Reply to: Keep itching to get into Contracting

[MyUserName]

Skill set is standard. I'm a Windows C++ programmer first and second ASP.NET developer.

I have a very similar skill set. I had to jack contracting in for family reasons but I might go back in a few years.

You seem to be in the grass in greener mode but you have an awesome position, I would (almost) kill for it! Your skills are extremely common in the contract world, unless you also have some good industry knowledge (banking. SC etc.) then you will struggle to get anywhere.

You might or might not get more money from contracting but please remember that a perm salary on 70k is 70k every year until you leave. Contracting is Xpd but only for each day you actually work. Holiday, sickness, bench time etc. will all reduce this but that 70k can be relied upon to come in every year.

[Pyrrhula]

As people have already said, when talking about package £450 a day vs £70k then you would probably stay with the £70k. So it then depends on what you really want most from contracting, if it is liquid cash you want then you will have more each month on £450p.d but without any guarantees that it will continue and knowing that if you get sick or injured you won’t be getting paid. If it is to get out of your comfort zone and work in an environment where you know that you will get the boot if you don’t perform then go for it.

I agree with one of the previous posters though, each new contract is exciting for a week or two but then just becomes much the same as the last.

[PerfectStorm]

Seems its luck of the draw. Many of the contractors I've gotten to know just get renewed year after year and people only get their marching orders if they're bad. For them, its very reliable (and about as much as a 'permanent' job)

[TheFaQQer]

Revised it looks more like a £150k equivalent permie salary - not quite as high but my point still stands. mostly

Since you're day rate is somewhere between £50 and £70 a day more than the OP is targetting, you're talking about an additional £11k to £15k a year.

If I was only looking at my current rate and my previous year, I'd be saying "oh yes, you can make much more than you're on" - 242 days on more than the OP is talking about, with next to no expenses because I was working from home.

However, I don't believe that's a sustainable level, so I don't suggest that it's one upon which to take advice. Don't get me wrong - I wish that it was, but I know from the lean years that it absolutely isn't something that you can rely on, which is where the caution comes into the calculations.

[permidom]

Do you have a niche/in demand skill set or standard BTW?

Skill set is standard. I'm a Windows C++ programmer first and second ASP.NET developer.

[uk contractor]

ahh

doh - I included my wife £15k odd from her job before she quit - whoops, my spreadsheet is a joint net thing and I'd forgotten that.

but I am on the first year of the flat rate scheme which pulled in a few k extra.

Revised it looks more like a £150k equivalent permie salary - not quite as high but my point still stands. mostly

Good luck & everything but I stand by my original point your not going to net £107k. £80-85k max depending on whether or not the HMRC decide to investigate further & or IR35 complications arising from that

I think the max legally using onshore accountants is around 80-84% take home anything higher is usually not worth using regardless of what others tell you be happy with 80-84% & no legal complications

This all comes back to you need to earn at least 1.25 your perm salary to even come close to matching it & thats assuming your going to get a full years work which in itself is becoming tougher when high contractor salaries are usually the first thing which gets canned when companies trim costs/downsize!

[TechJinx]

224.5 days @ £520 per day = £116740 gross (being generous, since some of your time was on £500 a day, but let's ignore that)

So how do you get from that figure to £107k net - that gives you a 91.6% return.

ahh

doh - I included my wife £15k odd from her job before she quit - whoops, my spreadsheet is a joint net thing and I'd forgotten that.

but I am on the first year of the flat rate scheme which pulled in a few k extra.

Revised it looks more like a £150k equivalent permie salary - not quite as high but my point still stands. mostly

[TheFaQQer]

moved onto £500/520 p/d contract and according to my figures after a year of contracting (exactly matching the financial year which has been handy for accounting...) and I reckon I've made £107k net this year

...

But as several have alluded to thats a full year billing 224.5 days (gotta love a detailed invoice tracker spreadsheet)...... so depends how in demand your skill set is.

