Reply to: What day-rate should you be on if the agreement is £34K pro rata?

[farout117]

Well, not sure you're right, there's obviously more detail to the situation than I've been able to post here, but to clarify - I work directly for this agency, in their office. The agreement was that I'd be paid £34K pro rata for a four month contract, the agreement was verbal and in email with one of their directors and there was no further detail (i.e. whether it would be payrolled, umbrella or whatever).

This was then taken to the FD, whom I had a discussion with about the best way for me personally to minimise my tax burden. He went away and asked some other contractors for advice (allegedly) and we then met again and he said that they'd just divide 34000 by 52 and five to get the day rate of £130 and that it wouldn't make any difference to them whether I went umbrella or on the payroll.

He did not mention anything about employers NI and the fact that the contractor bears the cost of employment and that has to be taken into consideration when determining the rate.

In his defense, he did not seem very clued up about umbrella or anything else relating to contracting (which one might think is a bit strange, given that he's working in a recruitment firm and that they have a bunch of contractors) so I'm reticent to put the blame on anyone at this point - it seems to have been plain ignorance on his part (and certainly on mine).

A big point that I need to make here is that I, before moving ahead, used the Parasol calculator where I fed in the day rate of £130 - it gave me the indication that I would clear just under £2,200 per month on that rate, which corresponded with my expectations.

So on this basis I proceeded through Parasol.

Like I mentioned earlier, I'm having constructive talks with them and am confident that I'll be compensated so I don't think that it will have 'cost me much' in the end (my stance at the moment is that I'm not working until this has been sorted out) apart form a bit of stress. Guess the positive is that I've learnt a lot about contracting and umbrellas so thanks to all who've offered their views!

You are too good to notice that they are taking you for a ride! If I were you I would walk after the 4 months and count it as experience.

Your calculations are too complex for my liking. That's why I avoid fixed term contracts like the plague!

[lukemg]

Are you getting holidays, sick pay and bank holidays paid ?? if so, how many ?
Otherwise use total/228.

[Gentile]

Well, not sure you're right, there's obviously more detail to the situation than I've been able to post here, but to clarify - I work directly for this agency, in their office. The agreement was that I'd be paid £34K pro rata for a four month contract, the agreement was verbal and in email with one of their directors and there was no further detail (i.e. whether it would be payrolled, umbrella or whatever).

This was then taken to the FD, whom I had a discussion with about the best way for me personally to minimise my tax burden. He went away and asked some other contractors for advice (allegedly) and we then met again and he said that they'd just divide 34000 by 52 and five to get the day rate of £130 and that it wouldn't make any difference to them whether I went umbrella or on the payroll.

He did not mention anything about employers NI and the fact that the contractor bears the cost of employment and that has to be taken into consideration when determining the rate.

In his defense, he did not seem very clued up about umbrella or anything else relating to contracting (which one might think is a bit strange, given that he's working in a recruitment firm and that they have a bunch of contractors) so I'm reticent to put the blame on anyone at this point - it seems to have been plain ignorance on his part (and certainly on mine).

A big point that I need to make here is that I, before moving ahead, used the Parasol calculator where I fed in the day rate of £130 - it gave me the indication that I would clear just under £2,200 per month on that rate, which corresponded with my expectations.

So on this basis I proceeded through Parasol.

Like I mentioned earlier, I'm having constructive talks with them and am confident that I'll be compensated so I don't think that it will have 'cost me much' in the end (my stance at the moment is that I'm not working until this has been sorted out) apart form a bit of stress. Guess the positive is that I've learnt a lot about contracting and umbrellas so thanks to all who've offered their views!

Ouch. I'm literally cringing reading those two statements highlighted in red.

Verbal agreements aren't worth the paper they're not written on, as I'm sure you now know. And it's amazing how many people attempt to give transparently self-serving "advice", under the guise of helping the person such "advice" is inflicted upon.

The good news is that these are mistakes you should only make a maximum of once. Next time, you'd be well-advised to get the deal in writing, and if you need any advice get it from people that are acting in your interest rather than their own. It's a mugs' game to get this close to the end of a contract, and to still be debating the minutiae of what you thought had been agreed.

[Hackneyed]

They've stiffed you mate. I'd renegotiate a proper day rate rather than this confusing "pro rata" nonsense, failing that, go and find a new job.

