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Contracting - pro's and con's???

 
#1 Contracting - pro's and con's???
03/12/2008 11:06

Anon

Hi All,

I'm a Management Consultant with 4 years experience and am deciding whether to move to industry or take on an interim/contracting role.

A few details.... several potential industry roles available which will pay c.£60k. Contracting will secure £600 a day for 9 months (approx £100k gross).

My concern is not one about job security, as after 9 months contracting at £600 a day I will have saved up an 'emergency' fund of cash to cover my mortgage for many months.

My concern is an often stated view that if you contract too early in your career (e.g. < 8 years experience) you end up stagnating as you will be offered roles doing the same things again and again. Therefore, the chances of taking on an interesting and varied role will be limited to none as company's will only provide contracts to those with a proven track record. Also, if you then wanted to leave contracting and enter industry/consulting you would be very limited (often asking for more money then your very concentrated skills are worth).

What are peoples thoughts/experiences on the above?

Is it true that contracting will initially pay more but you then stagnate in terms of role and earning potential?

Any advice would be appreciated.

Thanks

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#2 RE: Contracting - pro's and con's???
03/12/2008 12:30

Contractor to Anon (#1)

Anon,

I left MC earlier in year and currently work as an interim Project Manager on a simialr daily rate to the one you quote. I have over 9 years experience so my situation is slightly different.

Heres my pro's and cons:

pros

Financially lucrative - as you say very easy to earn in 6 figure salary.

Worklife balance very good

Flexibility to take time off for long periods (if you have the balls to take the gamble you will get another contract straight away!)

You are more in control of your own destiny and work location (subject to work being available!)

Cons

Very unstable lifestyle - difficult to forward plan.

You take the risk that you will be fit and healthy and able to work. If not, no pay.

No pension being built up each month (but if you save money correctly this can be remedied)

Unline working in MC, you will end up doing the same role (i.e project management), so less variety of roles.

IN summary, contracting aint for everyone. If you have large mortgage and need stability I would advise against it. In current climate I would say keep your head down in a permy job, get more experience and then weigh up your options. I would agree that ideally cntracting is more suited to someone at the end of their career, who has paid off all debts, kids hve left home and is more "fancy free" and requires a flexible lifestyle to enjoy the money. Also, once you have contracting on the CV it can make returning to permy work difficult as some employers ahve been burned by contractors taking permy roles to get training and then going back contracting. So, really think about it before taking the leap. The only reason for doing it is financial and worklife balance.

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#3 RE: Contracting - pro's and con's???
03/12/2008 13:14

Anon to Contractor (#2)

Thanks Contractor, some good advice.

I have a further question which I'm hoping someone can help with...

I've spent some time looking at the tax issues surrounding contracting and am pretty sure that any work I'm offered would be deemed as 'inside IR35' - thus I would pay more tax than I would if I was 'outside IR35'.

The other costs which I'm trying to factor in are the following -

- Private pension

- Life Insurance

- Private Healthcare

Could anyone provide some ballpark figures as to typical monthly costs involved with each of the above? I know you can't be accurate, as a lot will depend on my personal characteristics and demographics, but just a range of figures would be very useful to understand the net benefits of contracting.

Again, thanks in advance for your insight.

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#4 RE: Contracting - pro's and con's???
03/12/2008 13:58

Anon to Contractor (#2)

Thanks Contractor, some good advice.

I have a further question which I'm hoping someone can help with...

I've spent some time looking at the tax issues surrounding contracting and am pretty sure that any work I'm offered would be deemed as 'inside IR35' - thus I would pay more tax than I would if I was 'outside IR35'.

The other costs which I'm trying to factor in are the following -

- Private pension

- Life Insurance

- Private Healthcare

Could anyone provide some ballpark figures as to typical monthly costs involved with each of the above? I know you can't be accurate, as a lot will depend on my personal characteristics and demographics, but just a range of figures would be very useful to understand the net benefits of contracting.

Again, thanks in advance for your insight.

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#5 RE: Contracting - pro's and con's???
03/12/2008 14:20

anon to Anon (#4)

The nature of the industry roles is also important in making this decision. What are the roles?

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#6 RE: Contracting - pro's and con's???
04/12/2008 09:14

Blowgun to Anon (#1)

I somewhat disagree with the above pros and cons: Yes, contracting gives you significantly more $, but you should have a contract around 30yrs of age . This is because that dough can set you up nicely ( buy a house etc). It really isnt that difficult to go back into perm after contracting ( provided you do a good job of course- references matter here). Chances are that early in your career, perm jobs at large companies ( IBM, ACN ,EDS) will be exactly the same as contractors, only that contractors get a lot more.

The cons of course is that contractors are the first ones to go when the economy goes south ( so save the $ for a rainy day- it will come!!).

Also, contractors done have training , different job opps etc that perm do. But then again, I know plenty of companies that claim 'people are our most important asset' but offer hardle any training nor job verstility- have you doing monkey jobs just like contractors.

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#7 RE: Contracting - pro's and con's???
04/12/2008 09:31

Recruiter to Anon (#1)

Hi Anon,

Just an observation. I wouldn't typically expect someone to be looking at either £60K perm roles or £600 p/d contract roles. Even with the extra money in contracting the remuneration would suggest that these roles are at different levels.

Someone earning £60K perm I would expect to be looking at around £450 p/d as a contract rate, £500 tops. If this contract is indeed a big step up in terms of role then it sounds very worthwhile and could boost your earning potential for permanent roles after 9 months.

Worth pointing out also that many firms (especially the banks) have cut all contractor rates by 10% / 15% recently so the gap has closed a bit.

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#8 RE: Contracting - pro's and con's???
05/12/2008 13:42

Contractor to Recruiter (#7)

rates have definitely been hit. My £600/day role is now being advertised externally at £450/day, 8 months later. As for training, get some certification whilst in permy roles. Things like PRINCE2, MSP practitioner are deemed "default" now and you need these, not to stand out, but just to get considered...

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