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Contractors massively outdoing their permanent peers

 
#1 Contractors massively outdoing their permanent peers
18/08/2007 20:51

peter citera

I have been in the Big 4 It Consulting firms for abou t 9 years now and having spoken to a number of contractors recently, I think its becoming a no brainer that I should really be a contractor.

Contractors are taking home easily £100k pa (some even double that), whereas I am struggling with £75k now and I dont see myself breaking the 100k barrier anytime soon.

Should I really go contracting or stick with the dream of making partner one day? I am not getting any younger and steam will start to run out.

Any thoughts?

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#2 RE: Contractors massively outdoing their permanent peers
19/08/2007 06:28

Anon to peter citera (#1)

Contracting is a good idea. The only thing stopping me from doing it is I am the only wage earner in the house and if I don't earn family don't eat. I would love to take the plunge but am worried if the market drops ......

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#3 RE: Contractors massively outdoing their permanent peers
19/08/2007 15:48

VillageIdiot to peter citera (#1)

If the choice were 75K in full-time employment vs. 100K in contracting, I would take the 75K every time. You get paid holiday, sick leave, pension provision, laptop, stationery, paid business travel, training, etc, etc, etc. Your overall 'salary' is a lot higher than your basic, and there's a decent chance of career progression as well. You also have the certainty of a job in the future and a certain amount of protection (in terms of notice period / redundancy payments / etc) if things go wrong.

The world of contracting is very lucrative, and can be a good move -- but you've got to weigh the pros and cons. First, you have to know that you'll always be a contract away from unemployment. You need to factor in the fact that you won't get paid between contracts, that you'll need to bear your own expenses (certainly those relating to business development etc). And you need to accept that your career will generally stagnate -- you'll be taking on the same sorts of roles again and again instead of building towards something bigger.

For me, there would need to be a substantial premium -- more than 25K -- to make contracting an attractive alternative. At £800 / day, for example, you're talking over £150k per year based on a 200-day year, which suddenly looks attractive. Factor in the ability to shield a lot of that from income tax, and the argument becomes more compelling.

Summary: contracting can be good, but not if the day rates are only 33% over your current salary.

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#4 RE: Contractors massively outdoing their permanent peers
19/08/2007 18:56

peter citera to VillageIdiot (#3)

thanks VI.

My total package is about £79k. If I contracted I could easily pull in £800 a day as I have all the qualifications in my area of specialisation. I could even get around £1000 per day (I know others my level who do).

So I will be more than doubling my salary overnight. What I am not so happy about doing is throwing in 10 years of climbing up the corporate ladder. I think to myself that the time will come in the next 5 years where I can be earning as much as a contractor (with the added benefits).

Contractors are able to pay less tax too, right?

The more senior contractor I know are locked in to 4-5 year contracts and taking away 200k pa...so thats like a guaranteed million.

Tempting, but I think I am too ingrained in corporate ladder thinking...

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#5 RE: Contractors massively outdoing their permanent peers
24/08/2007 16:40

Taxman to peter citera (#4)

If your NOT caught by IR35 then you can pay less tax ie: salary of £5.80 per hour (As you will be taken to court if you pay yourself under the min wage) and rest in dividends at 19%

If caught by IR35 you dont pay the VAT on items, therefore travel is travel -17% vat (But still out of your pocket)

Also if IR35 you have to pay your Employer NI stamp and your OWN NI stamp.

Furthermore you can claim expenses (travel) for 12 months to and from your place of work, however if you stay there for 18 months you have to pay BACK these claimed expenses.

Also pension, you pay it

Holidays, you pay it

Sick, har de har!

So unless you get 50% MORE than you get now, dont bother.

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#6 RE: Contractors massively outdoing their permanent peers
24/08/2007 17:05

consulting reject to Taxman (#5)

but if you do get 50%+ more, then it's worth it. The cash flow is very intoxicating.

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#7 RE: Contractors massively outdoing their permanent peers
24/08/2007 17:29

tax to consulting reject (#6)

there's a number of companies you can work through to reduce the tax you pay and there's more than enough work to keep you employed ( I now contractors who have worked without a break for over 10 years. The only real downside is you may have to work away from home.....?

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