Well, not sure you're right, there's obviously more detail to the situation than I've been able to post here, but to clarify - I work directly for this agency, in their office. The agreement was that I'd be paid £34K pro rata for a four month contract, the agreement was verbal and in email with one of their directors and there was no further detail (i.e. whether it would be payrolled, umbrella or whatever).

This was then taken to the FD, whom I had a discussion with about the best way for me personally to minimise my tax burden. He went away and asked some other contractors for advice (allegedly) and we then met again and he said that they'd just divide 34000 by 52 and five to get the day rate of £130 and that it wouldn't make any difference to them whether I went umbrella or on the payroll.

He did not mention anything about employers NI and the fact that the contractor bears the cost of employment and that has to be taken into consideration when determining the rate.

In his defense, he did not seem very clued up about umbrella or anything else relating to contracting (which one might think is a bit strange, given that he's working in a recruitment firm and that they have a bunch of contractors) so I'm reticent to put the blame on anyone at this point - it seems to have been plain ignorance on his part (and certainly on mine).

A big point that I need to make here is that I, before moving ahead, used the Parasol calculator where I fed in the day rate of £130 - it gave me the indication that I would clear just under £2,200 per month on that rate, which corresponded with my expectations.

So on this basis I proceeded through Parasol.

Like I mentioned earlier, I'm having constructive talks with them and am confident that I'll be compensated so I don't think that it will have 'cost me much' in the end (my stance at the moment is that I'm not working until this has been sorted out) apart form a bit of stress. Guess the positive is that I've learnt a lot about contracting and umbrellas so thanks to all who've offered their views!

[Wanderer]

Have been put on £130 by the agency ((34,000/52)/5) but according to the calculator on this site that rate corresponds to a salary of £28,000. Using the same calculator, the rate i should be on is £155.

Anyone with a bit of experience who could guide?

They've stiffed you mate. I'd renegotiate a proper day rate rather than this confusing "pro rata" nonsense, failing that, go and find a new job.

[BlasterBates]

This is bang on the money actually, either they tried to pull a fast one or they made an honest mistake based on miscommunications. I tend to the latter - I was given a choice of being on a perm/ temp contract and be paid through the payroll or go brolly. I went brolly based on looking at Parasol's online calculator and a conversation I had with a Parasol sales rep (who should e hung and quartered for misleading me about the expected take home pay).

Like I said though, there is a good chance we can come to an agreement, but if not I'm pretty sure there are other options.

If this is an honest mistake which it sounds like it is I would query this. I think the client agency don't care they're just going to pay the equivalent of 34 K.

Now if you have a quote from a brolly which includes all their charges then you can do your calcs with a temp employee take home based on 34 K and it's the same, it doesn't really matter what you do.

[Hackneyed]

If the agency is employing as a temp, and paying your National Insurance and so on, then the 130 would be identical to 34k permie.....but presumably they're not.

If you are not a temp I would seriously consider sending them an e-mail saying it isn't worth your while, thx but no thx.

unless of course you're unemployed and it doesn't look like you'll easily find something in which case you could take it for the moment and find something better. Make sure you have a short notice period. At that rate I would have thought you could probably get a 4 week notice period.

The additional costs to calculate include doing your own accountants and employers national isurance. You would need an extra 5 grand or so to cover that.

This is bang on the money actually, either they tried to pull a fast one or they made an honest mistake based on miscommunications. I tend to the latter - I was given a choice of being on a perm/ temp contract and be paid through the payroll or go brolly. I went brolly based on looking at Parasol's online calculator and a conversation I had with a Parasol sales rep (who should e hung and quartered for misleading me about the expected take home pay).

Like I said though, there is a good chance we can come to an agreement, but if not I'm pretty sure there are other options.

[Hackneyed]

I could be wrong but it sounds like a fixed term contract. Are you getting paid through your own company or an Umbrella company, or are you on the client or agency payroll? Contract rates aren't usually described in terms of pro-rata annual salary unless it's a fixed term contract.

Hi bunk, thanks for replying.

It's a fixed term context til the end of August. The rate was verbally agreed as being the equivalent of £34k by me and one of the owners of the company/agency and I suspect that what they should pay me to have me receive the pro rata equivalent is not necessarily the same as £34k.

