Reply to: 70k+bonus vs 400pd contract

[BlasterBates]

As you can see there is no simple conversion it depends on your skill, circumstances location, i.e. will you need to travel, but not travel for a permie, are contracts longterm (in my field it's normal for contracts to go on beyond a year, so I can assume over 200 billing days on average) etc etc.

What you should do is compare earnings with the permie, then what you expect to earn as a contractor net, and then just weigh it up. Don't use simple conversion factors they're not really realistic for your individual circumstances.

Checkout the sticky thread on take home pay for a contract and then compare with a calculator for a permie salary, don't overestimate "employee benefits" they generally don't amount to much 5-10% maybe.

[xchaotic]

I prefer the one that considers 200 working days a year multiplied the rate.

Example:

500 a day = 100k a year

A salary of 80K + 10K pension + 10k benefits/bonus will break even

Sounds close enough, but:
1. I guess 100k/year contract minus 10k (to keep things equivalent) pension contribution so 90k minus expenses can be taxed a bit more efficiently - dividends, base salary even more pension contributions, retaining funds in a company and then again dividends, flat rate vat advantage, finally being able to claim expenses can be a huge difference. Whereas an 80k salary will be taxed at a pretty high rate and there's not that much you can do.
2. For the past 3 years, for various reasons, I have not been able to invoice for more than 200 days, in fact, I am quite consistent and those 3 years were all ca 180 billable days. I am certain that for others the figure will be higher but in my case it's reasonable to calculate based on that number.

I guess when talking 70k vs 400pd, I'd take the salary, especially in my case.
But at this level of income, I would probably look at other factors first and agree on the job if financially it was sufficient - i.e. it's not like you're going to starve either way.
If one job required to be in the office 14hrs (+2hrs commute perhaps?) each day and the contract could be done remotely, that's not really comparable is it as in 16hrs you can do two full time contracts easily... and if I'm guessing banking is the sector then I might even be right...

[Francko]

There is a common rule of thumb that suggests a rough equivalence between a contract on £x/hour and a salaried job at £x,000/year.

I prefer the one that considers 200 working days a year multiplied the rate.

Example:

500 a day = 100k a year

A salary of 80K + 10K pension + 10k benefits/bonus will break even

[malvolio]

too true

Perhaps you should read the start of the thread. Three pages in and w're back where we started!

There is a common rule of thumb that suggests a rough equivalence between a contract on £x/hour and a salaried job at £x,000/year.

No, it doesn't work with a bit of primary school arithmetic, if you discount all the downsides on contracting (holidays, bench time, chance of illness, need for training etc) and all the upsides in employment (same things, plus possible chance of knowledge progess etc).

But that's because comparing contracting to permiedom is comparing apples to oranges. The 1000x rule is a useful exchange rate between those fruits, for most of us.

too true

[Ignis Fatuus]

How did you come to the number for 70k / 560 pd ???? Doesn't seem to add up....

There is a common rule of thumb that suggests a rough equivalence between a contract on £x/hour and a salaried job at £x,000/year.

No, it doesn't work with a bit of primary school arithmetic, if you discount all the downsides on contracting (holidays, bench time, chance of illness, need for training etc) and all the upsides in employment (same things, plus possible chance of knowledge progess etc).

But that's because comparing contracting to permiedom is comparing apples to oranges. The 1000x rule is a useful exchange rate between those fruits, for most of us.

£400 pd is £50 ph is roughly £50k salary with all the extras.

£70k pa is £560 pd to get the same net. Not counting bonus and pension funding.

Hope that helps...

How did you come to the number for 70k / 560 pd ???? Doesn't seem to add up....

[kandr]

Just because one company does that doesn't make it the norm. Fundamentally, as a permie you expect to stay until told otherwise and as a contractor you work on the opposite premise.

What as a contractor you leave until they tell you to stay?

[yetanotherbob]

Everyone,
I must say i've got some really good insights from all your responses.
Also, since the permie job is in a sector with a traditionally high 'barrier to entry' (oft discussed on these forums), I think i'll just take the plunge this time.
As such i'm a contractor at heart but no harm jumping fence once in a while
Worst case: I'll get annoyed out of there soon.
Best case: Better contracts a few years down the line, contacts, learning etc.. Strategic move for My LTD.

[d000hg]

Ignoring the money, and if you are thinking that the 'permie' is a safer bet, I would beg to differ.

Currently clientco have all had to go through 2 waves of 'reapply for your job' in the past 12 months.

I would argue that contracting is more stable as you are master of your own destiny and you plan for periods without work (though never had any in 8 years of contracting)

Just because one company does that doesn't make it the norm. Fundamentally, as a permie you expect to stay until told otherwise and as a contractor you work on the opposite premise.

[d000hg]

£70k is pretty big, hopefully means doing something high up you can use to your advantage?

[portseven]

Ignoring the money, and if you are thinking that the 'permie' is a safer bet, I would beg to differ.

Currently clientco have all had to go through 2 waves of 'reapply for your job' in the past 12 months.

I would argue that contracting is more stable as you are master of your own destiny and you plan for periods without work (though never had any in 8 years of contracting)

[Ignis Fatuus]

Is it just about the money though, what about freedom from all the corporate BS and the fact you can leave without much hassle if its crap.

Fixable. Just ignore the corporate BS. Leave if you want.

[lukemg]

Key factor for me would be - In 3-5 years time, can I re-enter the contract market at a higher level than currently due to the skills and experience acquired in the perm role. If the answer is yes, snatch hand off and see out the coming storm in safe harbour....

[kandr]

Is it just about the money though, what about freedom from all the corporate BS and the fact you can leave without much hassle if its crap.