First contract, what's my day rate?

[malvolio]

Don't be a dick, because that last sentence says more about you than I. All I am doing is research!!

Ah the naivety of the would-be contractor... That last sentence is actually the right answer. As are the others bar one; I'll let you work out which that one was.

We have this conversation every other week on average but to put the same money in your pocket as a £77k perm gig you are looking at around £550-600 a day outside IR35 which, although in your game outside IR35 is by no means a given. You probably won't get that (although if you do...) but anyone that goes contract for the money is doing the wrong thing.

Just a thought - have a look through these boards for other people asking the same kind of question. You will find the same answers - and the same reaction from the OPs.

HTH...

[northernladuk]

Just a thought - have a look through these boards for other people asking the same kind of question. You will find the same answers - and the same reaction from the OPs.

HTH...

He's right there tbh. You can use the google method to search the forums. In google type in
<search word or phrase> site:forums.contractoruk.com

[CoolCat]

Nah, just do what the brokers do and take the schedule page of your mortgage to Halifax. Done quick as you like.

dont understand, please explain?

[Lance]

Nah, just do what the brokers do and take the schedule page of your mortgage to Halifax. Done quick as you like.

I’m remortgaging with a new lender and it’s no issue. No brokers, no daft questions.

[mattfx]

For an 85k permie job yes, there will be hours, yes there will be hassle and yes, there will be expectations. But presumably at that level:

- significant pension contributions
- healthcare
- 28-30 days holiday
- at least 5 days off sick
- life assurance cover
- potentially a car or travel allowance
- the list goes on

As others have said, your day rate would need to be £550-£600 outside of IR35 and good luck getting that with the way the market is at the moment - the New Year rush has gone and now everyone wants something for nothing is how it appears to be! Sorry to appear cynical but to be in this game, I think you have to be a little bit.

[LondonPM1]

Ah the naivety of the would-be contractor... That last sentence is actually the right answer. As are the others bar one; I'll let you work out which that one was.

We have this conversation every other week on average but to put the same money in your pocket as a £77k perm gig you are looking at around £550-600 a day outside IR35 which, although in your game outside IR35 is by no means a given. You probably won't get that (although if you do...) but anyone that goes contract for the money is doing the wrong thing.

Just a thought - have a look through these boards for other people asking the same kind of question. You will find the same answers - and the same reaction from the OPs.

HTH...

I ll stick my neck out here and ask about this as well

We do have these topics pop up regularly and we have wild answers which people take as gospel. How you go from 77K perm which ends up with 4,370 a month after tax to 600 a day which ends up with 12,000 before tax is simply beyond me.

That does not even account for the flat rate VAT markup worth 4% or the ability to expense or income split.

I would everytime take the contract because perm is no more safe then contract. In fact I seriously wonder whether 400 a day is > then 77K per year

[malvolio]

I ll stick my neck out here and ask about this as well

We do have these topics pop up regularly and we have wild answers which people take as gospel. How you go from 77K perm which ends up with 4,370 a month after tax to 600 a day which ends up with 12,000 before tax is simply beyond me.

That does not even account for the flat rate VAT markup worth 4% or the ability to expense or income split.

I would everytime take the contract because perm is no more safe then contract. In fact I seriously wonder whether 400 a day is > then 77K per year

OK, once again I'll stick my neck out and explain the methodology. It's very simple.

First work out the net pay you get on £77k a year. You get that just for having the job and it turns up every month without fail. We can assume the OP knows that number anyway.

Then you work backwards. Figure out the cost of all the things a contractor has to pay for - and I'm not going to list them all now but there are a lot - that a permies doesn't have to.

Then work out the average (and slightly pessimistic) number of days you will work a year ( a lot less then 365, or even 260) that you get paid for.

Then you divide that cost by that number of days to get a day rate.

After several iterations of that exercise over several years the average turned out to be (salary/1000) = hourly rate and (hourly rate * 7.5) = day rate.

It's an approximation, no more, no less, but it works as an indicator to the kind of question the OP asked.

It will be less if inside IR35 and you won't get expenses, although if you're making money on expenses then you're probably doing something wrong anyway. And if you think you earn 4% on VAT on FRS you're probably using the wrong SIC code or are not in IT...

And comparing post tax income of £4370 plus benefits to a pre-tax £12k a month is pointless. You have to look at take home value over at least a year, ideally several.


HTH. BIDI...

