When is it worth going contract?

[DieScum]

At which hourly rate do you think it is worth going contract?

I'm permanent. I earn 53k basic, + 10% bonus, + 3% pension contribution + 22 days holiday a year + bank holidays. My bonus is not guaranteed but has always arrived as expected so far. So far I have 4 weeks of training courses for new/improved skills per year.

[Lucifer Box]

Stay permie. You know it makes sense.

[Denny]

At which hourly rate do you think it is worth going contract?

I'm permanent. I earn 53k basic, + 10% bonus, + 3% pension contribution + 22 days holiday a year + bank holidays. My bonus is not guaranteed but has always arrived as expected so far. So far I have 4 weeks of training courses for new/improved skills per year.

I agree. You may earn more per hour as a contractor, possibly up to double what you've quoted as your salary above. However, the contractor rate takes into account all benefits (which obviously hikes up your salary level quoted above), plus there are economic downturns to take into consideration which can seriously slash your overall yearly takings over a five year period, lack of employment rights (you could be dumped very quickly). Plus, of course you will probably have to deal regularly with pimps (recruiters from employment businesses) unless you have loads of contacts who can get you work without them).

Contracting is only suitable for some people who can't bear the thought of being in one place all the time and don't want their career path dictated to by employers. It's not necessarily any more lucrative than being in a good well paid permie job like yours. Unless you're attracted by the prospect of being time rich (between contracts when you can go abroad for months on end without needing special permission from your employer) then forget it.

[VectraMan]

If I'd had had that salary and perks, I wouldn't have bothered with contracting, at least not for financial reasons. If you hate your job and want more freedom, then that's a different issue.

But you don't say what you do. If you're one of the select few that can go get the financial programming jobs in the city at £600 per day, then I guess it probably would be worth it.

[DieScum]

Well I enjoy the job and I am a conusltant so I spend my time on short term projects. Cerainly not the case of being stuck in one place. Been in three different countries over the last four weeks!

Just want to keep my eyes open. Wonder if a 500 quid a day contract would be worth it. Probably not...

[boredsenseless]

Well I enjoy the job and I am a conusltant so I spend my time on short term projects. Cerainly not the case of being stuck in one place. Been in three different countries over the last four weeks!

Just want to keep my eyes open. Wonder if a 500 quid a day contract would be worth it. Probably not...

Well of course it is if its a year contract, if its 4 weeks then it isn't ...

[ChimpMaster]

I battled with the same questions about 18 months ago, when I jumped ship from my 90k a year consultancy job (salary plus bonuses plus usual benefits) to take a contract. Reasons for the switch were in no way financial as you might imagine.

I made the move due to not wanting to travel any more -- at least not at the company's mandate. Now I can choose where to work, and I've put enough aside to be able to make that choice.

I probably come out slightly worse off financially (when you take into account company benefits) but I've been very happy with my choice of work locations! The job's boring and my career has stalled but I don't mind too much for the next couple of years - given that I'm skilled in a dying toolset.

Furthermore, financially, being paid a good rate enables you to decide how to spend/save it, i.e. you're not forced into a PAYE/training/4 weeks holiday/sickness/pension/healthcare/40% tax regime set by your employer. So you're free to split the 100k (assumed gross annual earnings at £500/day) anyway you want, after tax.

Having said that, if you're happy in your job and have good career opportunities, then stick it out - it's a decent package after all.

[DieScum]

Thanks for the insight ,Tazman. What made you want to stop the travel?

I am the same as you were but at the moment the travel is enjoyable. Good way to see the world. I have a few mates who have taken a year out to travel - I get paid to do it!

It suits at the moment. I am mid-twenties, no wife, no kids, girl in every port and friends dotted round everywhere. I suppose in a few years I will want to calm it down a bit. Might follow your example.

[XLMonkey]

... and to answer the question you actually asked...

roughly, equivalent cost to the employer is your annual salary divided by 100, per day. so 53k=530/day

it will feel like more, if you're working continuously. How much more depends on your rate. The more you are earning, the narrower the gap between how much you take home through full-time employment and how much you would earn as a contractor (so, someone on 300/day will take home probably 75-80% more than someone on 30k, but someone on 500/day will take home only 50-60% more than someone on 50k).

the differential between the two reflects:
- the greater risk associated with contracting
- the other benefits that an employee gets that you don't (or might choose not to pay for)
- the different taxation regime that applies to salaried income vs. dividend income.

I've got a little spreadsheet that calculates revenue and income for different daily rates that you are welcome to if you pm me. (I am an XL Monkey after all)....

[el duder]

as a first time contractor in your mid-20's your not going to be able to demand £500 a day.

sorry for putting a slant on it for you.

but just being realistic.

i earn usually between £200/300 a day i am 29 with 5 yrs experience, and have a niche skill set