Reply to: Perm vs contract offers

[rocktronAMP]

Hi all,
My partner has just been offered a contract for £500 a day. He is a perm and his salary is 60k. In addition he gets 20% bonus.

Wondering how the two compare. what day rate do you think compares to a say £70k perm salary - taking into account contractor risks etc?

Cheers
Bluedrop

The original idea that was taught to me was the 500 * 220, which is a staggering 110K gros salary before tax, providing your partner works 220 days.

My consultants answer is the classic: "It depends":-

It depends on

• what your husband/wife does as a main skill. E.g. a project manager, Java developer, DB admin, tester, analyst, front-end, back-end, dev ops engineer security guard.
• the faith or trust in the project - does he or she know the client well. If it is an ex-colleague from the past, and network chum, then you probably have it made.
• the stakeholders, the decision makers true aims for the project - some clients play poker face cards
• the true budget that your other half does not see for the all claim - grand claims are not equal to real-world results
• how the project actual runs in its course. Of course, You do not know until you are in the middle of the project. If your other half is involved train wreck project, which is difficult to turnaround, then you are history, eventually.
• contractors are hired for the "hard" projects not necessarily the "easy" ones. You are judged on performance from day 1 until to end.
• scope for the renewals. Most projects I hear always say there is scope for renewals, except for short term work until Xmas. This linked to the budget bit.
• the type of work - long hours at an investment bank, tough commuting times - away from home a lot - accepting dev ops supports at 3am in the morning
• the situation - contracting in a company that is going through restructuring - the culture of the client - the politics
• your personal situation: mortgage, school fees, rent, pensions, car and typical utilities? Can you afford to go months without work and still pay the essentials?
• it is a lot tougher in 2014 than in 2004, I rarely see developer contractors with 12 month security badge, it tends to spits and bobs, 2 months, renewal 3 month extension, another 3 month renewal, then the project finishes or the budget is halted unexpectedly. It is about mitigating risk and realising that things can go seriously wrong on spin of a fifty pence piece.

Nevertheless £500 per day is a very good rate for a software engineer in central London, 6 months. All the best

[MyUserName]

But it's in the ballpark of contracts ending prematurely. It is you who is making unfair comparison. Contracts ending naturally is part of the business and is foreseen circumstance, not a risk. The risk of a contract ending prematurely for reasons outside of the contractor control is still higher than a risk of losing a permie job, but it's not that far off.

Setting the risk of premature end of contract aside, 1 year on £500/day beats 70k permie hands down.

But the salary will come every year (barring anything dramatic) whereas contracts expire and the next one might or might not come along for months and might or might not be on the same rate, in the same geographical area etc.

[MyUserName]

I think you're overstating it.
I've had 12 month contracts which were then extended anyway, well before the contract end date.
On the other end of the spectrum, I've worked with no official contract (waiting for the paperwork) but that's not recommended.
Of course there is always risk of getting the boot, but it rarely gets executed as typically they just need the manpower.
I've been in a team where a contractor was clearly underperforming and they only got round to letting him go until his full 6 months contract lapsed.

I do not think it is an overstatement. My contract was running on 3 monthly renewals and there was no guarantee that there would be an extension. Not once did the paperwork reach me more than a day or so before the end date and each time the team leader insisted he wanted to keep me but it was not his decision. At one point all of this went on as normal and they did not renew.

To the best of my knowledge my situation is more common than yours. Contract terms rarely seem to be more than 6 months and are often renewed in blocks of 3.

[sal]

I'm not missing your point.

My point is that yours is not a fair comparison.

You're right in that permies can be made redundant, but it's just not in the same ballpark of (contracts ending naturally + contracts ending prematurely)

But it's in the ballpark of contracts ending prematurely. It is you who is making unfair comparison. Contracts ending naturally is part of the business and is foreseen circumstance, not a risk. The risk of a contract ending prematurely for reasons outside of the contractor control is still higher than a risk of losing a permie job, but it's not that far off.

Setting the risk of premature end of contract aside, 1 year on £500/day beats 70k permie hands down.

[Project Monkey]

It's not a question that anyone here can really answer - you need to look at your lifestyle etc. and see what you think. For example, if he gets a reasonable benefits package and lots of holidays in his £70k, then make sure you look at the value of those when he is comparing them.

How secure is the permie role? How likely is he to maintain the contract rate? How likely is he to get another contract without any significant downtime?

Ultimately - does he WANT to be a contractor? If not, then just looking at a headline figure isn't worthwhile.