[uk contractor]

FRS is now around 2% & not even worth doing.


Perm roles pay holidays & guaranteed income. Contracts are only guaranteed income AFTER you have billed & been fully paid! Many contracts end early or there is some monetary dispute.


These questions come up a lot on here mainly because people do not bother searching! There is so much valuable info on here & very sound advice given out daily which would cost a lot of money if you did not know this forum existed!


The bottom line is people come here ask the same old questions then usually go away once they realize their fantasy land expectations are not aligned with the real world job market in 2018!! I have yet to see many people come back to say thanks for the sound advice & saving me from making a costly mistake though............. So many people are deluded about the job market & set their expectations into fantasy world. Few contractors get a decent rate most get around the same as the perm role if you average out how many days they actually work but still many people think they are untouchable & godly when it comes to securing a new role as most likely they have not yet experienced the other side of the coin!

[HugeWhale]

Hey All,

So i'm ready to go contracting and getting asked about my day rate.

Obviously you are ready for what being a contractor means, however some people think the move from permanent to contractor is easy, when generally it is not. As a permie they see contractors making tonnes of cash and think 'I'll have a piece of that action'. What they don't see is the months on the bench, daily searching for contracts and sending your CV into a black hole from which it is never heard of again. They don't see that the nice agent who rolled out the red carpet while you were a permie hiring manager doesn't even bother to return your calls now you're a contractor. And as for your old contacts in permiedom - well good luck with that! You're either on the inside or you're on the outside, and you're most definitely on the outside. You don't even get to enjoy the bench time - why? because you spend all day trying to track down your next gig. You start to feel financial pressure too: no matter how big your warchest, it does impact you psychologically when there is absolutely nothing coming in month after month with no end in sight. And your spouse gets affected by this too.

And finally, after stating that you'd not work for less than £500 a day, you land a £330/day gig which involves working at three or four levels lower than you were used to. You believe that your experience will be valued, but it isn't - they don't give two hoots about your broader experience. You're there to do a job so get on with it. But you were used to a much more senior role and could do so much more than they ask - well, suck it up because they're not interested. Oh and see that organisational chart on the wall with the CEO at the very top? You're on there too, somewhere below the dust in the carpets. And be careful - say the wrong thing to the wrong person, no matter how innocuously, and you're out on your backside. No notice. No explanation. Oh and you're probably staying in a soulless B&B 150 miles from home as well. And at the end of the contract, you're on the bench again. And getting the second contract is the hardest.

And this is how they see you...

Dilbert Comic Strip on 1993-09-06 | Dilbert by Scott Adams


If they're asking for you personally for the first gig, ask for the top end of what they've ever paid a contractor/consultant before. After that, you'll probably have to drop substantially, probably below market rate till you're properly established.

Good luck.

[unixman]

OK, once again I'll stick my neck out and explain the methodology. It's very simple.

First work out the net pay you get on £77k a year. You get that just for having the job and it turns up every month without fail. We can assume the OP knows that number anyway.

Then you work backwards. Figure out the cost of all the things a contractor has to pay for - and I'm not going to list them all now but there are a lot - that a permies doesn't have to.

Then work out the average (and slightly pessimistic) number of days you will work a year ( a lot less then 365, or even 260) that you get paid for.

Then you divide that cost by that number of days to get a day rate.

After several iterations of that exercise over several years the average turned out to be (salary/1000) = hourly rate and (hourly rate * 7.5) = day rate.

It's an approximation, no more, no less, but it works as an indicator to the kind of question the OP asked.

It will be less if inside IR35 and you won't get expenses, although if you're making money on expenses then you're probably doing something wrong anyway. And if you think you earn 4% on VAT on FRS you're probably using the wrong SIC code or are not in IT...

And comparing post tax income of £4370 plus benefits to a pre-tax £12k a month is pointless. You have to look at take home value over at least a year, ideally several.


HTH. BIDI...

Eh? Number of work days in a year is 221, assuming 5 weeks holiday, 10 bank holidays and 5 days sick. Even at £400 pd, that equates to £88,400. Subtract 2k for accountancy, another 2k for expenses and you have 84k, comfortably beating 77k perm. That is without considering any tax savings open to the contractor. But it also assumes that accommodation costs are not too excessive.

You're entirely correct about expenses impacting the headline daily rate, but your numbers much too pessimistic IMO. For £600 per day, the same above calculation yields about 128k per annum.