help becoming a contractor

moneyspender1981

Hi,

i'm just after some advice about becoming a contractor and the best routes when it comes to pay/ tax etc?

Ive been a project manager for 15 years, but recently became redundant. Most jobs now seem to be contracts and I get alot of calls asking for my daily rate etc... which im not really sure on.

Also If I accept one of these roles... how do i bill them etc? Am i best using an umbrella company ?

any help appreciated...

Russe11

The calculation I have been given in the past to get a rough guide is...

PAYE Salary / 1000 = hourly rate for contractor
PAYE Salary / 100 = daily rate for contractor

This might sound over generous to salaried workers, but its not unusual for contractors to only have work for short spells then nothing. If the customer is offering longer runs of work the rate can drop dramatically. This is where the contractor becomes classed as an "employee", have to then use umbrella companies anyway.

So for example you where salaried at 35,000 a year, you would ask for a daily rate of £350, that is allowing you working day, travel time and cost, accomadation and other expenses. Used if you work away from home.

If you lived locally and not incurring large expenses then you might just be on a hourly rate, which allowes for you time.

Recently i've noticed contract work to advertise a rate for living within 50miles and a enhanced rate for those living more than 50 miles away, the rates are good but because they factor in expenses and that the overtime rates tend to be lower.

dlmcr

This should help you, lots of resource on this site:

forums.contractoruk.com

InsideInsurance

moneyspender1981 wrote: »

Also If I accept one of these roles... how do i bill them etc? Am i best using an umbrella company ?.

An optimistic way of calculating your day rate is to take your basic salary and divide by 100 as has already been suggested. The challenge is that day rates don't follow inflation like salaries do (to some degree) but are much more supply and demand driven.

So in the insurance world, about 18 months ago Solvency II was a major deadline and so insurers were sucking up the relevant contractors where ever they could get them. Even if you didnt work in SII the general rates for those same skill sets (eg PMs, BAs, DAs etc) all went up because it created a shortage - basically supply and demand.

Since the timescales for SII have now been relaxed etc many of these contractors were laid off and so the rates have dropped back down again.


Depending on your plans, you can use an umbrella company which makes life simple, you pay them to do all the calculations etc and you get money at the end of the month/ week and you know its all yours. You basically complete a weekly or monthly timesheet signed off by "your manager" and complete an expenses form with the same frequency.

This is not the most tax efficient route however, if your intending to do this more than 6 months and you believe you will be outside of the IR35 legislation then you will certainly be better off forming a limited company and going through that. Even if you are inside of IR35 it is arguably still better for you to do it this route.

There is the offshoring route but personally I wouldnt go there, its high risk, irregular payments and if the current press continues then it will get ever more cut off (and given your money is all outside of the EU in countries etc you have no protection)


I did 8 years of project, strategy and product management before switching to contracting. Its fairly nerve wrecking to start with but as long as you've got the mentality to be a contractor rather than employee then the financial rewards are obvious.

FWDiane

I can't advice on your daily/hourly rate, but tend to agrre that this will be market led and you then need to decide if this suits you (hopefully you won't be redundant for too long and have the luxury of making choices). Once you are offered a contract, immediately talk to a good contractor accountant. They will be able to give you advice on whether forming a limited company would make sense from a tax efficiency point of view, most of them can also provide IR35 reviews, often included in the cost of their fees. Unless the contract is an IR35 risk, for a very short period, you personally cannot be director of a Limited Company, or at a really low day rate going the Umbrella route is unlikely to be your best option, often we find our clients earn less with Umbrella than they would PAYE - you have to factor in Employers NI, can you reclaim expenses?, and with pensions auto enrolment round the corner you'll soon likely be picking up the cost of that too. Good luck, and hope you find something soon

NeverInDebt

:spam: post 6 reported

directdebiter

Hi

Welcome to contracting! Its a great way of life but at the moment quite competitive especially if you are a PM. There is a lot to consider on beconming a contractor - ideally you will set up a limited company and hire a contractor accountant.

As dmlcr said www.contractoruk.com is a great resource for first timers and an active forum to ask questions. Also speak to a couple of specialist contractor accountants who will advise on take home pay and processes. Some of the bigger specialist accountants include SJD Accountancy, Nixon Williams. They can provide great advice over the phone.

IF you bill over £25k which is likely as a PM you should use a limited company rather than an Umbrella. Also useful to check out the latest PM contracts on a dedciated PM site such as www.projectmanagerjobs.co.uk

One other tip - check any contracts are inside or outsid of IR35. Info on this is on contractoruk but is very important.

HTH! Good Luck.

paddyrg

Be aware though, contracting isn't for everyone. You should be expected to provide your own suitable machine, software licenses, etc. You are likely to be plonked either in a meeting room which will annoy people who hold meetings, or on the worst wonkiest desk in the gloomy corner. If you don't provide your own laptop (which from an IR35 position is a good thing to provide), you can expect an old 486 with a 14" CRT monitor, and the wonky chair. And to be the 'new boy' at each place.

Depending on the place, many likely the staff will be suspicious of a contractor who they imagine as earning diamond encrusted gold bars each day, and resent the fact the company has to use a contractor rather than one of their own. It can be tough breaking the ice.

One thing that used to help, and probably still does to an extent, is to smoke. When outside in the smoking shed of shame, people relate as people, not as job roles, you can talk across departments and be informal. At the cubicle/wonky desk it is all formal, much harder to show you're there to help them out, not pick the last meat from the bones of a dying project.

Of course, each company is different, some are used to high contractor counts and know how to work with them, whilst others aren't sure quite what to make of you, and why their brothers friend didn't get the job instead...

longtimelurkersam

I started contracting last November and there was plenty of jobs around so when asked what my day rate was (before I had got my first contract) I just said "oh I am talking to other agencies about roles in the XXX region" as these had been advertised accordingly.

You don;t say in what area your PM experience is? Obvioulsy I know it can be easily transferred etc but some areas command higher rates (corporate and investment banking for example) if you have the right experience.

Have a look on Technojobs. It might sound like an IT site but they have a lot of other industries on there and it will give you a feel for the day rate of a PM etc etc.