+1

[ELBBUBKUNPS]

Other thing to consider is they ever want to go back perm after contracting (some people do), as a contractor your likely to get marked as just a developer / mid level in permy would (assuming you are a developer), and a salary there would never compete against contract. May be it was just me but though I enjoyed contracting I didn't make any real career progression from it and after along time contracting I needed to go permy (for reasons I won't go into), and I found it very diffcult to get a decent salary compared to contracting, I did in the end get an ok salary but it was effort. I see alot of contractors go contract to perm at the same client these people tend to secure nice salaries BUT then if you claimed yourself outside of IR35 you could then have an issue.

Contracting the £ is good (assuming your outside of IR35), but you would also be wise to save the extra tax you saved thinking you were outside IR35 just in case HMRC come knocking, plus there is the issue of whether they ever want to go perm again as above.

I probably make no sence tbh

[jmo21]

You guys are missing my point, I never stated that contracting is more secure than perm. I only stated that perm is far from bullet proof income. You also seem to forget the fact that going from contract to perm is far easier, so in the not so likely event of the sweet £500/day contract falling through and the OP unable to secure another, (s)he can go back perm.

I'm not missing your point.

My point is that yours is not a fair comparison.

You're right in that permies can be made redundant, but it's just not in the same ballpark of (contracts ending naturally + contracts ending prematurely)

[sal]

You guys are missing my point, I never stated that contracting is more secure than perm. I only stated that perm is far from bullet proof income. You also seem to forget the fact that going from contract to perm is far easier, so in the not so likely event of the sweet £500/day contract falling through and the OP unable to secure another, (s)he can go back perm.

[yasockie]

I have worked as a contractor for just over 2. I think I have had a contract end with the possibility of no renewal 10 times

I think you're overstating it.
I've had 12 month contracts which were then extended anyway, well before the contract end date.
On the other end of the spectrum, I've worked with no official contract (waiting for the paperwork) but that's not recommended.
Of course there is always risk of getting the boot, but it rarely gets executed as typically they just need the manpower.
I've been in a team where a contractor was clearly underperforming and they only got round to letting him go until his full 6 months contract lapsed.

[MyUserName]

Then you can take one year off and still be better off, that a permie who worked 3 years on 70k (which according to the OP is actually 60k + bonuses)

I don't understand why people think that permies have guaranteed income? Companies go under everyday and people lose jobs.

I have worked as a permie for about 13 years and a contractor for just over 2. I think I have had a contract end with the possibility of no renewal 10 times whereas as a perm I have been put on notice of redundancy twice (and selected once) and been essentially booted out once after it turned out I had been hired for a different job than the one they were hiring for.

Hence on average I had to face, as a contractor, possibly losing my income every 3 months whereas as a perm it was more like every 4 years.

[BolshieBastard]

Then you can take one year off and still be better off, that a permie who worked 3 years on 70k (which according to the OP is actually 60k + bonuses)

I don't understand why people think that permies have guaranteed income? Companies go under everyday and people lose jobs.

Permies get paid if there is no work to do. Permies only find themselves unemployed if something has gone wrong ie they've been caught with their hand in the sweetie jar or the company goes mams up.

You are correct to a degree. Permiedom has far greater job security than contracting does.

[jmo21]

I don't understand why people think that permies have guaranteed income? Companies go under everyday and people lose jobs.

People always say that on here, and while true, I think more of our normal contracts come to and end naturally or end prematurely than permies get made redundant, so saying "why people think that permies have guaranteed income" is not a fair comparison really.

Plus most permies do not think about redundancy until/unless it happens to them.

So from that frame of mind, permie = regular, reliable paycheck - this is good for financial planning, starting with paying the mortgage/rent, and all other bills.

Turning their mind to going contracting, they immediately think of 2 things - big day rates..... but wait, the contract ends... what do I do then?

[quackhandle]

The contract length is only as long as the notice period. So in effect its one day.

+1, not to be all doom and gloom, how well does your partner understand IR35?

Two years in a £500 a day gig is very nice but not so nice if you get investigated and be found to be inside IR35. Kerching for Hector! £$£$£$£

qh

[BolshieBastard]

Yes, we have a warchest to cover one year.

Its a 6month contract, but its a 12month new project. He was told in the interview that an extension is likely if things go ok.

The contract length is only as long as the notice period. So in effect its one day.

[TheFaQQer]

Then you can take one year off and still be better off, that a permie who worked 3 years on 70k (which according to the OP is actually 60k + bonuses)

I don't understand why people think that permies have guaranteed income? Companies go under everyday and people lose jobs.

If the company is going under, then it makes no difference whether you are contractor or permie - you're going to be out without any payment.

If the company chooses to make you redundant, then it makes a big difference when compared to being a contractor who gets terminated on zero notice.

There is no such thing as job security, but some are more secure than others.