days off due to contractor furlough. Then, in addition, at the beginning of December I got a chest infection and had to have 7 billable days off.

Add that to a couple of random days off I've had here and there for actual holiday, and you're up to around 20 days off in a 3 month period, mostly enforced / not chosen, which I wasn't earning. Had I been a permie, that would've all been taken care of by my employer.

I was very lucky, I have a company I can undertake remote work for on the side which helped make up the shortfall who happened to need a project doing during the Xmas period, most people will not have this.

My contract is ending next week, I am not being extended (and neither do I want to be), everything was looking promising for an interview last week but I was second choice. Everything was looking sweet for another interview, but the funding for the role got pulled. My client asked if I could do a project at the end of my contract which I accepted and stopped looking, then they moved the goal posts with regard to date.

The above is relatively mild compared to some on here, who get in through the door of a new client only to find themselves being walked off site after 3 days because a PMO somewhere changed their mind in terms of resourcing, their timesheet never gets signed off and they don't even get paid for those days.

If you like the sound of the above and are more than happy coping with it (should read, your wife and kids are more than happy coping with it) by all means fill your boots.

I'll give a brief version from my perspective.

Took my first contract april last year. Permie £50k to £400 pd. Over Christmas I also had to have 5 billable days off due to contractor furlough, which I would have taken off anyway, because it was Christmas and I love my family.

Then, in addition, at the beginning of December I got ill, but came into work anyway because I was still able to stand up, walk around, type of a keyboard, etc and a like money :P

@mattfx I think on a permie salary you said, thats a pretty low rate. I think my rate is low for my permie salary tbh..

[HugeWhale]

Would they? £400 day rate can be a take home of at least £65k after tax over 10 months. Where as permie £77k is a take home of about £52k......... That's more than £10k difference. plus you get 2 months holiday.


I agree with your point against the other poster though. But needed to emphasise it more!

In my experience you won't average 10 months over the long term. 8 might be a better approximation. And it's not a question of enjoying 4 months off - you're working flat out on getting your next gig.