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Contract vs. staying permanent?

 
#1 Contract vs. staying permanent?
22/03/2011 09:32

anonymous

Hello,

I have 5 years consulting experience (currently a senior consultant) and an opportunity has come up to contract on quite a high day rate (£650-750 p/d). Naturally that interests me but i am relatively junior in the grand scheme of things so concerned about how easy it would be to move back in to permanent roles after doing this for 12 months?

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#2 RE: Contract vs. staying permanent?
22/03/2011 12:09

Mr Cool to anonymous (#1)

I strongly recommend AGAINST taking a one-off contract when motivated by the financial gain. There are a couple of reasons for this.

1) This will impact your permanent CV. Future employers will regard you with suspicion. If you “tarted” yourself once, what’s to stop you doing it again? They will be cautious about investing in someone who might just walk off again if offered a decent day rate.

2) How certain is the 12 month gig? It would not be the first time that a project was canned after just a few months or a new boss comes on board and brings in their own people.

3) Even a year at 650 would net you about 96K after corporation tax. Personal tax efficiency is high as a contractor (depending on your other income, marital status etc), but it could easily take 3 months to get a new job after the contract – that puts the annual equivalent back down to the low 80K’s – decent, but not life changing?

If on the other hand this is the trigger to make you consider at least 4-5 years contracting, then I’d say there is a lot less to worry about. Good contractors can stay billable at high utilisation rates, enjoy their time off and make good money. The only issue is that career progression is curtailed because clients generally buy you for what you have already done. It is not uncommon for more junior contractors to re-join permie firms after a 4-5 year period, in order to progress again. In this respect most MC firms are fairly open minded as long as they think they can retain you for 3-5 years at their firm.

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#3 RE: Contract vs. staying permanent?
22/03/2011 13:40

anon to Mr Cool (#2)

Thanks for that.

The assignment is relatively secure as 12 months. The project itself is over 2 years so there is actually potential to do the full thing.

In the long run i want to be contractor rather than a partner in a consulting firm, i just hadn't anticipated making the jump his early in my career and hence wanted to establish how easy it would be to go back into a big firm a few years down the line (currently at a big 4)

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#4 RE: Contract vs. staying permanent?
22/03/2011 16:47

Mr Cool to anon (#3)

Then I'd say take the contract. 12 months with a good chance to extend another 12 is as good as it gets and will establish you in the contract Market. A short period on the bench after that followed by another 12 monther would see you in perfect position to go back permie, if they can afford you.

You may find yourself going back in at almost the same level as you leave, but should progress quicker. You'll also have 30 to 50k in a lump sum to sweeten the pill.

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#5 RE: Contract vs. staying permanent?
23/03/2011 10:41

Newbie to Mr Cool (#4)

@Mr Cool - I'm thinking of contracting as a long term future and would like to understand better what level of day rate I should be trying to achieve to make it worth my while. Is there a formula that experienced people apply to establish this?

Recognise that this is highly dependent upon the market wanting rate for my skill set

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#6 RE: Contract vs. staying permanent?
23/03/2011 11:50

Shoe Polisher to Newbie (#5)

Before you go contracting, understand the effects of IR35 and talk to an expert about what £675 actually means. It's not as grand as you think.

You have to take an annual view and say that you'll lose four weeks money, you can't work non-stop with out a break. Bank Holidays as well you won't get paid for.

Sick leave, car allowance, salary sacrifice schemes. Death in service, critical illness.

Then, when your contract ends you've got to find another one. Getting your first contract is easy, your second a little tougher and after that you're in there with the rest.

You will be come detached, you won't invest in relationships at work as much (as good as it is bad by the way) and you won't be invited to the christmas party.

Getting a permy job at the end can be a burger too. I went contracting in 2003. I am going perm in April. It took me two years to get an offer (in the same employer!)

just my insight.

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#7 RE: Contract vs. staying permanent?
23/03/2011 13:44

Mr Cool to Newbie (#5)

@newbie

Have a look at ww.contractoruk.co.uk

A site for IT contractor mainly, but includes various simple tools and calculators for all sorts of contracting stuff.

