Reply to: Hi! Confused on Contracting

[simes]

The new guy might not understand OP. Or, he might.

But I do wish across the board that these new guys were a bit quicker to respond to those taking an interest in their queries... Sticking one post at top, and then disappearing is just plain rude, I feel.

[Old Greg]

40 weeks working a year, combined with a quick run through the various brolly calculators.

40 weeks? Fair enough, but if the OP is working via a brolly, then it's important to compare apples with apples.

OP, what do you base the current 45k per year via brolly on? How many weeks work is that? What is the daily rate?

[NotAllThere]

Really? Please explain.

40 weeks working a year, combined with a quick run through the various brolly calculators.

[malvolio]

Slightly curious about something... If you are on a temporary contract, through an umbrella (and presumably not as an FTC) you are already a freelance in the wide sense of the word - why are they wanting to change it?

[Hobosapien]

Currently I am earning around 45K on a temporary contract with the same company (through a umbrella company).

They have offered 350 daily rate.

Also, would I be falling under IR35?

According to a contractor calculator, for a salary of £45k (which via an umbrella is what you are equivalent to) it says you would need an 'outside IR35' day rate of £210, or 'inside IR35' day rate of £264 to be no better or worse off. So £350 either inside or outside IR35 is 'winning'.

Safest course (seeing as you're currently on a temp contract so no guarantee of long term work with the client anyway) is to accept their offer but still contract via the umbrella. The client shouldn't care about this if they are being honest about their intentions (they will be paying only the £350/day regardless of how you operate), and it means you'll be operating inside IR35 so less risky for the client anyway.

Sorted.

[malvolio]

£41k to £57k as a % increase is roughly 40% more. If considering a pay increase in permie land which is more like 5%, I would submit it IS a damn sight more...

But the OP won't get £57k since he won't do 12 months work, can't claim expenses and will have necessary bills to pay. He would be lucky to break even at the end of the year.

[simes]

assuming 12 month contract
assuming no expenses
assuming no pension
assuming 20 days holiday
assuming no other time off
assuming starting at the start of the new tax year

It's more like £57k take home. That's a lot of assumptions.
It's more cash, but not a 'damn sight more'.

£41k to £57k as a % increase is roughly 40% more. If considering a pay increase in permie land which is more like 5%, I would submit it IS a damn sight more...

[DeludedKitten]

assuming 12 month contract
assuming no expenses
assuming no pension
assuming 20 days holiday
assuming no other time off
assuming starting at the start of the new tax year

It's more like £57k take home. That's a lot of assumptions.
It's more cash, but not a 'damn sight more'.

How much of those things do you get through an umbrella company anyway?

[simes]

Eight clients, of which three have been visited two or more times in that period.

NLUK, indeed. Fully understood. And beware another upcoming assumption, only those looking would be commenting on the State of the Market. For my part, I would not be jumping in on the thread to smugly state, "I'm alright Jack." I'd be shot; even more so than my current input to the boards sustains.

So, it doesn't really tell me, or indeed anyone, who on this board is currently / always contracted. As a percentage of contractors then, am not sure how it plays out across the board. But, as said, mine was an assumption.

As for warchests, I absolutely have one. The past is in no way a guaranteed pointer to the future.

[malvolio]

Ok, quite possibly another thing based on my own experiences, and not aware of those of others.

For my part, I have been 12 months per year for the last 10 years. So apologies for the assumption.

Fair play.

How many clients in those 10 years?

[northernladuk]

Ok, quite possibly another thing based on my own experiences, and not aware of those of others.

For my part, I have been 12 months per year for the last 10 years. So apologies for the assumption.

Fair play.

More than enough threads on here that should prove to you that your situation is absolutely ideal and pretty uncommon. You've actually commented on one this week about a guy that's having to go perm because of struggles to find a gig. Go have a read of the State of the Market thread as well. No one in there (but you) has a 12 month track record.

The number of warchest threads should also tell you that it's a reality that should be factored in. If we all did 12 months straight for 10 years we wouldn't need warchests.

[simes]

As an aside, in 20+ years as a contractor, I've averaged 7 months a year earning an income...

Don't factor in 12 months. That's an absolute best case and not a reliable figure.

Contracting and perm/temping are such different animals you can't do a like for like. You have to factor in the nuances of each and time on the bench is one of those things that will happen so has to be part of the equation to get a realistic(ish) figure.

Ok, quite possibly another thing based on my own experiences, and not aware of those of others.

For my part, I have been 12 months per year for the last 10 years. So apologies for the assumption.

Fair play.

[Lance]

Really? Please explain.

20 working days per month = £7k.
12 months at such = £84k (With this calculation, there are still four weeks' holidays inc all the bank holidays)

Even with no expenses, pensions, other deductibles, you'd take home a damn sight more than £41k. Both Corp and Personal tax would/could come in at under £20k.

assuming 12 month contract
assuming no expenses
assuming no pension
assuming 20 days holiday
assuming no other time off
assuming starting at the start of the new tax year

It's more like £57k take home. That's a lot of assumptions.
It's more cash, but not a 'damn sight more'.

[malvolio]

The boring old ((salary / 1000) = hourly rate) estimation will give you a starter for 10. That indicates roughly what you charge gross to get the same net pay in your bank account over a year. £45 an hour is roughly £340 a day.

It is very very approximate, but it does give a sense check.

As an aside, in 20+ years as a contractor, I've averaged 7 months a year earning an income...

[fiisch]

Don't factor in 12 months. That's an absolute best case and not a reliable figure.

Contracting and perm/temping are such different animals you can't do a like for like. You have to factor in the nuances of each and time on the bench is one of those things that will happen so has to be part of the equation to get a realistic(ish) figure.
.

Out of interest, what figure do you use? I've done some back-of-the-fag-packet calculations using 10 months, but sometimes this feels a bit overly generous.... Still trying to find the sweet spot in regards to what I should take in terms of dividends over and above salary payments.

To the OP - that's a terrible deal. They're essentially removing your rights and lowering your tax bill in return for a promotion, but not only is it on dodgy ground re.: IR35 as people have said, but I'd wager you'd be much worse off in the long run.... Personally, I'd ask for the expected payrise on the same terms as you're on.

If the idea of contracting appeals via a ltd. company, think about a move elsewhere, but if you've got the opportunity for a promotion to boost your CV, there is a long-term financial benefit of that (assuming they'll agree to giving it to you on the right terms). I actually think what they've offered is a tad unfair, as they're baiting you with benefits that they're not paying for, and something that HMRC would undoubtedly frown upon.