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How much more money would you have to make to go from staff to contract position?

(28 Posts)
eleusis Wed 01-Aug-07 21:40:49

I sent my CV out, not really expecting a reply. And they have asked what my "hourly rate" would be. I am staff now and not really sure how to translate my current salary into a contract figure. Can anyone help?

eleusis Wed 01-Aug-07 21:41:49

Obviously, I would expect a bit more £££ to go from security of staff to contract.

soapbox Wed 01-Aug-07 21:46:10

CD has recently done this so may have better info that me.

I would look for a minimum 50% more than the staff rate to cover:

holiday pay
sick pay
pension payments
car allowance
etc etc

eleusis Wed 01-Aug-07 21:52:04

oh gosh, that's more than I was thinking. I had been thinking more like a 20-30%.

If you think of more etc etcs that would be useful. I suppose I would need to hire an accountant as well.

eleusis Thu 02-Aug-07 06:41:43

bump for morning crowd

eleusis Thu 02-Aug-07 08:29:08

and again.

suey2 Thu 02-Aug-07 08:49:23

note your NI will be much less if you can be self-employed: class 1 is 11-12% (for employed) class 2 + 4 (self employed) costs much, much less. (i think £25 per month? may be wrong)
I would add up what the costs to you would be if you replaced any perks personally: eg medical insurance, pension, sick pay etc. Then you will have to decide what you want to charge them for reduced security. If you want another child, you will not be protected by employment law, so they could just get rid of you (I think). Similarly if the work just drops off- i don't know if they even have to give you 'reasonable notice'.
You could find out what any agencies would charge to provide your service.
For your reduced security, you need to make it more expensive for them, that's the deal. Don't undersell yourself.

flowerybeanbag Thu 02-Aug-07 09:01:01

eleusis worth checking this guide to working out if you are actually employed or self-employed.
It's not always a matter of deciding that you are self-employed and invoicing for work, it depends on the nature of the contract/work you are doing at the time and the nature of the relationship with the employer/client.
I have come across several situations before where clients of mine have been using 'consultants' or 'contractors' only to find that by the nature of the relationship they would in fact be classed as employed workers (and therefore entitled to all relevant rights, benefits etc). Has been tricky when said 'consultants' have got pregnant...

eleusis Thu 02-Aug-07 09:56:08

I don't think I can be self employed. I think I would have to set up a company and work for it. I don't really know though. I'm rather ignorant on anything to do with tax, accounting, etc. I would definately have to get an accountant to do all this for me.

I'm not planning any more children, so the maternity leave isn't an issue.

muppetgirl Thu 02-Aug-07 10:04:57

Dh decided to contract as opposed to permenant staff and although it was worrying at first we have never looked back.

It's been three years and he's just started a contract for a year. With him he got a good idea of his rate (his is daily not hourly) from the recruitment sites he uses. He is now confident in asking for more if he thinks the role demands it or accepting the rate offered. He has set up his own company but an accounts service it and sort out all the paperwork.

There is no sick pay, and that has been a worry for us as we were paying debts off but now we set an amount aside to cover eventualities. We also have income insurances just in case dh is unable to work for a long period as I don't (and will never) earn what he does.
Holidays cost you twice as much as you pay for the hoilday and then for the week you don;t work.
He does miss the team bonding that goes with permenant jobs.
It does give him flexiblity that he didn;t have as a staff member.
Hope that helps a little

muppetgirl Thu 02-Aug-07 10:05:38

an accountant

eleusis Thu 02-Aug-07 11:00:16


Muppet, do you know how much he increase his gross pat as a percentage when he took the first contract? Does 50% sound right to you?

muppetgirl Thu 02-Aug-07 11:31:18

He took home around a fifth of what he does now after tax and nat insurance. We are sooo much better off but you do then take off 20 days paid holiday, however many days sick pay etc.

CountessDracula Thu 02-Aug-07 11:35:13

I would say 50% too
you need to take into a/c the cost of all your benefits

private healthcare
holiday/sick pay (you can insure against this, talk to Contractor Financials they have a good policy that pays from day 1 of sickness)
Life Cover to replace death in service
Cost of accountants (I use SJD Accountancy they are great, specialise in Contractors and do it all for £85 a month, check their website)

It is great as you have more flexibility and a bit more money, I take home quite a bit more than when I was employed, you can pay yourself a small salary and dividends which are deemed as tax paid up to top rate tax band then 25% on dividends thereafter. You can take advantage of taper relief after 2 years too if you wind the company up.

