Reply to: Equivalent Day Rate

[Bunk]

I couldn't be bothered to work out the NICs either, hence paying myself £700 instead of something slightly less.
Looks like the difference is in the VAT rate - i thought the flat rate would be 14.5% (13.5 in my first year).


I always include the expenses because they're largely travel for me which i'd have to stump up for as a premie too to a large extent unless I was on client site. Perhaps I should account for only 5k of those expenses being 'profit'.
I only worked it out so that I could get a rough idea of how much cash i can expect to have at some future date (garden to get landscaped, kitchen falling to bits etc, etc), so I'm not to fussed about the exact number in comparison to my premie roles as I've already earned over a year's salary since november. For some reason my other half isn't keen on me taking the next 7 or 8 months off though

VAT would be 13.5% of 120k which is £16,200.

[SpontaneousOrder]

Here's what I get with your figures:

Turnover                £120,000 inc VAT
VAT                     £120,000 - 16,200 = 103,800
Salary                  £103,800 - 8,400 = 95,400
Expenses                £95,400 - 10,000 = 85,400
Corporation Tax         £85,400 - 17,080 = 68,320
Basic Tax Band          £68,320 - 0 (tax) - (£29,745 divs) = 38,575
Higher Tax Band         £38,575 - 9,643.75 (tax) - 28,931.25 = 0

Total takehome = 8,400 salary + 29,745 + 28,931.25 = 67,076.25
Inc expenses = 67,076.25 + 10,000 = 77,076.25

I've ignored NIC because they'll be pretty low on that salary and I can't be bothered working it out.

The 67k figure is the one I'd pay attention to, because that's the cash you'll actually have. Including expenses always seems pointless to me because you've already spent them.

Disclaimer: IANAA

I couldn't be bothered to work out the NICs either, hence paying myself £700 instead of something slightly less.
Looks like the difference is in the VAT rate - i thought the flat rate would be 14.5% (13.5 in my first year).


I always include the expenses because they're largely travel for me which i'd have to stump up for as a premie too to a large extent unless I was on client site. Perhaps I should account for only 5k of those expenses being 'profit'.
I only worked it out so that I could get a rough idea of how much cash i can expect to have at some future date (garden to get landscaped, kitchen falling to bits etc, etc), so I'm not to fussed about the exact number in comparison to my premie roles as I've already earned over a year's salary since november. For some reason my other half isn't keen on me taking the next 7 or 8 months off though

[Bunk]

My calculations for 100k earnings, flat rate vat @13.5% and expenses of 10k, salary of £8,400 come out to about 79.5% retention of my day rate.
I could be missing something though.

LtdCo           Me            HMRC
---------------------------------------
120                 0                                      //Revenue
106.5                             13.5                // Minus VAT
96.5                10                                    // Expenses
88.1                18.4                                 // Salary
70.48                             17.62              // CT
37.48               51.4                                 // Basic rate divi  
0                   88.88                               // higher rate divi
                    79.51         9.37               //  higher rate tax

Here's what I get with your figures:

Turnover                £120,000 inc VAT
VAT                     £120,000 - 16,200 = 103,800
Salary                  £103,800 - 8,400 = 95,400
Expenses                £95,400 - 10,000 = 85,400
Corporation Tax         £85,400 - 17,080 = 68,320
Basic Tax Band          £68,320 - 0 (tax) - (£29,745 divs) = 38,575
Higher Tax Band         £38,575 - 9,643.75 (tax) - 28,931.25 = 0

Total takehome = 8,400 salary + 29,745 + 28,931.25 = 67,076.25
Inc expenses = 67,076.25 + 10,000 = 77,076.25

I've ignored NIC because they'll be pretty low on that salary and I can't be bothered working it out.

The 67k figure is the one I'd pay attention to, because that's the cash you'll actually have. Including expenses always seems pointless to me because you've already spent them.

Disclaimer: IANAA

[northernladuk]

My reason for considering contracting is because I am being offered a position at £450 a day which taking into account 28 days holiday and weekends would give me a salary of around £101k.

No it wouldn't. It would give you a salary of about 10k. Are you taking in to account sick days, public holidays and possible bench time on that as well?

But Wouldn't I be paying far less tax (20%??) and so take home pay would be greater than my current role?? My current take home pay is ~£4,500

Nope, calcs above show this. Remember you take home that even when you are on holiday and bank holidays etc.

There is also a lot of speculation about my current company and whether they are about to pull the plug etc. So, as I have an opportunity potentially lined up I am trying to decide whether to jump ship now, or ride it out.

