Contracting directly?

[redman123]

Just wondering how it works for people contracting direct with clients for example, a bank

Forgive my ignorance but is it as simple as it sounds as most other consultants go via umbrella and an agency so direct would mean a better rate for the contingent worker?

[northernladuk]

You've got it all completely wrong. You aren't even starting to think in the right way so the answer won't be apparent. I'll try explain a couple of examples to get you going. It's not everything so will be missing things other people might add.

Forget the odd client that will take a bum on seat contractor on like us. It happens but rare. That's the client managing the contractors instead of an agent which isn't the norm. It's much more likely to be something out of the following.

Clients will have a few different methods of aquiring different services. For contingent labour, bum on seats, temps they will go via agencies. The agencies provide a service, they find, sift and present contractors, handle pay, contracts and so on. Contractor just turns up. Another way of getting services is through a Preferred Supplier List. This will be suppliers who have already been vetted and various things already signed so work can be fast tracked. This is generally for whole services, goods etc, not people. Then there is the straight bid war if the client wants some work doing.

The contractors direct are likely to be either very lucky or part of a group offering as solution to the client, not bums on seats. So a different delivery method to us. If you don't understand this then you are in no position to try your luck if you get me. They are likely to have put a proposal together and submitted more like a small consultancy than a bum on seat contractor so acting more like a business. Could be on a day rate but more likely on some kind of fixed cost. It varies.

All that said there is then the Public Sector frameworks like GCloud and the specialist one to further complicate things.

So there isn't really a comparison between your average joe contractor via agency and one that is direct. Different delivery styles, engagement etc.

You also mention most other via umbrella--> agency which is an inside gig which is even less likely to be direct. Inside contracting is more akin to temping than direct contractors.

And no, even if this route were an option you do not pocket the extra money. The agency earns it by doing a service for a client. Why would the client pay you the same amount, don't get that service and then have to do the admin themselves?

It's every noobie contractors dream to either become an agent for their client and pocket the comission or become a consultancy at their client to hoover up work. It never happens and when that contractor starts to understand what they are, their client and business in general it becomes obvious why.

[jamesbrown]

The contractors direct are likely to be either very lucky or part of a group offering as solution to the client, not bums on seats.

Basically, this. Lucky (e.g., contact that is involved in procurement at the client or on their board), niche skillset or selling services as part of a larger consortium, or both of the last two.

[jamesbrown]

Pretty much everything in contracting is driven by supply and demand, unsurprisingly. If you're in high demand, you dictate the terms. If you're in large supply, you don't. The only thing you can do to fix that balance is to work on your skillset and/or your contacts, but the latter normally comes with the former.

[gixxer2021]

I’m direct, was through recommendation (so very lucky!). It’s outside IR35 for a small company, even had to provide the contract. I’ve only had one other direct contract and that was actually through Jobserve many years ago, again a small company. I can’t see many contractors getting direct work with any of the banks these days tbh.

[jamesbrown]

I can’t see many contractors getting direct work with any of the banks these days tbh.

True, there are some industries where procurement policies are such that you need to be even more niche/in-demand or lucky to get direct work. Direct BAU-type coding work at a bank is going to be pretty rare nowadays unless you're in the "lucky" category and, even then, I doubt it.

[redman123]

I’m direct, was through recommendation (so very lucky!). It’s outside IR35 for a small company, even had to provide the contract. I’ve only had one other direct contract and that was actually through Jobserve many years ago, again a small company. I can’t see many contractors getting direct work with any of the banks these days tbh.

Thanks all for the replies. It was asked on the back of a small conversation I had in passing with someone.
For the person I had in mind this is the closest match. He did mention that he was referred by the line manager after the IR35 thing. In essence he left and rejoined “directly” and skillset is an ordinary PM nothing special!

It may be he’s extremely lucky but in terms of processing would he not still go via umbrella or is a preferred supplier doing his PAYE?

I also recall someone else saying they are paid via PAYE and do not pay Umbrella fees so they have to take holidays for holiday pay but are a contractor. (even though umbrellas will do this for you and their margin is at approx 88 p/m - they said they couldnt get an uplift in rate anymore as its maxed out, to cover their “fees” - why would you?) on another note I would call this other person extremely lucky to have been there for 7 years!

[WTFH]

Thanks all for the replies. It was asked on the back of a small conversation I had in passing with someone.
For the person I had in mind this is the closest match. He did mention that he was referred by the line manager after the IR35 thing. In essence he left and rejoined “directly” and skillset is an ordinary PM nothing special!

It may be he’s extremely lucky but in terms of processing would he not still go via umbrella or is a preferred supplier doing his PAYE?

I also recall someone else saying they are paid via PAYE and do not pay Umbrella fees so they have to take holidays for holiday pay but are a contractor. (even though umbrellas will do this for you and their margin is at approx 88 p/m - they said they couldnt get an uplift in rate anymore as its maxed out, to cover their “fees” - why would you?) on another note I would call this other person extremely lucky to have been there for 7 years!

It’s hard to tell from your story but to have “left and rejoined directly” do you mean he used to be permanent with the bank and then came back as a contractor a few days/weeks later, or was he already contracting through another way? The fact that he was there for 7 years would imply he’s effectively a permanent employee and not really a contractor at all.

If the role is inside IR35, then you must go via an umbrella.
If the role is outside IR35, then you will have options to go via your own Ltd

I’m intrigued by how your “small conversation” included the margin a particular umbrella was making, but just as a thought, £88 per month is less than an accountant will charge to do the finances for your own Ltd, and your friend may not have told you all the joys of running an Ltd.

And one final thing, we used to have a poster on here who was a PM at a bank and obsessed with rates, but most of his stories were hypothetical or made up, and he was always very light on the relevant facts, so I’d take anything anyone tells you with a pinch of salt.

[redman123]

The person was on a contract outside, left and rejoined directly. Presume this is not via ltd co and not connected to the 7 years comment. I should have clarified.

The other person I spoke to we didnt discuss umbrella margins that was my own rough calc. They have been working for 7 years as a contractor

I found it odd they said they had to take holidays or it gets lost. Like a permie but not one for sure. Why not let the umbrella add it to your pay. Hey ho

[eek]

I found it odd they said they had to take holidays or it gets lost. Like a permie but not one for sure. Why not let the umbrella add it to your pay. Hey ho

Because some umbrellas make a LOT of money from stealing unused holiday pay.