Flippity-Flop: Weighing up a Return to Contracting

[fiisch]

What is the formula people use for weighing up a permanent versus contractor salary? I seem to recall day rate * a certain no. of days gave an approximate equivalent permie salary.

How is the contracting landscape / IR35 / changing corporation tax impacting your ability to get contracts / at same level as before?

I'm an ex-contractor from the insurance industry turned perm last year, predominantly due to growing family and being attracted by the certainty of a perm income to cover ever increasing household bills. My current situation is quite fortunate - £90k and a fairly easy role, nearly fully remote, with 1 day a month in the office and all travel paid, and a nice company/team to work with.

However, the usual permie carp that makes us all shudder has been prevalent - failed promises of promotion (well a fulfilled promise, with all of the work and none of the payrise), internal politics, appraisals etc., and I've moved to a different area of change within my industry that I am not as excited (more bored?) by...

I (or moreover, my wife) am starting to get tempted again by contracting opportunities just 16-odd months after turning perm, with rates for similar roles around the £600-650/day mark outside IR35. I seem to think these rates are broadly equivalent to my salary, but I can't remember the formula to prove this to myself/wife.

Return to the cut and thrust of contracting, or stick within the relative safety of permiedom?

[malvolio]

Not again....

It can't be done, there are way too many variables. The old guesstimator was hourly rate * 1000 equals gross salary for the same net income, but with all the changes that is nowhere near accurate.

You can only aim for as much as possible, and be fairly confident that contracting will pay better - for as long as you are being paid (i.e. not 365 days a year).

But it's worth mentioning that a lot of the long term benefits of contracting are not fiscal.

[WTFH]

What is the formula people use for weighing up a permanent versus contractor salary? I seem to recall day rate * a certain no. of days gave an approximate equivalent permie salary.

How is the contracting landscape / IR35 / changing corporation tax impacting your ability to get contracts / at same level as before?

I'm an ex-contractor from the insurance industry turned perm last year, predominantly due to growing family and being attracted by the certainty of a perm income to cover ever increasing household bills. My current situation is quite fortunate - £90k and a fairly easy role, nearly fully remote, with 1 day a month in the office and all travel paid, and a nice company/team to work with.

However, the usual permie carp that makes us all shudder has been prevalent - failed promises of promotion (well a fulfilled promise, with all of the work and none of the payrise), internal politics, appraisals etc., and I've moved to a different area of change within my industry that I am not as excited (more bored?) by...

I (or moreover, my wife) am starting to get tempted again by contracting opportunities just 16-odd months after turning perm, with rates for similar roles around the £600-650/day mark outside IR35. I seem to think these rates are broadly equivalent to my salary, but I can't remember the formula to prove this to myself/wife.

Return to the cut and thrust of contracting, or stick within the relative safety of permiedom?

Your question is asked all the time and it is not simple to answer, other than to say: it depends.
One person can come up with a figure, and 10 others will tell you it's wrong, while being unprepared to suggest a more accurate one.

Perm salary: you can look at a monthly pay slip and see how much has gone into your personal bank account and into a pension and know there are no further tax/NI/etc deductions in the future. You get paid while on holiday, or sick, etc.

Contractor: You have a day rate. If you're outside IR35 and you put that through your Ltd, how many shareholders do you have? How do you split dividends? How much do you put into pension? How much do you withdraw each month as a salary (or salaries)? How much do you leave in to take out at a later date? How many days a year do you work? What schemes/risks are you prepared to take?

[jamesbrown]

LPM1 will be along shortly.

[northernladuk]

What is the formula people use for weighing up a permanent versus contractor salary? I seem to recall day rate * a certain no. of days gave an approximate equivalent permie salary.

THere isn't one. I am sure someone will come along and try band some numbers and then someone else will pull them apart as happens every single time this question is asked.

How is the contracting landscape / IR35 / changing corporation tax impacting your ability to get contracts / at same level as before?

Expect to be inside on every gig from now on and be super pleased when you get an outside one, not the other way around. Because a majority are inside you are up against the dross that usually couldn't get an outside one. So if you are good you'll be fine. If you were average or below it's going to be tougher to get gigs.

I'm an ex-contractor from the insurance industry turned perm last year

Definitely be inside for most of your future gigs then.

My current situation is quite fortunate - £90k and a fairly easy role, nearly fully remote, with 1 day a month in the office and all travel paid, and a nice company/team to work with.

I wouldn't be leaving that to go contracting inside.

However, the usual permie carp that makes us all shudder has been prevalent - failed promises of promotion (well a fulfilled promise, with all of the work and none of the payrise), internal politics, appraisals etc., and I've moved to a different area of change within my industry that I am not as excited (more bored?) by...

But you get crap gigs and and reduced rates as well. With hybrid working coming in more and more it's likely you'll be asked to be in the office more than before as well.

I (or moreover, my wife) am starting to get tempted again by contracting opportunities just 16-odd months after turning perm, with rates for similar roles around the £600-650/day mark outside IR35. I seem to think these rates are broadly equivalent to my salary, but I can't remember the formula to prove this to myself/wife.

Plan on the same rate (and less) inside and see if it starts looking as attractive.

Return to the cut and thrust of contracting, or stick within the relative safety of permiedom?

In the current climate I'd be hard pushed to turn down a 90k easy role.

[NowPermOutsideUK]

Delighted to be part of this community and looking forward to hearing the reply to this topic!!

[malvolio]

Delighted to be part of this community and looking forward to hearing the reply to this topic!!

It's already been posted...

[northernladuk]

Delighted to be part of this community and looking forward to hearing the reply to this topic!!

10 Print "It's the same as the reply given in the last 20 times this came up."
20 Goto Mal's Post

[SussexSeagull]

Unless you have one of these mythical skills that means you will be beating clients off with a stick I would be tempted to stick with what you have at the moment as several long term contractors on here are struggling to find work.

[edison]

What is the formula people use for weighing up a permanent versus contractor salary? I seem to recall day rate * a certain no. of days gave an approximate equivalent permie salary.

However, the usual permie carp that makes us all shudder has been prevalent - failed promises of promotion (well a fulfilled promise, with all of the work and none of the payrise), internal politics, appraisals etc., and I've moved to a different area of change within my industry that I am not as excited (more bored?) by...

Are you sure you're cut out to be a permie?

You seem to have pretty easy life for the money. A lot of experienced contractors are finding it tough, now might not be a good time to get back into contracting to have a good sustainable income. What will your wife think if after your next contract you are on the bench for 3-4 months earning no money? I've only ever worked outside IR35 in 10 years of contracting and 2022/23 is shaping up to be my best year ever for billing, but my wife was saying only yesterday how she wishes I would get a more 'stable permanent' job.

NLUK makes a good point about inside gigs. To a lot of firms who employ large numbers of contractors you are now a disposable commodity resource.

I don't know if there's a correlation, but smaller and medium firms seem to have relatively more outside gigs, that might be better hunting ground. I've just finished at a specialist small to medium size insurer and everyone I worked with was outside IR35 with SOWs.