Contract Advise

[ContractDale]

Hi,

I'm hoping someone can advise me on this. I have been offered an opportunity to work as a contractor with a previous employer.

I am currently working as a permanent employee and haven't contracted before so my knowledge of contracting is limited apart from what I've found on the web and from speaking to contractors I currently work with. This contract opportunity has been offered direct to me from the client but I really have no idea where to start with this.

I know I'll need to sort out an Umbrella company, but the contractors I've spoken to at work have suggested that I need to speak to an agency to sort out the contract etc.

The problem is that even though what I've been offered by the company is more than what I'm currently earning it isn't a massive amount more so if an agency takes say 20% and then I have to pay £25 per week for an Umbrella company I don't think I'm going to be a great deal better off.

I'd be grateful to hear any opinions on where to start with this, do I need to get an agency involved? or is there any other way of sorting out a contract with this company? any advise would be appreciated

Thanks

[BolshieBastard]

Hi,

I'm hoping someone can advise me on this. I have been offered an opportunity to work as a contractor with a previous employer.

I am currently working as a permanent employee and haven't contracted before so my knowledge of contracting is limited apart from what I've found on the web and from speaking to contractors I currently work with. This contract opportunity has been offered direct to me from the client but I really have no idea where to start with this.

I know I'll need to sort out an Umbrella company, but the contractors I've spoken to at work have suggested that I need to speak to an agency to sort out the contract etc.

The problem is that even though what I've been offered by the company is more than what I'm currently earning it isn't a massive amount more so if an agency takes say 20% and then I have to pay £25 per week for an Umbrella company I don't think I'm going to be a great deal better off.

I'd be grateful to hear any opinions on where to start with this, do I need to get an agency involved? or is there any other way of sorting out a contract with this company? any advise would be appreciated

Thanks

If you involve an agent in this, you need to make certain both the client and the agent know the rate you have been offered is your rate and if the agent wants a mark up, it sorts that separately with the client.

In other words, the agent's cut doesnt come off the rate you've been quoted.

However, I suspect as soon as you do introduce an agent to all this, it will all get messy since the client will probably say the agent's cut has to come out of the money they said they'll pay you and, the agent will say they want a huge cut of your money which probably means the difference between what you are on now and what you'll get in the new role will be severely reduced.

Not certain if there are any links here to contract templates but Im guessing this isnt going to be a money spinner for you.

[Gonzo]

Hi,

I'm hoping someone can advise me on this. I have been offered an opportunity to work as a contractor with a previous employer.

I am currently working as a permanent employee and haven't contracted before so my knowledge of contracting is limited apart from what I've found on the web and from speaking to contractors I currently work with. This contract opportunity has been offered direct to me from the client but I really have no idea where to start with this.

I know I'll need to sort out an Umbrella company, but the contractors I've spoken to at work have suggested that I need to speak to an agency to sort out the contract etc.

The problem is that even though what I've been offered by the company is more than what I'm currently earning it isn't a massive amount more so if an agency takes say 20% and then I have to pay £25 per week for an Umbrella company I don't think I'm going to be a great deal better off.

I'd be grateful to hear any opinions on where to start with this, do I need to get an agency involved? or is there any other way of sorting out a contract with this company? any advise would be appreciated

Thanks

You don't have to involve an agency.

You probably don't have to use an umbrella company - if you do you will be paying employers' NI in addition to employees' NI have you included that in your calculations about whether or not you will be better off?

What about holiday pay that you won't get as a contractor?

What about sick pay that you won't get as a contractor?

What about pension contributions that you won't get as a contractor?

What about a bonus that you won't get as a contractor?

What about permanent health insurance that you won't get as a contractor?

What about life assurance that you won't get as a contractor?

Are you sure it is worth it?

[mudskipper]

You don't need an agent. You do need either an umbrella or a LtdCo. As others said, LtdCo means more money in your pocket, but you will almost certainly need an accountant. My accountant provided me an IR35 friendly contract template, which I then altered for my requirements.

