Time to start contracting?

[northernladuk]

Firstly, you are very, very lucky in that there is some excellent, constructive advice in this thread which is not always the case.

I have no idea what you mean by this

Also, your maths is slightly wrong as you say your current package, on a salary of £70k, is worth £77k.
You don't seem to have accounted for sick pay, training, holiday pay etc.

The perceived wisdom regarding package value, IIRC, is 25% of salary so yours would be worth approx £88k.

and as all new guys to the game also forget you do not get paid holidays, no pension, no sick, no car... nada.. Take off 2 weeks for holidays off this rate you have no doubt calculated, couple of 100 a month for pension, your car, out of work around 2 months a year etc and the value of a contract over a year plummets considerably. Granted there are benefits in dividends etc but lets not go in to all that yet again. Plenty of threads with the finance numbers in elsewhere

[d000hg]

From a financial perspective, the numbers seem to add up. On a 70k salary, I am assuming my overall package to be worth 77k (it already includes 6k benefits allowance, but added 4k pension and 3k bonus). If I can charge more than £400 a day, then it starts to be even more compelling.

You're assuming you can average 200 working days a year. That's in itself probably pushing the statistics even in normal life, before you factor in what happens if you get sick or want holidays each year. You could easily expect to spend 2 months between each contract.

Most people seem to suggest that contract rates should earn you about double a permie salary if you work a full year. Taking a contract role on a few percentage points sounds like a lot of risk for little gain.

[TheFaQQer]

Overall, I think you will worse of on £400 a day compared to £70k a year. You need to pick up a lot more than £400 a day to match what you now have IMO and now is not the ime o start out. Stick with the £70k for now is my advice. Right now I'd think seriously about accepting a guaranteed £70k a year and my day rate is currently £650.

WHS.

£70k salary, you need to be looking at £70/hour to break even. Chances of you getting that rate are going to be slim.

How much have you got saved? How reasonably can you cope with being out of contract for a while? There are a number of people on here that have been / are currently / are about to be benched - last year I had 7 months without a contract. If you are out of work for a while, do you have the resources to meet your outgoings? Could you pay your mortgage etc. for a year with no income?

[dynamicsaxcontractor]

I am not posting that often here, but will do to this as I can see you are in a similair market as me. I am working as a Dynamcis AX consultant, not miles away from SAP but smaller.

If you can get contracts in without to much breaks, at the rates you suggest (£400-500) you will get paid more than a perm earning £100K. Add the freedom and the fact that politics doesnt affect you anymore.... Easy descission, but only if you can get the contracts!

Last point, remember that the agents will take the p*$$ out of you for your first contract....

[TheFaQQer]

If you can get contracts in without to much breaks, at the rates you suggest (£400-500) you will get paid more than a perm earning £100K. Add the freedom and the fact that politics doesnt affect you anymore.... Easy descission, but only if you can get the contracts!

To gross £100k, you need 200 days at £500 a day. Then you have your tax and NI to take out of that.

The total billable days a year is 251 assuming no days off, no sick days, no holidays. At £500 a day, that brings in £147462.5 including 17.5% VAT. So £125,500 per year before tax and NI.

That doesn't provide much "freedom", does it?

[dynamicsaxcontractor]

To gross £100k, you need 200 days at £500 a day. Then you have your tax and NI to take out of that.

The total billable days a year is 251 assuming no days off, no sick days, no holidays. At £500 a day, that brings in £147462.5 including 17.5% VAT. So £125,500 per year before tax and NI.

That doesn't provide much "freedom", does it?

That depends how you define freedom doesn't it. For me it's freedom to be able to take a day off whenever and knowing that after next contract I can take however much time I want off without fighting a manager or having to resign. Not that I have had many days off the last years, but thats because I have preferred to work.

Your assumption of no days off is correct as you never have sick days as a contractor.

£125,000 before tax and NI through your limited company is ALOT more than £70,000 as a perm before tax.

[northernladuk]

That depends how you define freedom doesn't it. For me it's freedom to be able to take a day off whenever and knowing that after next contract I can take however much time I want off without fighting a manager or having to resign. Not that I have had many days off the last years, but thats because I have preferred to work.

Your assumption of no days off is correct as you never have sick days as a contractor.

£125,000 before tax and NI through your limited company is ALOT more than £70,000 as a perm before tax.

We really should keep quoting the numbers in these posts. Some people can't see the reality of it. You are missing things like 2 weeks hols, average of 1 - 2 months out of work, pensions, possibility of having to travel the country to work so hotels etc etc... its just not about the top line

[dynamicsaxcontractor]

We really should keep quoting the numbers in these posts. Some people can't see the reality of it. You are missing things like 2 weeks hols, average of 1 - 2 months out of work, pensions, possibility of having to travel the country to work so hotels etc etc... its just not about the top line

This is starting to get quite interesting. Take the lower number, £500 per day for 200 day for a year - £100K turnover. At what level would you consider a perm package being better? I have quite a few curveballs to throw in to this, but will let you start this.

[SueEllen]

£125,000 before tax and NI through your limited company is ALOT more than £70,000 as a perm before tax.

Northernladuk has been repeating this which you are ignoring is while you may earn £125,000 in one year is that it may have to live on this amount for longer than one year.

We have recently come out of recession and if you do a search on these boards there are thread showing people who have been out of contract for a year.

[dynamicsaxcontractor]

Northernladuk has been repeating this which you are ignoring is while you may earn £125,000 in one year is that it may have to live on this amount for longer than one year.

We have recently come out of recession and if you do a search on these boards there are thread showing people who have been out of contract for a year.

I am not sure why people think they are safe just because they have a perm role, but if you are not interested in discussing this I wont either.