Talk to me about contracting....

[stumblymonkey]

Hi all,

I got notified of impending redundancy last week...it's my first one so it was a bit of a shock but doing okay.

Bad timing as we're planning pregnancy and my age means I don't want to delay for two years to get enhanced mat pay. I'm the main breadwinner so I will need to cover my own mat leave somehow.

Anyway....since I won't get enhanced mat leave I'm seriously considering contracting once I've left my current cuntweasel of an employer.

I'd get about £550-£650 per day.

Can anyone tell me 'things I should know about contracting'?

Examples:

• Tax implications
• Impact on getting a mortgage
• Private pension: what do you do and how much does it cost?

Obvs I will also do research online but I trust the vipers!

What type of contracting? IT?
My DH is an IT contractor and there was a really helpful thread about it on here a few weeks ago, perhaps search for it?
Getting your first contract can be hard and it can be very unstable and unpredictable.mit do want suit everyone but the £ can be excellent.
Doesn't suit everyone and may not be ideal if you are planning a family

As a business Project Manager.

We are planning to start a family but since I'm being made redundant I won't be able to get enhanced maternity pay with a new employer if I was permanent so....I actually think contracting will be better. I will just take time out for mat leave and cover it with savings.

I'll have a look for the thread...

Also get a free initial meeting with an accountant to talk you through your options

I have a couple of friends who are PM's, the money is good but the hours can be ridiculous, especially if there is a release.
I also have another friend who is a very experienced PM within a large company he has just been made redundant and is struggling to find his first contract, feedback has been that he is too "corporate " as he has been at the same company for a long time.
My DH recently finished an IT project when it was pulled with just 1 weeks notice, he did quickly get another one but due to messing about with contracts he couldn't start for 3 weeks, this cost us £thousands. We had money from when he was working so it wasn't a major issue but it was frustrating. Also, his last contact was supposed to be local but last minute they changed it to London ( we live in The North) so he had a choice of starting from scratch to find another contract or move down there for 3 months, which is what he did. I am SE too so very flexible and it wasn't a major problem but these things do happen.
I don't want to be negative, it does work for us and DH really enjoys it, he learns a lot and the money is great but it's not all good.
Watch out for IR35 as well, as I'm SE too we both work under a limited company for different clients so we are fine but it can be a problem.
I'm not saying don't do it but research it carefully, getting that first project will be the tricky part.

There can be a long delay in getting your first contract so you'll need the redundancy money to tide you over. Most employers with contractors prefer someone who has a bit of contracting 'experience'.

As a business change manager 550-650 is v optimistic. Think 400-500 as a more realistic figure. If you go through an umbrella company then they will take a percentage as well.

If you set up a limited company, you'll need 2 years accounts for a mortgage. There are specialist brokers who can assist contractors though.

If you're comparing contractor to permi salary wise, work on assumption that you'll be paid for 42 weeks per year. The extra weeks covers holiday/bank holidays/sickness/gaps between contracts.

It can be great, but hard work to start with. If you're not intending to work for the next employer for 2 years before maternity then it'd be like restarting contracting again after maternity. It's also rare to find pt contracts, which you might want after maternity.

550-650 is realistic in the financial services sector in the City which is my area.

450 is the rate for a business analyst rather than a PM (and I'm a senior PM with global experience). I've been the person bringing contractors in to work on my projects so I'm pretty confident in my rate estimates.

I've got a lot of contacts in the London insurance market and I know I interview very well. The market is buoyant at the moment (according to several agents who specialise in my sector) so feeling pretty comfortable about getting contracts.

I'll have the redundancy package (I guess about £8k plus £15k pay in lieu of notice) as a nest egg for the expected breaks between contracts.

At the moment I take home £4.5k pcm and save £1k-£1.3k pcm and we're going to be VERY strict about saving any extra take home from contracting to cover breaks/mat leave/holiday/sickness.

I guess I'll take what we need to live on as salary and leave the rest to accrue for dividends.

I've taken a look around and have a shortlist of three companies recommended to me who do umbrella and accountancy for LTD company contractors so will have appointments with them next week to talk through pros and cons and take home pay under both.

I've read up on IR35....I suspect I'll be able to avoid it if I can make sure my contracts are worded correctly (focus on deliverables, no direct control)....and make sure I don't work for one client for too long. I'll get advice on this too from the three companies.

After looking into the mortgage thing I think we should be able to get a mortgage after two years and we'll just continue to rent until then. We'll have to see how they view the fact that I'll probably take six months out of working for mat leave though!

If the bank had an issue with incoming money dipping for six months could I argue discrimination if this is purely for mat leave and that they have to take an average of earnings excluding mat leave?

I definitely won't be part time after mat leave as I'm the breadwinner so will always be full time...

I contracted and had maternity leave in between and actually found it a good way to release money from my Ltd company as I only took no wage plus max dividends while working. I was on a similar daily rate to what you expect and was able to afford to take over a year off without running out of funds having contracted for a year beforehand.

Sorry that should say I took minimum was plus dividends

Please get some advice if you are thinking of setting up a limited company, there are tax efficient salary and dividend amounts, etc to consider

Agree with IceMaiden - you need some proper advice. Taking a larger salary won't be more tax efficient. Even with the tax changes, dividends are a better option for drawing money out of the firm. I'm sure the accountants you're meeting with will explain all this.

You may find it impossible to get a contract whilst you're pregnant. Not to stay in one, but you may need to be lucky with the timing. Then when you're ready to start work again you will need to warm up a bunch of cold leads, so it may take some time.

Overall a new permanent job is a less risky option. It sounds like you're putting a fair amount aside in savings as it is, which could cover a short-ish maternity leave even on SMP?

Will your DH be a SAHD or at least the primary carer after the baby's born? As a contractor it is less easy to be taking a day off at short notice when the baby's ill and can't go to childcare, although I would expect that such things are a hanging offence even for permies in the City! In my experience (which is public sector) most people (men and women) try to avoid contracting when they have young children.

Actually you don't need two hears trading history or accounts to secure a mortgage when you start contracting.

As an IT contractor you can secure a mortgage from the first day of your first contract. But you need to talk to a specialist broker that can arrange a contractor mortgage.

A contractor mortgage is based on your contract rate and not your accounts.

In order to calculate how much you can potentially borrow, you can use this simple formula:

1. Take your current contractor day rate;
2. Multiply that by the number of days you work per week;
3. Then multiply that by 48 weeks, the number of weeks per year used to

calculate your annual salary;

1. Finally, multiply that annual gross salary by 4.5, the avg multiplier used

to determine your true contractor mortgage affordability in the lender’s eyes.

I hope that helps.

I've been a contractor for 4 years now. I use an umbrella company, principally as it was only ever intended to be a stop gap! Recent tax/expense changes mean I probably ought to revisit the best setup for my circumstances.

The only downside for me is being away from home a lot. If I was based closer to London I could envisage remaining as a contractor forever.

I love that I get to avoid a lot of politics as a contractor. I have a lot of autonomy and don't have to take part in whatever the latest scheme HR has cooked up. I can switch between full time and part time hours fairly easily