permi, switching to contracting, what to expect?

[Eirikur]

Also keep in mind, once you're in contracting it is almost impossible to get out of it again. Employers and recruiters will think you won't stay for very long and they think you are used to the high income (compared to the same perm role) so they tend to ignore you for any perm roles.

[edison]

The basic calculation is annual salary / 1000 equals hourly rate. That allows for the thirty-odd things you'll be paying for yourself that you don't now that aren't in the calculators, which only work on gross income and assume you work a full year, to give you roughly the same net take home as your permie job. Which is what you live on.

Do it the other way round. Work out what net income you need to pay all the bills each month times 12. Add 13.8% for employer's NICs, then 25% to cover your taxes. Then add 20% for CT. Then add 20% for expenses. Then divide by 210 to get your minimum gross day rate (we don't get paid 365 days a year). And that doesn't leave any profits to buy the Jaguar with and you've only had four week holiday.

Still feel so comfortable?

Go contracting for freedom and self-determination, not money. Leaving a 95th percentile guaranteed salary (plus, I assume health care, car and pension funding) in this market is not your best option.

I wouldn't necessarily agree that there is just one 'market', there are regional/industry/skill set variances that can be significant. Only the OP can truly gauge the personal risk of leaving a high salary job. However, it can be done - I recently left a job with a six figure package including a higher salary than the OP. I've been going for contracts up to £700/day and secured my first one within three weeks of looking.

[permi11]

Thanks all again. I appreciate your help on this topic.
Yes I did have my doubts regarding contracting jobs but surely your comments helped me understanding the other factors too.

[malvolio]

The basic calculation is annual salary / 1000 equals hourly rate. That allows for the thirty-odd things you'll be paying for yourself that you don't now that aren't in the calculators, which only work on gross income and assume you work a full year, to give you roughly the same net take home as your permie job. Which is what you live on.

Do it the other way round. Work out what net income you need to pay all the bills each month times 12. Add 13.8% for employer's NICs, then 25% to cover your taxes. Then add 20% for CT. Then add 20% for expenses. Then divide by 210 to get your minimum gross day rate (we don't get paid 365 days a year). And that doesn't leave any profits to buy the Jaguar with and you've only had four week holiday.

Still feel so comfortable?

Go contracting for freedom and self-determination, not money. Leaving a 95th percentile guaranteed salary (plus, I assume health care, car and pension funding) in this market is not your best option.

[northernladuk]

Don't forget to factor in a couple of months on the bench, unpaid holidays and zero perks per year to come up with a more reasonable figure.

[SueEllen]

Thanks All for the answers. These are quite useful but raises more questions.








Sorry but just wondering is £600/day really equivalent of 72k for a permanent role? Was looking at the Contractor Calculator - Your Expert Guide to Contracting. For UK Contractors, Freelancers, and Consultants and it shows
On a salary of £72,000, net income per month is £4,060
To earn the same contracting, outside of IR35, you would need a rate of £42 per hour (£310 per day).
To earn the same contracting, inside of IR35, you would need a rate of £56 per hour (£414 per day).

My idea was if I get a contracting job for around 450-500k, I'll be better off as I'll be getting 1.5-2k more (with some tax savings) than what I get now (per month). IS that not the case with this rate?



Frankly, my whole idea of doing contracting is obviously to earn more than what I earn. Do you think it's better to stick to permi with 72k rather than going on contracting for 450-500 per day?

Sorry but I havent done any market research for contracting or permanent.
I can either join a technology lead position (like CTOs, permi) or software architect/developer (contractor) whichever gives more money but not able to decide which would be in favour in the current market situation.
So seeking your thoughts on above as you are already in the contracting world.

One thing you need to learn is as a contractor you need to do your own research.

Posters here have been kind and pointed you in the right direction so at least you have a start.

[permi11]

Thanks All for the answers. These are quite useful but raises more questions.

Hello All,

Same as others, I am thinking of doing IT contracting. I currenly hold CTO position of a startup with core hands on JAVA/J2EE background in telecom/media domain. I have following questions

1) My initial thought to go with an umbrella company in the beginning but not sure if I'll be under IR35 taxing. Reason I am asking is to calculate how much daily rate should I expect from contracting (as a java technical lead) if I come under IR35 or outside IR35? My existing salary is 72k. So what contracting rates should I expect/ask?

£72k is a day rate equivalent of around £600. You won't get that, so your net will drop. Work on the £400-£450 area as a beginner

With the current market is what you can get not what you want. I wouldn't be jumping from 72k in this market, particularly as a new contractor.

1) Sadly I think you will be in for a shock when it comes to rates.

Sorry but just wondering is £600/day really equivalent of 72k for a permanent role? Was looking at the Contractor Calculator - Your Expert Guide to Contracting. For UK Contractors, Freelancers, and Consultants and it shows
On a salary of £72,000, net income per month is £4,060
To earn the same contracting, outside of IR35, you would need a rate of £42 per hour (£310 per day).
To earn the same contracting, inside of IR35, you would need a rate of £56 per hour (£414 per day).

