Reply to: Offered a Contract, is it worth considering?

[fiisch]

That's what I previously thought, until I talked to my accountant. I'll tell you what I found, but I have to qualify it with the fact that I don't claim to be a tax expert. There's tons I don't understand so if someone wants to argue about taxes I'm out.

If I was a permie on 75k, I would get roughly 51k in my pocket at the end of the year.

Last year when I was on £450 and worked the whole year, I took out some salary and dividends and paid taxes , and ended up with around 60k in my pocket. I also ended up with around £11,000 in the company account that I could conceivably take out, pay taxes on and then spend. I also put £10,000 in my pension.

Obviously this is a gross simplification and doesn't take into accountant the 3 months on the bench this year, but it looks like 50k versus 75k when all is said and done.

That's why I stopped looking for permie roles and I'll keep looking at contracts.

As stated, that's assuming outside.

Now add to that, the permie gets a bonus, gets paid if he's sick, gets paid holiday, gets a pension contribution and has guaranteed work even in quiet periods.

To get closer to a "real" figure, you need to factor these in, plus your costs e.g.: insurances, accountancy fees.

The high-level figures of contracting are very enticing, but you need to look at it with a pessimistic lense (time out of work, sickness) to get a true sense. In the current climate, I would hold off until the true impact of IR35 is known.

[hairymouse]

If it's such a big difference and a big deal to you why did you apply for the permanent role at 75k in the first place?

Part of it was panic, because the contract market is so down. Also because I read so many posts here that said 450 is roughly equivalent to 75k. And because it's a fairly interesting job. After the interview, when it seemed possible that I may get offered the role, I talked to my accountant to find out exactly what it would mean for me in my pocket. That's when I stopped looking at any more permie roles.

[PCTNN]

The whole point of my previous post was that a 450 rate is nowhere near 75k perm. That's a big deal to me, since I'm in the running for a permie role at that salary and I may turn it down in favour of holding out for a contract that would pay so much more. Assuming that it comes through of course.

If it's such a big difference and a big deal to you why did you apply for the permanent role at 75k in the first place?

[LetterBox]

The whole point of my previous post was that a 450 rate is nowhere near 75k perm. That's a big deal to me, since I'm in the running for a permie role at that salary and I may turn it down in favour of holding out for a contract that would pay so much more. Assuming that it comes through of course.

I'm not convinced that being a "good ones / sensible ones" contractor is going to correlate all that much with skill. I've noticed that that most of the contractors I've worked with who were noticeably smarter and more highly skilled than everyone else were frequently the ones compensated the least. In my crystal ball, I don't see a future where inside ir35 contractors are less skilled than outside contractors.

I appreciate that there are very smart people who love the tech or work in general, inside or outside makes absolutely no difference, they'll just do a great job, but these people are rare. Most will look at the risk / reward and make common sense decisions accordingly.

As Northernladuk has already posted, the new world order is expecting that 450 to be inside, so just convert it to a salary. 450 on an umbrella calculator gives 5.2k a month, give that 10 months and you'll have 52k. Divide that by 12 and you'll have 4.3k

Stick 75k into a PAYE calc and you'll get 4.3k

If you can continue to source regular work at 450 for outside contracts then that's all groovy.

[hairymouse]

I'm a little confused about the 100k FTC.

A 450 rate would probably be a 75k perm, in my experience a FTC is basically offered at the same salary as it would be as perm, but fixed period, hence an awful choice for most.

Those who have niche skills are being hit with the same stick, but they will bounce back into the market when clients make the required exceptions. For the non niche skills i suspect the work will all go offshore or consultancies, clients will also offer inside ir35 roles but those will be taken up by less skilled contractors as the good ones / sensible ones will not be taking this option. So the inside ir35 contractors will be poor, the offshore services will be poor, the consultancies wont deliver and will over time be seen as very expensive. Maybe in a few years the rates for ordinary skills will creep up on the inside ir35 offerings, but i cant see it being a significant move. Besides, that perm job in a few years will also increase in salary, benefits etc.

