Reply to: Day rate translated into perm salary

[kaiser78]

I should clarify what I originally meant. My day rate on a 3 month contract is £375 but the client (direct not through an agent) has suggested it could go perm in the future. The question is, what salary should I reasonably ask for if this scenario unfolds?

So I gave you this advice in post #14;
"Very approx. calculation from contractor rate to salary is (day rate/hrs per day)*800."
This means £375 = £40k permanent (based on 7.5hr day).

Was this not sufficient as a rough guide ???

[northernladuk]

I should clarify what I originally meant. My day rate on a 3 month contract is £375 but the client (direct not through an agent) has suggested it could go perm in the future. The question is, what salary should I reasonably ask for if this scenario unfolds?

Difficult one this. Just because they are paying you that rate it rarely means they will match it for perm. You are a temp resource that demands more because you are a specialist it's a short term gig. If you are doing something like PMO and you work out you need 50k to go perm they are unlikely to pay that.

You need to look around at what market is and pitch it higher than that because you are a known quantity.

IMO on the whole comparing rates to wages is a really poor decision point. Contracting and perm are very different beasts so have to consider all the factors, not just the rate.

And are you sure your IR35 status is water tight if you are doing a perms job?

[ckms]

I should clarify what I originally meant. My day rate on a 3 month contract is £375 but the client (direct not through an agent) has suggested it could go perm in the future. The question is, what salary should I reasonably ask for if this scenario unfolds?

[m0n1k3r]

it's still a reduction in take home.
I wouldn't go back to permie without at least 100k salary but according to the 'equivalent' calculations I should be more like £50k. But I left a £70k+ permie job to go contracting.

The 'equivalent' calculations are made to provide the same take home. Clients/employers don't care about that. What matters to them is equivalent cost to them.

I've done some costing in the past, and for an organisation with a reasonably slim, non-hierarchical organisation and not too excessive benefits, the cost of somebody having a gross salary (ex bonus, ex benefits) of £65k a year is around £130k. That includes both direct and indirect costs.

That is then also what they would expect to pay for a contractor for the same role. 130k over 220 days is £590 a day to the agency. Given that most agencies tend to take 20% (15% if they have to go through an MSP, and 12% if they go through Capita on the CL1 framework), that leaves around £475 to the contractor. Based on this particular example, a reasonable conversion factor would be 135.

[Lance]

Are you 100% sure you outside of IR35 though and if investigated would get through ok ? If not you should be putting the money aside just in case then the whole £ looks different.

even inside IR35 £120k is still more money than £70k

[BoggyMcCBoggyFace]

it's still a reduction in take home.
I wouldn't go back to permie without at least 100k salary but according to the 'equivalent' calculations I should be more like £50k. But I left a £70k+ permie job to go contracting.

So yes you're right. These calculations are a load of rubbish.

Are you 100% sure you outside of IR35 though and if investigated would get through ok ? If not you should be putting the money aside just in case then the whole £ looks different.

[MrMarkyMark]

it's still a reduction in take home.
I wouldn't go back to permie without at least 100k salary but according to the 'equivalent' calculations I should be more like £50k. But I left a £70k+ permie job to go contracting.

So yes you're right. These calculations are a load of rubbish.

Lance, I totally agree.

In fact my mate said he had never felt skinter

[munkee]

Agreed. I was pn £75k but left to go contracting and my take home is way more. Also I don't have to spend all the hours of the day in the office anymore. I lose out on sick days and a few holiday days, but I never really took them anyway

Pretty much the same as myself. Take home is much higher plus also ploughing money into the pension. I rarely used up holiday as permie anyway but now it means I can retire myself early.

[VillageContractor]

it's still a reduction in take home.
I wouldn't go back to permie without at least 100k salary but according to the 'equivalent' calculations I should be more like £50k. But I left a £70k+ permie job to go contracting.

So yes you're right. These calculations are a load of rubbish.

Agreed. I was pn £75k but left to go contracting and my take home is way more. Also I don't have to spend all the hours of the day in the office anymore. I lose out on sick days and a few holiday days, but I never really took them anyway

[Lance]

To be frank, it's all a load of rubbish anyway.
It really depends on your art of negotiation.

A mate negotiated a cool 95k basic with an IB, previous day rate £550 PD.
Obviously he may have told porkies to them about his day rate

it's still a reduction in take home.
I wouldn't go back to permie without at least 100k salary but according to the 'equivalent' calculations I should be more like £50k. But I left a £70k+ permie job to go contracting.

So yes you're right. These calculations are a load of rubbish.

[MrMarkyMark]

To be frank, it's all a load of rubbish anyway.
It really depends on your art of negotiation.

A mate negotiated a cool 95k basic with an IB, previous day rate £550 PD.
Obviously he may have told porkies to them about his day rate

[malvolio]

Happy to be called thick here. But the context of the document shown is around cost to the employer. I have made the assumption (maybe incorrectly) when reading through the original post that the author wants to essentially know what rate they need to equate to the same take home pay of a permie.

Whilst the calculations would be difficult and there's lots of variables involved I doubt a 40k permie walks home with the equivalent of a £400/day contractor. Maybe the cost to the client is the same, but not for the contractor. However based on the interpretation of everyone else, I would say the 1% seems close enough.

Fair comment. The basis of the hourly/1000 rule is to deliver the same net take home, allowing very roughly for the freebies permies get and the costs of running YourCo and not working 260 days a year.

As you say, getting that salary is the hard part, the client will be looking to spend the same cost of employment as he is paying for a contractor. Given they will be carrying overheads of between 75% and 200% of salary, it is not surprising there is a gap between the two

[northernladuk]

Happy to be called thick here.

Thicko .

[munkee]

Happy to be called thick here. But the context of the document shown is around cost to the employer. I have made the assumption (maybe incorrectly) when reading through the original post that the author wants to essentially know what rate they need to equate to the same take home pay of a permie.

Whilst the calculations would be difficult and there's lots of variables involved I doubt a 40k permie walks home with the equivalent of a £400/day contractor. Maybe the cost to the client is the same, but not for the contractor. However based on the interpretation of everyone else, I would say the 1% seems close enough.

[malvolio]

I don't have a better measure for it, however this has not been my experience.

I've had 3 permie roles paying in excess of 100k basic.

Never managed to get my contract rate above £750 plus expenses.

That's the problem with approximations; there's always some hero trying to prove them wrong by quoting a specific example.

It doesn't matter, it's only a rough guess.