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Should I consider a contracting job? Currently I earn £82K as permanent in Scotland

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    Should I consider a contracting job? Currently I earn £82K as permanent in Scotland

    Hi,

    I am in a big dilemma and need some guidance.

    I am an IT professional with nearly 20 years experience and earn £82K as permanent staff in Scotland. I live with my family ( wife and 2 young kids ). We are planning to move closer to London in near future and confused whether I should take up a contract role or stick with Permanent job.

    I have done some research and if I stay as permanent staff I think I can get around £90K to £100K as base salary with a new permanent job near London.

    If I choose contracting I believe that I would get around between £450 to £500 per day for my line of expertise.

    Both the above options will include reasonable travel away from my base location. I am confused which option to go for. Whether it will be better to go for contracting or should I stick with permanent.

    Any inputs/guidance/advice is much appreciated.

    Thanks

    #2
    With the changes potentially coming in 2020 I'd snap their hand off if a client offered me that plus benefits.

    Do you enjoy your perm job? The only reason I'd leave that kind of money is if I hated the job.
    'CUK forum personality of 2011 - Winner - Yes really!!!!

    Comment


      #3
      Originally posted by northernladuk View Post
      With the changes potentially coming in 2020 I'd snap their hand off if a client offered me that plus benefits.

      Do you enjoy your perm job? The only reason I'd leave that kind of money is if I hated the job.
      Many Thanks for your reply. Yes, I do enjoy my current job and most importantly there is no travel time at all. But since we have plans to move towards London i am trying to find out which will be more effective. Taking up a permanent job of around £90 to £100K or taking up contract roles which on average would pay £450 a day.

      Comment


        #4
        52 weeks in a year, 48 working weeks, 240 working days.

        £500 / day, with 240 working days, is £120K a year.

        Out of that you will make employer pension contributions, pay an accountant, pay insurance, probably purchase a laptop occasionally. You're down below £110K, depending on how big your pension contributions are.

        Factor in other benefits. Maybe you wouldn't buy them if you are a contractor so they are of little value to you. Maybe they are very valuable. Just remember, everything you get now, if you want to still get it then, would be paid out of that £110K.

        Then remember that you might get injured in a car accident or have to have an appendix removed, or just have a really bad flu bug that knocks you out for a week. You won't be earning £500 / day as a contractor if you aren't working. Your permie employer will be giving you something.

        Maybe you'll be unpaid for a week between gigs while contracts are being sorted out. Doesn't happen to permies.

        Maybe you'll finish a contract and not find the next one for three months. No pay for three months. I'd guess if you can command that kind of salary you probably won't be too long out of contract, but it happens. There's no security in contracting. Three months with no pay suddenly makes that £500 / day look pretty weak compared to £90-100K that's always there.

        For contracting to be a good move, you need to get enough to pay for all the things you are giving up (such as employer pension contributions, potential bonuses, maybe employer-paid PMI, etc). And, you need to get enough to compensate you and provide a cushion for all the risks you are taking -- the better tax efficiency helps with that, but not enough.

        If you are comparing to £90K permie with decent benefits and no bonus, you probably need to get at least £500 / day, probably £550-600. If you compare to £100K you probably need £600-650 / day. If there are bonuses, you'd need more. If you are going to be inside IR35, again you'd need more.

        If you never have down time between contracts and never get ill and never get hurt and nothing ever goes wrong and you aren't giving up a chance at bonuses and you aren't going to be chucked inside IR35 by clients occasionally, £400-500 a day should be reasonably close to that perm salary.

        This question comes up often enough, someone should write a thorough discussion of it and make it a stickie.

        Comment


          #5
          What exactly do you do? Unless its very niche stick to the £82K perm & be happy where you are as contracting is a lot of uncertainty especially if you have a family to provide for & bills to pay on time. Closer you get to London the higher the job competition & living costs!

          Comment


            #6
            Originally posted by uk contractor View Post
            What exactly do you do? Unless its very niche stick to the £82K perm & be happy where you are as contracting is a lot of uncertainty especially if you have a family to provide for & bills to pay on time. Closer you get to London the higher the job competition & living costs!
            Thanks for your message. I work as SAP consultant.

            Comment


              #7
              Originally posted by WordIsBond View Post
              52 weeks in a year, 48 working weeks, 240 working days.