Contract rates often look attractive on the face of it. A commonly suggested calculation for the 'real' permie equivalent is hourly rate*1000 - probably a good starting point to see if you really will be as much better off as you hoped.

Good luck

[chef]

In short, you don't need an agent at all as you have the holy grail of contracting and that is contracting direct with the client rather than having an agent in the mix. All you need is a contract you send to the client to sign that obviously ensures you are not caught by IR35. But before you do that you need to think about a few things:

- you need to decide if the client is actually paying you a fair rate or simply upping the permie rate a bit and expecting you to take on all the responsibility. A VERY VERY rough guide would be to work out your hourly rate as a contractor and multiply by 1000 and compare to your permie salary. Or you could use variious contractor calculators on here.
- you also need to decide are you doing this as a short term "fast buck" and then look for permie work again or is this a lifestyle change and you're taking the leap into managing your own life/work etc. In short, do you like the idea of looking for your own work and the rewards that come with it or do you not believe you have the skillls/attitude once this gig ends? That should help you decide if you go via the self employed route, the umbrella route or the limited company route.

As advised on here, get yourself an accountant, the most important thing. They will advise you on the costs involved in the self employed/umbrella or limited routes. There are recommendations on here which a simple search will find.

Then, assuming all is good and the amount you will "take home" is worth it then you should either think of joining the Professional Contractors Guild (PCG) as they give you excellent discounts on insurance and also have IR35 friendly downloadable contracts or ask you accountant if they have an IR35 contract or ask one of your contractor mates if they would either give you a contract they use or have previously used.
Then simple, word it for yourself, send it to the client for signing and welcome to the world of contracting.

[chef]

and just to be a pedant, its "Contract Advice" and "I'm hoping someone can advise me"

[DodgyAgent]

If you need an agency and you want a low and transparent margin then please do PM me.

[Wanderer]

The problem is that even though what I've been offered by the company is more than what I'm currently earning it isn't a massive amount more so if an agency takes say 20% and then I have to pay £25 per week for an Umbrella company I don't think I'm going to be a great deal better off.

You will also have to pay employer's national insurance if you work through a brolly company. I'd suggest Ltd unless you are doing a short contract. The downside of Ltd is that there is a lot of aggro about accounts and stuff and it doesn't go away when you stop working - it takes quite a while to close down your company when you are done with it.

What Gonzo said, plus you will have no job security either. They can drop you the minute's the going gets tough - it's a lot harder to do that with permies. Also remember that a "6 month contract" is only as long as your notice period (eg, 1 week). They can dump you anytime at a week's notice - they don't have to give you work for the whole 6 months.

You don't NEED an agency but for a first timer, well you are probably better off with one if it doesn't cost you anything (eg, the company pays the agency margin). The agency can (in theory) protect you from the company a bit - paying you on time is usually something that an agency would do whereas in a direct relationship with a company you may get stuck in their accounts department and end up chasing them all the time.

If you bring a contract to an agency on a plate then they will take less than 10% for their fee but make sure it doesn't come out of your pocket. That said, if the company are willing to pay an agency a margin then you might as well take the 10% margin yourself and go direct.

To be blunt, if the gross contract rate isn't excellent (as chef says 1000 x your contract hourly rate > permie annual salary) and you don't have a "war chest" of 3-6 months salary saved in the bank then walk away. It's not worth it, sit tight in your permie job especially as you will have no job security contracting and may end up on the bench for a while at the end of your contract.

[Troll]

and just to be a pedant, its "Contract Advice" and "I'm hoping someone can advise me"

Any C.V with that kind of 'howler' that crossed my desk would end up straight in the bin

[Churchill]

Any C.V with that kind of 'howler' that crossed my desk would end up straight in the bin

I do that with every third CV, just to weed out the unlucky bastards.