Reply to: The financial benefits on contracting don't seem worth it

[PurpleGorilla]

The financial benefits on contracting don't seem worth it

When I was permie, I can't remember anything that I paid for as an expense that I didn't claim back from the company. When I got my first contract, it was a shock that I had to book my own travel, and just how expensive it was - I'd never had to concern myself with the cost before.

I paid my petrol for 15 years as a permie. What did I do wrong!

[TheFaQQer]

I would add in the £5k of expenses.

An employee pays most expenses out of their own pocket.

When I was permie, I can't remember anything that I paid for as an expense that I didn't claim back from the company. When I got my first contract, it was a shock that I had to book my own travel, and just how expensive it was - I'd never had to concern myself with the cost before.

[PurpleGorilla]

No idea where did you get these 7 months from, let alone being the norm. Most contractors get contracts back to back and only take breaks when they want.

Probably your are coming from the figure of of around 220 days per year but these are working/billable days not calendar days. amounting to 10 calendar months of work and 2 months of bench/vacation.

Rough calculations:

220x£300=£66k gross income
-£9k sallary
-£5k expenses
-£2k accountancy etc. fees
=£50k taxable company profit
-£10k CT
=£40k distributable profit

so you end up with 9k+40k=49k pusshing you over the threshold so you have to pay about 2.5k income tax leaving you with

£47.5k vs 27k as permie

I would add in the £5k of expenses.

An employee pays most expenses out of their own pocket.

[sal]

I understand that there are a lot of contractors cutting back days/hours as a matter of choice as they earn more than enough and value their free time.

My point was that the majority are working way more than the OP suggested 7 months, and when you compare a contractor take home for 10 months of work against permie for 10 months (assuming 20 days paid leave + 6 days of public holidays + odd sick leave) you still end up with close to twice as much in favor of the contractor.

But then i guess there is no point in trying to educate people, that think we are stupid enough to work for peanuts while soiling our pants in insecurity about our job.

[malvolio]

I accept that I am far from the norm, but for six completed years when I bothered to count the days worked, I averaged 163 days a year billing. And that includes the year when I billed 242 days.

Current gig, over 2.5 years, I've averaged 78% billable time out of the total possible.

In near 19 years of contracting, I've also averaged around 7 months a year in contract.

OTOH I do charge quite a lot...

[TheFaQQer]

No idea where did you get these 7 months from, let alone being the norm. Most contractors get contracts back to back and only take breaks when they want.

I accept that I am far from the norm, but for six completed years when I bothered to count the days worked, I averaged 163 days a year billing. And that includes the year when I billed 242 days.

[sal]

you will be working 7 months per year (which is a rule of thumb I have read)

No idea where did you get these 7 months from, let alone being the norm. Most contractors get contracts back to back and only take breaks when they want.

Probably your are coming from the figure of of around 220 days per year but these are working/billable days not calendar days. amounting to 10 calendar months of work and 2 months of bench/vacation.

Rough calculations:

220x£300=£66k gross income
-£9k sallary
-£5k expenses
-£2k accountancy etc. fees
=£50k taxable company profit
-£10k CT
=£40k distributable profit

so you end up with 9k+40k=49k pusshing you over the threshold so you have to pay about 2.5k income tax leaving you with

£47.5k vs 27k as permie

[TheFaQQer]

Average rule of thumb is hourly contracting rate *1200 = perm salary equiv. Some guys on here use *1000, although I think *1200 is more realistic.

Either way contract rate + lifestyle + lots of other factors far outweighs permie role any day of the week (mon - fri)

That's one way to look at it (or even two).

However, round here, the multiples just don't add up. My first (and lowest paid contract) was significantly higher than I could get locally in a perm role, whether using 1000 or 1200 as a multiple.

[TheFaQQer]

Think about what you could be doing with that other 5 months of the year not tied to a desk.

For many, panicking that they can't find any more work.

[kaiser78]

Let's say you are a jack of all trades .NET developer with nothing special about your skillset. Five years experiences and you are earning £35,000 with a take home pay of about £27,000. That is the average developer salary in the UK.

Now consider that in your area the market rate for such a contractor is about £300/day, maybe £350. Well,and working on the assumption that you will be working 7 months per year (which is a rule of thumb I have read), your take home pay would be about £35,000 per year. I know there are no certainties with this as taxation and contracting, along with rates and work, are uncertain, but let's try and have a discussion here.

That would have you £8,000 per year better off. That's not to be sniffed at, but it's not exactly a huge amount if you are in contracting primarily for the money.

Am I completely off the mark here or is this what contracting has to offer? I have only begun looking into it with real intent recently, but I am not sure it's worth the hassle for that kind of pay rise.

Average rule of thumb is hourly contracting rate *1200 = perm salary equiv. Some guys on here use *1000, although I think *1200 is more realistic.

Either way contract rate + lifestyle + lots of other factors far outweighs permie role any day of the week (mon - fri)

[JRCT]

The first couple of years that I contracted (and I'm only into my third), my take home was probably only about £5k more than my previous permie salary. However, I only worked 6 months of each year. My first break coincided with my wife going back to work after mat leave and I had 3-4 months at home with the baby.

THAT was priceless and something I could never have done in my permie role.

[Scrag Meister]

I call troll/sockie.

So the OP had 5 months of a year when perm? Not even comparing the same thing.

Work 7 month and get the extra 8k, then work 4 of the other 5 for the extra 25k!!!!

My perm to contract switch was an increase of 2.5 times perm income.

At least try and compare apples with apples.

[Batcher]

Think about what you could be doing with that other 5 months of the year not tied to a desk.

I had one year with 8 months on the bench. The first three were by choice for the break and the rest I worked on Plan B until the market improved so I did have some money flowing through the business. I really enjoyed working on something other than IT systems and I continue to do it in my spare time. I will eventually retire from IT and do Plan B part-time I think.

I wouldn't have had the chance to do it as a permie so there is a lot more to contracting than the money.

Other than that I've only had 2 years with 3-month breaks in 18 years of contracting. The rest is normal 2-4 week holidays when i can fit them in.

[The Spartan]

Think about what you could be doing with that other 5 months of the year not tied to a desk.

Exactly contracting is not just about the money though it is a benefit if you're at the top of your craft, for me it was about flexibility, new challenges and a chance to show the doubters that I have big brass cojones.

[Contreras]

Think about what you could be doing with that other 5 months of the year not tied to a desk.