What is your job?
I am looking for a couple of PMs atm...

wheresthehamster Thu 02-Aug-07 11:42:40

The dividend/salary thing needs looking into though. If you are in certain industries - computing springs to mind - you have to pay yourself a proper salary of 95% of gross earnings (after pension and employers NI) and accountants and expenses have to come out of the other 5%.
After 20 years contracting DP went permanent and we are better off taking into account company pension schemes, paid holiday, bonuses and other company perks.

muppetgirl Thu 02-Aug-07 11:47:06

Yes dh is an It contractor and wanted to pay himself through dividends but the loophole closed and so he is salary now. Like I've mentioned we have the insurances, which cost a bit more but it's nice to know we're covered should anything happen.

muppetgirl Thu 02-Aug-07 11:50:08

Ah, and some companies have strange policies about the length of time a contrator can stay. Barclays' only let contractors stay 6 months as they say if they needed the contractor longer -why isn't the position a permenant position? They got round this by moving depts and the wage came from a different dept but they could only do this once though.
This all depends on what line of work you are in I suppose.

eleusis Thu 02-Aug-07 12:11:50

The job is for an Information Manager on an oil and gas project. So that means coordinating the data and document deliverables required for the client (an oil company) and managing the processes across the project to ensure these things come in from the vendors and are adhered to be the engineers.

It is basically what I do now. But I'm rather in a dead end at my current comapny/project largely due to working for a company who has just been spun off from it's parent, has no money for a training budget (a sore subject you may recall from a previous thread, CD). Seems I work work work and never go anywhere -- not very fast anyway. Many people feel this way. Leaving do's are a weekly event. We joke that people round here leave so fast you'd think the building was on fire.

I don't think it's really your market CD, unless you have ventured into the oil and gas business.

Ok, I've replied with a vaguish figure which reflects about 50% more than I make now in gross pay.

muppetgirl Thu 02-Aug-07 12:16:51

The good thing dh says about contracting is that he spends 6 months in a company generally with an opportunity to extend and if he doesn't like the project he can move somewhere else with no hard feelings. He has a short attention span so this work suits him brilliantly.

muppetgirl Thu 02-Aug-07 12:19:18

As for training he does do a lot of reading outside work for work though he's very teccy and loves that too. Currently working for a japanese investment bank and is gen-ing up on his a level maths and he loves it. He loves learning and solving problems so this is perfect for him.

Kewcumber Thu 02-Aug-07 12:20:38

As many people have said you need to cover your existing benefits plus paying NI etc (though depending how you set it up company may pay on your behalf) plus you need to allow for not working 100%. In addition you can charge a premium depending on how scarce your skill is or how much in demand.

In my breif deluded moments of doing consultancy I was charging about double my salary equivalent for short projects but dicounted it significantly for committed longer term projects.

50% extra does sound reasonable unless people are queueing up for you in which case I would go for 75-100% - the company doesn;t have to take on a permanent employee with all the associated employment rights. (Usually)

MrsRecycle Thu 02-Aug-07 12:24:21

why didn't you ask me ele?? I'm an expert!! Probably cos I haven't replied to your mail and you think I'm too busy.

When I'm asked for an hourly rate I just quote what my salary is less the last three zeros. So £45,000 would be £45 an hour, £65,000 would be £65 an hour. Seems to get me work (after a 20 minute interview over the phone!!).

Also, don't bother about setting up a Limited Company - I had one for years and it was a real hassle to run (even with an excellent accoutant). I now use an umbrella company (parasolit at the moment) and its so easy - everything is done on-line and I get paid every week. Okay take home pay is a bit less than a limited company but I don't have to spend a day a month on paperwork etc.

mslucy Thu 02-Aug-07 12:25:44

I have worked contracts for over ten years and wouldn't change it for all the world.

1. You earn more
2. You pay less tax
3. You can take breaks between contracts so you can have a life
4. You are less likely to get suckered into office politics
5. If you don't like a job you know it's only temporary
6. You get to meet lots of nice people and get a better overview of your industry than you would do if you stick in the same place for years.


1. Hard to plan as contracts often overrun
2. You are reluctant to take many holidays as you're effectively paying twice (for the holiday and the money you lose)
3. You have no rights re:maternity leave etc

Kewcumber Thu 02-Aug-07 12:27:40

Good point, you'd have no rights re maternity Eleusis - you'd better stop now...

MrsRecycle Thu 02-Aug-07 12:28:08

Also, I constantly check out current market rates for my type of work/position using And depends if you are going direct or via an agency. One client I was "direct" with I quoted them £600 a day (which was a lot for me) and found out that they had budgeted for £1000 a day and I could have got that.

I love contracting, I can work for 6 months, take 6 months off, pick and choose my jobs. And NO office politics to deal with.

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