I do love my crystal ball.

The whole point of my previous post was that a 450 rate is nowhere near 75k perm. That's a big deal to me, since I'm in the running for a permie role at that salary and I may turn it down in favour of holding out for a contract that would pay so much more. Assuming that it comes through of course.

I'm not convinced that being a "good ones / sensible ones" contractor is going to correlate all that much with skill. I've noticed that that most of the contractors I've worked with who were noticeably smarter and more highly skilled than everyone else were frequently the ones compensated the least. In my crystal ball, I don't see a future where inside ir35 contractors are less skilled than outside contractors.

[LetterBox]

I'm a little confused about the 100k FTC.

A 450 rate would probably be a 75k perm, in my experience a FTC is basically offered at the same salary as it would be as perm, but fixed period, hence an awful choice for most.

Those who have niche skills are being hit with the same stick, but they will bounce back into the market when clients make the required exceptions. For the non niche skills i suspect the work will all go offshore or consultancies, clients will also offer inside ir35 roles but those will be taken up by less skilled contractors as the good ones / sensible ones will not be taking this option. So the inside ir35 contractors will be poor, the offshore services will be poor, the consultancies wont deliver and will over time be seen as very expensive. Maybe in a few years the rates for ordinary skills will creep up on the inside ir35 offerings, but i cant see it being a significant move. Besides, that perm job in a few years will also increase in salary, benefits etc.

I do love my crystal ball.

[northernladuk]

And bench time and no benefits

It's getting very close so a well paid permie gig starts becoming an option.

[hairymouse]

That's a nice summary of the past. Now consider the future with most roles inside and a very dry market. How do your figures look now?

That's a good question. I'd really like to know what those figures would look like given the scenario of £450 per day Inside IR35, or the scenario of £300 a day, or a Fixed term contract at £100k for a year. I'm guessing that all of these are better than the permie role in varying degrees.

[northernladuk]

That's a nice summary of the past. Now consider the future with most roles inside and a very dry market. How do your figures look now?

[hairymouse]

My rate is 5-600 per day.

I'd bite someone's nadgers off for £80k PAYE.

The rate you are considering is an effective paycut once all factors taken into consideration.

That's what I previously thought, until I talked to my accountant. I'll tell you what I found, but I have to qualify it with the fact that I don't claim to be a tax expert. There's tons I don't understand so if someone wants to argue about taxes I'm out.

If I was a permie on 75k, I would get roughly 51k in my pocket at the end of the year.

Last year when I was on £450 and worked the whole year, I took out some salary and dividends and paid taxes , and ended up with around 60k in my pocket. I also ended up with around £11,000 in the company account that I could conceivably take out, pay taxes on and then spend. I also put £10,000 in my pension.

Obviously this is a gross simplification and doesn't take into accountant the 3 months on the bench this year, but it looks like 50k versus 75k when all is said and done.

That's why I stopped looking for permie roles and I'll keep looking at contracts.

[fiisch]

My rate is 5-600 per day.

I'd bite someone's nadgers off for £80k PAYE.

The rate you are considering is an effective paycut once all factors taken into consideration.

[Manic]

+1 on sticking with the permie job @120k.

[darsa]

As most people say stick with the 120k, it's a no-brainer. You'd be very crazy to dip your toes in the contracting market right now, you have an amazing salary and I wouldn't reconsider unless you were being offered much more (800 range). Always account for the extra benefits and the security a permanent job gives you (so never do an 'equal' comparison, add a good 15-20% margin)

[Old Greg]

600 of is a good rate. 120k p.a. is a great salary.

[jmo21]

I have not yet seen any contract, so difficult to say in or out. Will do some reading on what defines IN and OUT before I can confirm.

You do not get to decide. And if they decide you are inside, then you are inside.

Stay perm for now. In 6 months to a year, maybe things will get a bit better on the IR35 (changes cancelled, clients decide to not completely stop using LtdCoContractors, rates rise significantly - we can all have some hope!!?)