              £500 / day, with 240 working days, is £120K a year.

              Out of that you will make employer pension contributions, pay an accountant, pay insurance, probably purchase a laptop occasionally. You're down below £110K, depending on how big your pension contributions are.

              Factor in other benefits. Maybe you wouldn't buy them if you are a contractor so they are of little value to you. Maybe they are very valuable. Just remember, everything you get now, if you want to still get it then, would be paid out of that £110K.

              Then remember that you might get injured in a car accident or have to have an appendix removed, or just have a really bad flu bug that knocks you out for a week. You won't be earning £500 / day as a contractor if you aren't working. Your permie employer will be giving you something.

              Maybe you'll be unpaid for a week between gigs while contracts are being sorted out. Doesn't happen to permies.

              Maybe you'll finish a contract and not find the next one for three months. No pay for three months. I'd guess if you can command that kind of salary you probably won't be too long out of contract, but it happens. There's no security in contracting. Three months with no pay suddenly makes that £500 / day look pretty weak compared to £90-100K that's always there.

              For contracting to be a good move, you need to get enough to pay for all the things you are giving up (such as employer pension contributions, potential bonuses, maybe employer-paid PMI, etc). And, you need to get enough to compensate you and provide a cushion for all the risks you are taking -- the better tax efficiency helps with that, but not enough.

              If you are comparing to £90K permie with decent benefits and no bonus, you probably need to get at least £500 / day, probably £550-600. If you compare to £100K you probably need £600-650 / day. If there are bonuses, you'd need more. If you are going to be inside IR35, again you'd need more.

              If you never have down time between contracts and never get ill and never get hurt and nothing ever goes wrong and you aren't giving up a chance at bonuses and you aren't going to be chucked inside IR35 by clients occasionally, £400-500 a day should be reasonably close to that perm salary.

              This question comes up often enough, someone should write a thorough discussion of it and make it a stickie.
              Thank you so much. Your detailed response is much appreciated. I get your point. Contracting might look beneficial if I am on contracting all 240 days which is a big assumption and may not always happen. However, couple of my friends suggested that if I have a own limited company there are various ways and loopholes to take home maximum of the £120K and all done legally.

              Unfortunately, in my line of work it is a bit difficult to command more than £500 / day in contracting as most of these IT work is now done elsewhere like in Phillipines and India where labor is cheap.

              Comment


                #8
                Originally posted by BroglieBoy View Post
                Thank you so much. Your detailed response is much appreciated. I get your point. Contracting might look beneficial if I am on contracting all 240 days which is a big assumption and may not always happen. However, couple of my friends suggested that if I have a own limited company there are various ways and loopholes to take home maximum of the £120K and all done legally.

                Unfortunately, in my line of work it is a bit difficult to command more than £500 / day in contracting as most of these IT work is now done elsewhere like in Phillipines and India where labor is cheap.
                There are no loopholes. It's important you understand that. Most if not all are marginally legal or lead to bigger bills further down the line. The people who bang on about such things are not the best informed sources of information and usually have no idea how much trouble they are in.

                Plus, inside IR35, you don't get expenses anyway...

                Stay permie. On your salary package you won't get more money and you will get a lot more risk. Not worth it in your position.
                Blog? What blog...?

                Comment


                  #9
                  Originally posted by BroglieBoy View Post
                  Thank you so much. Your detailed response is much appreciated. I get your point. Contracting might look beneficial if I am on contracting all 240 days which is a big assumption and may not always happen. However, couple of my friends suggested that if I have a own limited company there are various ways and loopholes to take home maximum of the £120K and all done legally.

                  Unfortunately, in my line of work it is a bit difficult to command more than £500 / day in contracting as most of these IT work is now done elsewhere like in Phillipines and India where labor is cheap.
                  What area of SAP? I think your permie salary estimate may be too high, and contracting day rate estimate may be too low.

                  Comment


                    #10
                    Originally posted by BroglieBoy View Post
                    Thanks for your message. I work as SAP consultant.
                    Stay where you are & be grateful for the £82K! SAP in London there are several 100 earning way less than £82K perm for sure! The bubble burst on SAP several years ago right now contractor salaries are getting lower all the time into the close to 300 a day bracket due to supply & demand factors.

                    Comment

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