224.5 days @ £520 per day = £116740 gross (being generous, since some of your time was on £500 a day, but let's ignore that)

So how do you get from that figure to £107k net - that gives you a 91.6% return.

[TechJinx]

Well done for earning that but sorry there is no way will you legally get to keep the £107k. If you can get away with £85k net I would be amazed quite frankly & I presume you do your own online personal tax returns every year............... Saying you leave it up to the accountant tells me you do not even understand the tax liability implications even giving your wife half the shares has implications for her she will now need to complete a HMRC tax assessment every year & give full financial details etc etc unless you pay your accountant to do it all for both of you which would be costly!

As a very rough guideline you need to earn gross about 1.25 times a perm salary to make them equal but as you lose the other perm benefits & may not work over 200 days per year its hard to give an exact number.

Not at all - remember I'm including £2k a month into a pension, and her shares keep her below the higher rate so yes we need to do a tax return but it's such a simple one it takes 15/20 minutes.

The accountants prepare the figures and join all the HRMC dots and I keep my own. Note that I'm including EVERYTHING in my net figure - expenses, wife income, what I'm keeping in retained that I class as part of my net worth in the same way I do my pension pot, the lot as its money I'm getting now that I wasn't before. Yes I have a very tax efficient position but thats half the point of being a contractor - gross figures mean nothing - it's all about the net surely.

It seems to be a fashion on this forum to immediately say someone does not understand or is clearly missing something when you know very little about their position. I have taken everything into account and spent a very long time working and scenario planning out what I can do to maximise Net income. I then run this past the accountant - not the other way around, so I'm in control. (I even secretly quite enjoy buggering around with the spreadsheet each month)

I even got my business insurance via quid FFS so I got £120 cashback - thats how detailed I end up going.

Also you'll note I wasn't the one asking the question, just sharing how you can make the system work, within the rules to show there is another side than the "you don't understand it, don't do it, if you have to ask you don't belong" brigade.

[unixman]

>70k ? 90% home based ? And the only downside of your job is boredom ?

No, obviously you should not go contracting. Stay in the job for as long as possible, and enjoy life. Your only problem is probably not having enough holiday to enjoy your money. Wait until such time as you are made redundant, or forced to leave in some other way, then consider contracting.

At 450 pd (or maybe even 350), you would probably improve on 70k, even with the hazards of contracting. However you would have to work quite hard for your money, and travel a lot, and sometimes stay away from home. And sometimes be bored in the contract work, and sometimes be bored at home looking for contracts.

[uk contractor]

I'd dispute the figures being bandied around here - I left a £78k job (admittedly with some pretty good perks like non contributory pension making it a job worth ~£100k with no bens


moved onto £500/520 p/d contract and according to my figures after a year of contracting (exactly matching the financial year which has been handy for accounting...) and I reckon I've made £107k net this year - which equates to £183k as a permie salary using a reverse calculator.
(assumptions are that I've "made" the money in my war chest and pension but haven't drawn them yet - used the same calls on my non bens salary above so its on equal footing)

Now that includes having one of the best set ups where my wife has half the shares and I did have quite a large amount of expenses travelling into London daily from Z6 but still - thats not too different to the figures the OP was quoting and is a substantial increase.

Just my 2 pence worth from the other side of the fence.....

But as several have alluded to thats a full year billing 224.5 days (gotta love a detailed invoice tracker spreadsheet)...... so depends how in demand your skill set is.

Well done for earning that but sorry there is no way will you legally get to keep the £107k. If you can get away with £85k net I would be amazed quite frankly & I presume you do your own online personal tax returns every year............... Saying you leave it up to the accountant tells me you do not even understand the tax liability implications even giving your wife half the shares has implications for her she will now need to complete a HMRC tax assessment every year & give full financial details etc etc unless you pay your accountant to do it all for both of you which would be costly!

As a very rough guideline you need to earn gross about 1.25 times a perm salary to make them equal but as you lose the other perm benefits & may not work over 200 days per year its hard to give an exact number.