Shoe polisher is correct that you need to look at more than just day rate. There’s your own personal tax situation, your need for security, your estimated utilisation/bench ration, how much holiday you want to take, etc.

Personally I work about 210 day a year (90% utilisation over 4 years) which is freaking fantastic but still gives me a month off every summer. I’m senior enough to work from home regularly. I cover all my living costs (four bed detached suburban house, 2 kids, non-working wife, mortgage–free holiday/retirement home in the sun) plus have 30K extra per annum for pure fun. I have enough money in my company account to handle being out of work for two years. I work 8.30 to 6 and never on weekends. See my kids almost almost every morning and every evening. Been away overnight about 10 times in the last 4 years. Get to work with smart director level folks at major banks.

To be fair, if I was still working at a big firm, then I’d be at or pushing, partner level and so would be on about 500k+ a year. So while I make a good living (more than my client peers) and enjoy no politics or sales pressure, etc, I have sacrificed income to enjoy my life.

It’s a nice life but I’ve got 15 more years before I’m totally mortgage free AND a million in the bank in cash on which to retire, and there’s certainly not much chance of materially improving on that without a major change.

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#8 RE: Contract vs. staying permanent?
23/03/2011 15:30

rc to Mr Cool (#7)

shame Osborne didn't take the chance to nail IR35 today, which is the biggest and unfairest thorn in the contractor's side - I suspect they will be looking hard at anyone with decent revenue who is not paying a ton of NI and 50% tax

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#9 RE: Contract vs. staying permanent?
23/03/2011 22:31

Dave to rc (#8)

What's unfair about taxing workers who receive payments from a client via an intermediary and whose relationship with their client is such that had they been paid directly they would be employees of the client, at at a rate similar to tax levied on employees?

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#10 RE: Contract vs. staying permanent?
24/03/2011 00:37

hello to Dave (#9)

Mr. Cool,

How long you have been doing contracting? What was the last permanent level position with the BIG 4( I assume)? and Finally how old are you?

Regds

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#11 RE: Contract vs. staying permanent?
24/03/2011 08:48

Mr Cool to hello (#10)

Potted career history for context - I did 5.5 years in financial services and joined a Big4 as manager. Made SM after 4 years and left a year later to take a Director position in a small start up consultancy. Grew the business pretty well – but when times got tougher and it was clear we were not going to make millions so sold the firm to a larger competitor. I was 34 by that time. I joined a huge SI firm to head up their Investment Banking Sales team, but the culture was a disaster so after a year I took my money and went travelling (with a little bit of work) for about three years.

When I came back to the UK I found that the jobs on offer were fairly uninspiring – either BIG4 offers at SM level or small firms with no USP looking for rainmakers to save their bacon. An option came up to do a contract and I thought “why not?” I had to compromise initially as the first role was as an SME/Lead BA. But within 6 months I was running projects and within 18 I was running Programmes. I’d say that is a typical compromise that is required – you have to step down initially but will out-accelerate the competition and soon get back to the level at which you’ve previously performed.

With 4 years of contracting, I’m now a grand old man at 42.

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#12 RE: Contract vs. staying permanent?
24/03/2011 16:26

it does sum up to Mr Cool (#11)

so you are 42 now means:

37/38 to 42: contracting

34-37- travelling

33-34- senior manager

29-33- manager

23.5-29- financial services

I also joined as manager at BIG 4 when I was 30 and then stayed there for 3 years before turning to contracting.

I would assume you have been contracting with the same employer since then

-hello

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#13 RE: Contract vs. staying permanent?
24/03/2011 17:23

Mr Stalked to it does sum up (#12)

Nearly - not quite.

38 to 42: contracting

34-37- travelling

31-34- start up

30-31 - SM

26-29 manager

20-26- financial services

One major contracting client that keeps extending/recalling me, plus two others where I've done shorter higher value work - usually wihtout actually "leaving" the main place.

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