To ask for your opinion on my day job vs contractor work dilemma?

[fourtriangles]

Any views on my work dilemma would be gratefully received. These are the two options-

Option one: Normal work contract, four days per week, all of it in the office 9 to 5 with no wfh option. Office is a 45 to 55 minute commute each way. Contract has the usual annual leave, bank holidays, pension etc.

Option two: Work as an independent contractor doing similar role. Work from home except for one day per week on site. Average income across the month would be same/ a bit higher depending on how much I take on but no bank holidays, annual leave etc. There is no chance of work drying up.

From a family point of view, option two would mean that most of the week I would be home in the morning when DC (early secondary age) leave and afternoon when they get back from school. I absolutely love wfh and hate feeling trapped in an office all day, hate commuting and with winter coming this will involve driving in dark mornings and evenings. I feel with option two I will have much more flexibility in how I use my time across the day/ week, can be there more for DC, will be much less tired from commuting. The only drawback is being out of the "comfort" of a work contract with paid leave. My DH has as secure full time job that pays less than mine but we could survive on if we had to.

Any thoughts?

One more thing in favour of option two is that I would have more flexibility in terms of taking time off during school holidays to go for a longer trip to see family abroad, something I'm keen to do with ageing parents.

I would never spend 8 hours a week commuting, ever again. There is absolutely no reason to be office based if your job can be done remotely.
Take the contract role and if you continue to feel insecure look for something else. There are more than 2 options 😀

Thanks so much for your comment @Mortgageportgage ! I absolutely hate commuting so glad to hear I'm not the only one. Especially with the dark mornings and evenings coming 😫And good point that I could also reconsider if it's not working out. I'm probably being quite black and white about it.

Sounds like you want to contract, and that there's very little downside to it if it's secure work (as you say it is) and you could survive on your DH's income if things go pear-shaped.

Only thing to consider is pension contributions, critical illness/health/life insurance/assurance etc so all the benefits you lose from a perm role. Make sure you're basing your income from contracting on covering these additional costs yourself, plus loss of income from vacation/bank holidays/sickness.

Option 2.

Yes that's absolutely it, I want to contract but I do worry about losing those benefits and I've had them nearly all of my working life. My true earnings would probably be lower when factoring that in but then I would have the benefit of flexibility and being at home. I'm just feeling tired of the office/ commute scene in my mid forties after more than 20 years of it.

Option 2 and increase your rates - if your income is the same as if you were employed, you're not charging enough.

If you're going to be self-employed you'll need to consider whether you meet HMRC rules, www.gov.uk/guidance/check-employment-status-for-tax

100% option 2. Make sure your day rate is high enough that it covers a standard amount of leave/sick days, and if possible, enough for you to contribute to your own pension.

The comfort factor is a myth. I've been contracting in this way for ten years and had work throughout. Friends who were more nervous and so took full time employment have been made redundant and it's sometimes taken then several months to find a new job. Because they were employed and thought they were 'safe', they didn't have savings to cover this.

if you can try to save enough to cover periods of low work - ideally to pay the bills for 6 months - then this should provide you the same comfort that a full time job would, but without all the drawbacks of working in the office etc.

Option 2, as long as you have a good chunk of savings to cover lean periods/sickness. Also think about pension.

Just jumped to option two. 100% no regrets. Look at vanguard for pension and AXA for income insurance. It is tax deductible - lots is including generous WFH allowance from tax office and commuting costs the day you do go in . You ll be surprised your income might not be as low as you think

Option 2, if you have savings/can save to cover if you couldn't work or couldn't get work. And can make pension contributions on a par with what the employer would have done. and consider an insurance policy that could cover serious illness?

First thing is to crunch the numbers re the contracting option as with the recent expansion in the scope of IR35, you may find yourself having to be paid via an umbrella company, and bearing all the "employer" costs yourself, i.e. employers NIC, workplace pension, apprenticeship levy, umbrella processing costs, as well as not qualifying for holiday pay, statutory sick pay, paid notice periods, and having to pay for your own equipment etc.

The pay is normally a lot higher for contracting roles to compensate for all that, usually a minimum of 25% and often more like 50% higher.

Obviously if money is less important than convenience etc., then getting a lower "take home" pay may be a price worth paying, but at least check out the numbers so that you can compare properly.

Thanks so much, these are all really good points. I do have some savings set aside already but I could work on putting an amount aside specifically to cover any periods without income. I have fairly decent pension provision built up already but will definitely look at adding to this.

Option 2 BUT your pay should definitely be higher. you have to factor in the pensions contributions and leave etc. otherwise you are just getting underpaid to get the wfh option.

Option 2 and factor in an accountant to help with all the tax stuff? Eg corp tax, income tax etc.

I would ditch commuting in a heartbeat if my job allowed it, it's infuriating and a total waste of personal resource IF the same role can be done from home.

What form of “independent contractor” would you be? Taking an inside IR35 contract actually means you are deemed employee so subject to all the same direction and control, but not entitled to any employment rights.
As others said, income should be considerably more than a permie role to take account of the loss of benefits and rights - also be very careful about rates - many rates are quoted as a day rate but they omit to warn you that employers NI will be deducted from the quoted rate (even though that’s not strictly legal).

In short, make sure you know exactly what you are signing up for - contract work is a very complex area and many employers and agencies don’t know what they are talking about so don’t trust advice from them.

Thanks. It's actually difficult to compare the two in terms of pay as with option one it is a fixed salary but I have to be in the office for fixed hours. With option two, I take on specific projects I am paid for. I think I could take on two of these per week and bring in a slightly higher salary but I would be at home and also have more time to play with- I don't think it would take me a full 8 hours per day to get these done. So with option two I would probably spend slightly fewer hours working than option one.

Agree with pp who say you should be earning more as a contractor.

Will you be inside or outside IR35?? Will you be paid an hourly or daily rate?? Depending on the type of work you do, don’t be drawn into being paid on a ‘per project’ basis.

I will be outside of IR35. When I say per project, they are not exactly projects but pieces of work, they will each take the same amount of time to do. I'm in a very specific niche area so apologies if it seems I'm being mysterious. Something I could compare it to is being an Oftsed inspector and being paid per school review (I totally do not do that job but to give an idea).

As advised by Previous Posters - please take care. If you are outside IR35 this implies you'll be running your own limited company - you need to read up and be fully informed about that.
Also I've heard of people being offered an outside IR35 role, only to find once the role starts that it is assessed as inside, which will likely result in a lower income for you.

I’ve been employed and a Contractor, I prefer the latter but need to earn a lot more for the equivalent wage due to no paid holidays , sickness pension etc so you should be on 25% plus more as a Contractor
I have just done an IR35 review requested by one of our clients and we are outside but if there was just 1 of us doing as you describe it’s unlikely we would be so be careful- something isn’t just outside IR35 because the company says it is

Also do you need liability and/or indemnity insurance?

I’ve done both and generally speaking your contractor rate has to be at least 30% higher to make it worth the risk.

You also must factor in payment on account of your tax bill https://www.gov.uk/understand-self-assessment-bill/payments-on-account having to pay 50% more tax than you had calculated can be a bit of a surprise.

Another thing to consider is private health insurance as well as pension but I'd do option 2 definitely.