[TechJinx]

No, you are. Sorry, but if you don't know that, how on earth are you running a company properly and ensuring everything is properly covered off, even if you aren't actually liable for them...? YourCo's income and expenditure is your responsibility, nobody else's.

.

I have insurance and the accountants cover off what I need to pay in terms of national insurance.

I just didn't know your acronynms - so thanks perfect storm for a more constructive answer .

I was looking to move house at the time and, having only been contracting for 15 months, felt I would struggle to get a mortgage. The company I contracted for were keen to keep me so they offered a decent perm salary (granted less than I was getting as a contractor, but still better than my previous perm role) so I made the switch back.

I moved 4 months after I started contracting - used a specialist broker who got me a good rate with a high street lender on my contract rate - didn't need any accounts etc. It's the only time I've had to send a CV to get a mortgage though!

[malvolio]

Mal is being obtuse..

Who - me!?


OK, I was - but it kinda comes back to my point about your job is being a contractor, not a PM or a coder or an architect, and you need to understand as much of it as you can. Including all the arcane details that don't bother permies.

[Willapp]

I was looking to move house at the time and, having only been contracting for 15 months, felt I would struggle to get a mortgage. The company I contracted for were keen to keep me so they offered a decent perm salary (granted less than I was getting as a contractor, but still better than my previous perm role) so I made the switch back.

Have now moved house and I probably would have still been in the same perm role but, surprise surprise, they got bought out by a larger company and I could just see the job turning to **** so I jumped quickly and was lucky to land a great contract and just before xmas too.

I would always consider going perm again if the circumstances were right, but I would do it knowing that I'm exchanging a big chunk of cash for the security or opportunity that a perm position might offer.

[theroyale]

Go for it

Thing is my permanent job in IT is not very exciting. I've been in the job 10 years now and tired of it. The temptations to ditch my job are regular but l have a feeling I'd regret it given how "comfortable" the role is.

There are a few reason to ditch,

1. More variety
2. Experience life (90% of my work is home based with occasional travel to customer sites). Only advantage working from home is the 2.5 hrs l save not travelling, otherwise it's kinda boring as l like banter
3. More money (upto £450 should be attainable)
4. Nothing to lose but potentially a lot to gain - GF with no kids planned, debt free, war chest would last me years if l end up on the bench
5. New challenge

The reason not to ditch my job,
1. Salary (>£70K)
2. Usual perks such as good pension, life insurance, medical cover, car allowance, project bonus
3. Really easy projects (time consuming but nothing is rocket science)
4. Professional team members (no tools or wasters)
5. Plenty of work (can't recall idle time in-between projects)
6. At an age where it might not be best to jump. Keep thinking this is something l should have done in my 20's

Really I've got it good right now but it's as interesting as staring at a washing machine.

I do count myself lucky to be in this position at 40 years old.

Right now my skills are leading teams, writing design documents and getting my hands dirty on C++/JavaScript/HTML/.NET. I could easily works as a BA or get my hands dirty on development with the latter offering good daily rates.

Has anyone been in my position?

What would you do?

I do read about the contracting market not being so hot but l work with contractors a plenty.

Interesting responses so far.

I went into contracting 5 years ago (after 5-6 years as perm, so a bit younger than the OP who's 40) and have hugely enjoyed the experience.

The money is the main reason you go into it of course. Flexibility is another. But there are other reasons that one might put in the "soft skills" bucket:

I have become a more confident person in life generally (because of the way you sell yourself and hit the ground running in the contracting world). I have become more deadline- and goal-oriented (for e.g. I have hit my fitness goals a whole lot better after becoming a contractor).

I have become more interested in the wider technology world. I am no longer stuck in one job waiting to be told (or to discuss with my manager at next appraisal meeting) what to do in the next six months/one year. I can actually -- within reason and the boundaries of opportunity on jobserve -- find new and more exciting things to do.

The one thing I have by-and-large escaped (living in London zone 2) is having to travel too much. I would hate commuting long distances/staying in B&Bs during the week etc. So if you don't live in or near a hotspot, take note.

To the OP: do your maths, and then go for it.