Again thanks for all the replies!

Up to you that one I guess but I am not seeing much benefit to go contracting in this thread.

[malvolio]

My calculations for 100k earnings, flat rate vat @13.5% and expenses of 10k, salary of £8,400 come out to about 79.5% retention of my day rate.
I could be missing something though.

LtdCo           Me            HMRC
---------------------------------------
120                 0                                      //Revenue
106.5                             13.5                // Minus VAT
96.5                10                                    // Expenses
88.1                18.4                                 // Salary
70.48                             17.62              // CT
37.48               51.4                                 // Basic rate divi  
0                   88.88                               // higher rate divi
                    79.51         9.37               //  higher rate tax

OK, so let's just think about this a moment

You don't get paid for days not worked. That's holidays, rotations, bank holidays, time off... I base my numbers on working 7 months a year, tops. After 16 years, I've not been proved wrong.

You have to pay Employers NICs at 13.8% of gross earnings...

You have accountants or umbrella fees, sickness insurance, PEI, BUPA, training, materials....

When I say divide your gross salary by 1000 to get an equivalent hourly rate to retain net parity, I'm not making it up. Most, if not all calculators are wildly optimistic. Even the good ones are based on you working full time. You won't be.

[SpontaneousOrder]

My calculations for 100k earnings, flat rate vat @13.5% and expenses of 10k, salary of £8,400 come out to about 79.5% retention of my day rate.
I could be missing something though.

LtdCo           Me            HMRC
---------------------------------------
120                 0                                      //Revenue
106.5                             13.5                // Minus VAT
96.5                10                                    // Expenses
88.1                18.4                                 // Salary
70.48                             17.62              // CT
37.48               51.4                                 // Basic rate divi  
0                   88.88                               // higher rate divi
                    79.51         9.37               //  higher rate tax

[Bunk]

Firstly, apologies for not replying sooner! I have been away...

Reading through your posts is certainly interesting and has given me food for thought! I am in the Oil & Gas industry, and I am currently working Offshore on a 2 week on 3 week off rota. Which I appreciate if I tried to work out a day rate based on the amount of days I work now, it would be unrealistic.

My reason for considering contracting is because I am being offered a position at £450 a day which taking into account 28 days holiday and weekends would give me a salary of around £101k.

But Wouldn't I be paying far less tax (20%??) and so take home pay would be greater than my current role?? My current take home pay is ~£4,500

There is also a lot of speculation about my current company and whether they are about to pull the plug etc. So, as I have an opportunity potentially lined up I am trying to decide whether to jump ship now, or ride it out.

Again thanks for all the replies!

20% on £101k? Nope, it'll be more than that. How much more depends on whether you have expenses or not, although if you do have expenses, then that's not really part of your take-home pay anyway.

It also depends on whether you're inside IR35 or not.

I just stuck the figures into a contractor calculator and it came out around £5,800 a month outside IR35, £4,500 inside IR35.

[ydraiggoch]

Firstly, apologies for not replying sooner! I have been away...

Reading through your posts is certainly interesting and has given me food for thought! I am in the Oil & Gas industry, and I am currently working Offshore on a 2 week on 3 week off rota. Which I appreciate if I tried to work out a day rate based on the amount of days I work now, it would be unrealistic.

My reason for considering contracting is because I am being offered a position at £450 a day which taking into account 28 days holiday and weekends would give me a salary of around £101k.

But Wouldn't I be paying far less tax (20%??) and so take home pay would be greater than my current role?? My current take home pay is ~£4,500

There is also a lot of speculation about my current company and whether they are about to pull the plug etc. So, as I have an opportunity potentially lined up I am trying to decide whether to jump ship now, or ride it out.

Again thanks for all the replies!

[Fred Bloggs]

I'm in the industry, currently working in Surrey. The market is split between jobs with EPC contractors (mostly) and operating co's (fewer roles). The rate for an electrical engineer is about £65 per hour with the EPC companies, with a ceiling at around the £70 mark. The operating co's usually pay day rates and it would be typically around the £650 per day mark. I haven't seen much difference of rate per the locatons of the roles. ie Aberdeen and London pay about the same. Personally, I'm not sure I'd give up a £90k a year job to go contracting, but the OP will have his reasons, no doubt. It's a fairly low risk venture as there is always jobs in the O&G industry, the problem comes when (like me) none of the roles are anywhere near where you live. HTH.