I'm of course aware that the contract I have states £130/day and had it been just any agency it might have been difficult to resolve (still might be) but as the relations between myself and them are partly based on a long term connection I think we may be able to find a solution. All I care about is obviously to get a reasonable wage for the work I do for them, according to the verbal agreement referred to above, the technicalities and terminology doesnt interest me one bit.

[BlasterBates]

If the agency is employing as a temp, and paying your National Insurance and so on, then the 130 would be identical to 34k permie.....but presumably they're not.

If you are not a temp I would seriously consider sending them an e-mail saying it isn't worth your while, thx but no thx.

unless of course you're unemployed and it doesn't look like you'll easily find something in which case you could take it for the moment and find something better. Make sure you have a short notice period. At that rate I would have thought you could probably get a 4 week notice period.

The additional costs to calculate include doing your own accountants and employers national isurance. You would need an extra 5 grand or so to cover that.

[cojak]

Not sure where you get those figures from, Stek. Pro rata means in proportion to the amount you would get if you were a full time employee. I generally consider the period that full time employees work to be 48 (weeks) x 37.5 (hours per week), = 1800 hours per year. Number of days permies work per year = 48 * 5 = approx 240. Nobody works 52 weeks a year, even Santa and Mrs Claus.

Hourly rate for £34k 'pro rata' is therefore 34k/1800 = £18.89, and day rate for that amount pro rata is £142, give or take. Generally speaking, contractors bill themselves at a minimum of double the amount that the same experience of permanent employee would cost, to account for the fact that we have to find our own work, do our own accounts, pay our own taxes, etc. etc. Most of us wouldn't touch a role with the words "pro rata" in the Job Description with a barge pole, because the concept of pro rata only applies to temps, for whom the employer should be paying PAYE, etc, for their limited period of engagement with the company.

I can see where you're coming from for pro rata calcs.

It's all about net vs gross.

[Gentile]

Think it's always been the Rule of Thumb norm around here to allow for being on bench, accountancy fees etc, as a perm to contractor conversion. I understand where ur coming from re: pro-rata but I think in this case the agent has shafted the OP by lulling to the OP into thinking perm and contract are same rates!

Your proposed formula was a pretty good estimation for that purpose.

I think that the OP, unfortunately, has been misled by the agent in this case into believing that pro rata meant something other than "you'll get paid the same amount as a full bob of the same skill would during the same period, except you wont have the same 'benefits' as a full bob".

Never mind, Hackneyed: think of the money this contract has cost you as school fees, learn the lesson, and don't ever agree to do a role on a pro rata basis ever again, unless it's at least "£70k pro rata".

[SimonMac]

I could be wrong but it sounds like a fixed term contract. Are you getting paid through your own company or an Umbrella company, or are you on the client or agency payroll? Contract rates aren't usually described in terms of pro-rata annual salary unless it's a fixed term contract.

I think this is the case, it screams fixed term contract

[moggy]

Not sure where you get those figures from, Stek. Pro rata means in proportion to the amount you would get if you were a full time employee. I generally consider the period that full time employees work to be 48 (weeks) x 37.5 (hours per week), = 1800 hours per year. Number of days permies work per year = 48 * 5 = approx 240. Nobody works 52 weeks a year, even Santa and Mrs Claus.

Hourly rate for £34k 'pro rata' is therefore 34k/1800 = £18.89, and day rate for that amount pro rata is £142, give or take. Generally speaking, contractors bill themselves at a minimum of double the amount that the same experience of permanent employee would cost, to account for the fact that we have to find our own work, do our own accounts, pay our own taxes, etc. etc. Most of us wouldn't touch a role with the words "pro rata" in the Job Description with a barge pole, because the concept of pro rata only applies to temps, for whom the employer should be paying PAYE, etc, for their limited period of engagement with the company.

WGS

I would also add the employers NI @ 13.8% as it you're treating it all as salary then this needs to go on. 34,000 + 13.8% divided by 48 divded by 5 = around £164

[Scrag Meister]

Employer's NI, Insurance, Your own hardware etc...

There are loads of costs not associated with being perm.

IMHO sounds like you are being stiffed a bit.

[stek]

Stek misread the question and gave the "what is a permie wage roughly equivalent to when comparing to a contracting day rate" rough calculation that many use.

Yes I think I did but I also attempted to 'lift the veil' and expose what the agent was trying to do to the OP!