My idea was if I get a contracting job for around 450-500k, I'll be better off as I'll be getting 1.5-2k more (with some tax savings) than what I get now (per month). IS that not the case with this rate?



Frankly, my whole idea of doing contracting is obviously to earn more than what I earn. Do you think it's better to stick to permi with 72k rather than going on contracting for 450-500 per day?

Sorry but I havent done any market research for contracting or permanent.
I can either join a technology lead position (like CTOs, permi) or software architect/developer (contractor) whichever gives more money but not able to decide which would be in favour in the current market situation.
So seeking your thoughts on above as you are already in the contracting world.

[malvolio]

Hello All,

Same as others, I am thinking of doing IT contracting. I currenly hold CTO position of a startup with core hands on JAVA/J2EE background in telecom/media domain. I have following questions

1) My initial thought to go with an umbrella company in the beginning but not sure if I'll be under IR35 taxing. Reason I am asking is to calculate how much daily rate should I expect from contracting (as a java technical lead) if I come under IR35 or outside IR35? My existing salary is 72k. So what contracting rates should I expect/ask?

£72k is a day rate equivalent of around £600. You won't get that, so your net will drop. Work on the £400-£450 area as a beginner

2) I am keen to move into banking sector as I see a lot of banking sectors contracts demands in the long run...The technologies I have worked in are the same as banking except the domain knowledge... any tips or thoughts if its a good idea to move into banking contracts n how?

Finance roles invariably go to people already contracting in finance. They have enough applicants not to bother with those from the outside; it's not about tech knowhow, it's about understanding the regulatory environment and getting through the vetting. It can be done, but don't bet on it unless you know someone on the inside.

3) which are the best contract job sites I should follow. Being permi for the existing company for more than 6 yrs now, I didnt follow the job market quite yet

Whichever ones have the job. 99% of agencies use aggregators; they post a job to one and pick which job boards they want it to appear on. Even the self-proclaimed specialist agencies usually aren't.

Also what do you want to pitch yourself as? Tech expert or management? Agencies are basically dumb, they are looking for specific experience in a specific discipline, and usually in a specific vertical. Make sure you know where your marketable skills are and be aware that there will be another 20-30 people with the same skills and a contracting history that you need to be better than.

Thanks in advance.

You think?

[northernladuk]

1) My initial thought to go with an umbrella company in the beginning but not sure if I'll be under IR35 taxing. Reason I am asking is to calculate how much daily rate should I expect from contracting (as a java technical lead) if I come under IR35 or outside IR35? My existing salary is 72k. So what contracting rates should I expect/ask?

Need to read up on IR35 a little more I think. There are calculators for inside and outside IR35 as well as for umbrellas. Google is your friend. With the current market is what you can get not what you want. I wouldn't be jumping from 72k in this market, particularly as a new contractor. Is there no option to just negotiate a better wage and stick where you are?

2) I am keen to move into banking sector as I see a lot of banking sectors contracts demands in the long run...The technologies I have worked in are the same as banking except the domain knowledge... any tips or thoughts if its a good idea to move into banking contracts n how?

I am not sure this is strictly true. There are many roles across sectors and you have to take what comes up. It isn't easy getting in to banking and it certainly helps when you have had the experience but as a contractor do not focus on one sector too much else you will spend more time on the bench. The last 3 roles I have had have been in Pharma, Telco and banking so it isn't impossible to switch between. Banking sounds attractive because the rates seem to be a bit higher but don't lose touch of reality when you are researching roles.

3) which are the best contract job sites I should follow. Being permi for the existing company for more than 6 yrs now, I didnt follow the job market quite yet..

I would ask why you are looking to switch to contracting without actually knowing what is out there. Surely you need to know the market like the back of your hand before you make the jump?

[eek]

Startup and 6 years at the same place does not compute. After 6 years it's hardly a startup.

There are two other things to note. 1) Sadly I think you will be in for a shock when it comes to rates.

2) it's going to be hard to find your first contract after 6 years in 1 place. It's probably doable but it ain't going to be easy.

[permi11]

Hello All,

Same as others, I am thinking of doing IT contracting. I currenly hold CTO position of a startup with core hands on JAVA/J2EE background in telecom/media domain. I have following questions

1) My initial thought to go with an umbrella company in the beginning but not sure if I'll be under IR35 taxing. Reason I am asking is to calculate how much daily rate should I expect from contracting (as a java technical lead) if I come under IR35 or outside IR35? My existing salary is 72k. So what contracting rates should I expect/ask?

2) I am keen to move into banking sector as I see a lot of banking sectors contracts demands in the long run...The technologies I have worked in are the same as banking except the domain knowledge... any tips or thoughts if its a good idea to move into banking contracts n how?

3) which are the best contract job sites I should follow. Being permi for the existing company for more than 6 yrs now, I didnt follow the job market quite yet..


Thanks in advance.