[ITPRO2]

Those adverts were not for technicians, some of them requested Chartered Engineer status.

Sure maybe there is a bit of boom at the moment.

If the market is as you say he justs need to ring up an agent and get 700 day contract.

Here's an example:

http://http://www.jobserve.com/gb/en/JobSearch.aspx?shid=5D8F462378F4A92E

An arbitrary search on a website such as jobserve will not give you an accurate view of the market. O&G jobs are simply not advertised there. The ones listed on your link seem to be outside this market (judging from the locations).

Don’t take this the wrong way, but what you’ve done is like me searching for “IT jobs” on Google and then claiming I know the going rate and state of the market.

Electrical Engineers tend to be on the lower paid side when compared to other disciplines. However, I’d be surprised if 75/h wasn’t easily achievable around London (higher in Aberdeen or lower in Norfolk).

[BlasterBates]

Jobserve will not list any decent posts besides technicians, etc (not qualified professionals). I didn't even know this site would list specialised roles such as these. Try oil and gas jobsearch. However, this will not list rates most of the time (most positions don't). You'll have to speak to an agent or a colleague to find out the rates for the roles.

Not being able to earn decent money outside Scotland (i.e Aberdeen) is incorrect. The hubs in the UK are London (including Surrey, Hampshire and outside Reading), Aberdeen and Great Yarmouth. The rates you've quoted are also on the low side.

Assuming the OP has >10yrs experience and is competent (i.e. capable to leading small team, etc), he will earn much more as a contactor. The market is very busy at the moment and he should have no problem getting a contract. If it all goes wrong, he will also be able to walk back into a permie role (at that salary level) very easily assuming he's competent.

Also, the OP should be very wary of taking advice from this board. I get the impression most people are in IT and the two industries seem to be very different (rates, market, bench time, etc).

Those adverts were not for technicians, some of them requested Chartered Engineer status.

Sure maybe there is a bit of boom at the moment.

If the market is as you say he justs need to ring up an agent and get 700 day contract.

Here's an example:

http://http://www.jobserve.com/gb/en/JobSearch.aspx?shid=5D8F462378F4A92E

[SpontaneousOrder]

I assume you're being sarcastic?

No. It's just that I was reading through threads, saw that post and can't really remember what I was trying to get at.

[ITPRO2]

I can't remember why I questioned your reasoning. It sounds fair enough to me

I assume you're being sarcastic?

The money seems to go up steadily from starting to around 10 years regardless of what you're doing (give or take a bit). Once you get over 10 years, you have to take progressively bigger roles for the money to move up substantially. This is my experience anyway.

[ITPRO2]

I had a quick look on jobserve which confirmed my suspicions, the only place you can earn is Scotland on oil and gas, and the rates are 450-550, on a salary 114K I would say not worth it. Once you're out of Oil and Gas field, pay is abysmal, so you want to hang in there.

Jobserve will not list any decent posts besides technicians, etc (not qualified professionals). I didn't even know this site would list specialised roles such as these. Try oil and gas jobsearch. However, this will not list rates most of the time (most positions don't). You'll have to speak to an agent or a colleague to find out the rates for the roles.

Not being able to earn decent money outside Scotland (i.e Aberdeen) is incorrect. The hubs in the UK are London (including Surrey, Hampshire and outside Reading), Aberdeen and Great Yarmouth. The rates you've quoted are also on the low side.

Assuming the OP has >10yrs experience and is competent (i.e. capable to leading small team, etc), he will earn much more as a contactor. The market is very busy at the moment and he should have no problem getting a contract. If it all goes wrong, he will also be able to walk back into a permie role (at that salary level) very easily assuming he's competent.

Also, the OP should be very wary of taking advice from this board. I get the impression most people are in IT and the two industries seem to be very different (rates, market, bench time, etc).

[BlasterBates]

Agree with above, I see no financial reason to go contracting, 114 K is a damn good salary.

When you're contracting you usually have to travel, unless you want to live in your car I would be budgeting 1.5 - 2 grand a month.

If you have a premie job where you can live around the corner, I would stay where you are.

Even if you are travelling as a permie, travel expenses usually boost your income so you need to add this on, and normally you can stay in a nice hotel, as a contractor they come off your day rate.

I had a quick look on jobserve which confirmed my suspicions, the only place you can earn is Scotland on oil and gas, and the rates are 450-550, on a salary 114K I would say not worth it. Once you're out of Oil and Gas field, pay is abysmal, so you want to hang in there.