Cost to employer

[Clarky]

Bit late I know...

But www.listentotaxman.com is good... includes the Employers NIC contributions on there now too...

But yeah, should've pitched yourself high than what you did...!

[McBainCo]

I have used in the past anything from a factor of 1.8 to 2.5 depending upon the fixed and variable costs of the employer.

A £30,000 salary will hover between £245 to £340 pd. Assumed 220 workind days p.a.

A contractor under £200 pd, would be working at below the national average salary (£25000)

[ASB]

Oh good lots of different answers. As ever it depends upon on what you are trying to achieve. So heres another one.

For my guys I have to budget on 1300 hours per year. I also have to take a surcharge on salary which is 42% - this is supposed to cover all employment related costs (holiday, sickness, pension, bonus, NI, life insurance, health and HR costs). Also does NOT include accomodation costs.

In my case this would give me an effective hourly rate of 30,000 * 1.42 /1300 = 32.76 or a day rate of 242.42.

If I was looking to fill a 30k role I had with a contractor I would be expecting to pay 275 at most to the agency. This would be reasonably cost neutral.

[tim123]

It's worse than that. The standard project management rule of thumb says you can expect 200 productive days from a permie. There are 260 days in the year, so you are paying 30% more because when they are in work they are in review meetings, progress meetings, one-to-ones, talking to HR, filling in review forms and all that other crap contractors don't do.

Why don't contractors do that "sort of crap". Their work needs peer reviewing as much as anyone else does,

The only person that I knew who wrote deliberately obscure code was a contractor (and boy did the company regret not reviewing his work from day 1)

tim

[RichardCranium]

Why don't contractors do that "sort of crap". Their work needs peer reviewing as much as anyone else does,

The only person that I knew who wrote deliberately obscure code was a contractor (and boy did the company regret not reviewing his work from day 1)

Where review meetings = "How are you performing relative to Corporate Objective 17: 'Enhancing the image of the Corporation' = 5 marks towards getting your annual bonus."

Where progress meetings = the local middle manager saying "prayers", telling you about their latest training course and making a feeble joke about their cat.

Where one-to-one = where your untrained line manager gets you to sit in a room with them for three hours where they humiliate and bully you because that's how they think motivation is achieved.

Where talking to HR = trying to find out which form to use this week to claim your bus fare.

Where filling in review forms = ticking boxes on a badly designed Word template giving your view on what the corporate objectives should be in the next five year plan.

That sort of crap.

[MPwannadecentincome]

What happened to the perm to contract rule of thumb that perm annual salary / 1000 = contractors hourly rate?

So in this case £30 per hour at 7.5 hrs a day = £225 per day

And I'm sure there are 'benefits' on top of the £30,000 to account for too?

[ChimpMaster]

Am I missing something here?

If I'm on £76/hour, then by our general rule of thumb my permie salary would be £76,000. .....

BUT £76 * 7.5 *21 * 11 (rate * hours * days in month * 11 months worked) is over £130,000.

So that's a difference of £54,000! I can't imagine how 5 weeks holiday/sick pay/pension/healthcare would ever amount to £54k.

[expat]

Am I missing something here?

If I'm on £76/hour, then by our general rule of thumb my permie salary would be £76,000. .....

BUT £76 * 7.5 *21 * 11 (rate * hours * days in month * 11 months worked) is over £130,000.

So that's a difference of £54,000! I can't imagine how 5 weeks holiday/sick pay/pension/healthcare would ever amount to £54k.

Oh for goodness' sake. Every time we try to give sensible answers about a decent rue-of-thumb comparison, someone comes along with a piece of less than sensible arithmetic.

1. What's that 12th month? If it's supposed to cover everything, it's not a good input to the calculation. I'd say at least 1 month to cover being on the bench. 5 weeks holiday. 10 days public holidays. Write in 1 week sick time.

That makes 3 months off in 12.

OK, OK, you may not be benched, you may not take sick leave, you may not take 5 weeks holiday. In so far as you don't, so far are you diverging from the rule of thumb. The point of the rule of thumb is to make a standardised comparison of like for like. If you then behave as a contractor in a way that permies don't or can't behave, adjust accordingly, don't invalidate the base calculation.

2. £76 * 7.5 *21 * 9 = £107,730.

3. I suggest allowing 5% for expenses not normally incurred by permies. Hector does and he's not known for throwing money away.
£102,344.

4. Employers NIC (like for like, remember) £11,614.
Leaves £90730.

5. There is more: it looks like trying to nickel'n'dime the figures to death, but remember, every little bit that you fail to count has the effect of inflating the contractor figure. Personally I'd take 2 months estimated bench rather than 1, but YMMV. I'd also add travel to site: employees may choose to live and work in nearby places, contractors often can't so choose because contracts are in various places. Etc etc, maybe not exactly right down to £76k but much nearer that than £130k.


As I said, you may then do things like not go sick, not take 5 weeks holiday, etc. That is your personal variation from like-for-like (and maybe the reason you contract), but it is not a rejection of the base calculation.

[HornyHorse]

Oh for goodness' sake. Every time we try to give sensible answers about a decent rue-of-thumb comparison, someone comes along with a piece of less than sensible arithmetic.

1. What's that 12th month? If it's supposed to cover everything, it's not a good input to the calculation. I'd say at least 1 month to cover being on the bench. 5 weeks holiday. 10 days public holidays. Write in 1 week sick time.

That makes 3 months off in 12.

OK, OK, you may not be benched, you may not take sick leave, you may not take 5 weeks holiday. In so far as you don't, so far are you diverging from the rule of thumb. The point of the rule of thumb is to make a standardised comparison of like for like. If you then behave as a contractor in a way that permies don't or can't behave, adjust accordingly, don't invalidate the base calculation.

2. £76 * 7.5 *21 * 9 = £107,730.

3. I suggest allowing 5% for expenses not normally incurred by permies. Hector does and he's not known for throwing money away.
£102,344.

4. Employers NIC (like for like, remember) £11,614.
Leaves £90730.

5. There is more: it looks like trying to nickel'n'dime the figures to death, but remember, every little bit that you fail to count has the effect of inflating the contractor figure. Personally I'd take 2 months estimated bench rather than 1, but YMMV. I'd also add travel to site: employees may choose to live and work in nearby places, contractors often can't so choose because contracts are in various places. Etc etc, maybe not exactly right down to £76k but much nearer that than £130k.


As I said, you may then do things like not go sick, not take 5 weeks holiday, etc. That is your personal variation from like-for-like (and maybe the reason you contract), but it is not a rejection of the base calculation.

Methinks you make too many assumptions for there to be any value left in the so called generalisation. It becomes a meaningless rule dreamt up by a drone with no ability to encapsulate the personal criteria which form the value of one's effort and time. It becomes worthless.