Moving from permanent, PAYE job into contracting - best way

gettingready

Perhaps someone can advise?

Currently in a regular, full time, permanent PAYE job.

Possibility to move into a much better paid, 6 month contract somewhere else.


Never contracted before - any advice re how to get the best/most out of it please?

I have no idea about umbrella, ltd etc etc so looking for "Dummies guide to contracting" really.

Thanks a lot.

p00hsticks

I don't want to put you off (I've spent a number of years contracting myself but am now back as an employee) but go in with your eyes open - a read of this thread that's just appeared on another board might highlight some of the pitfalls.

https://forums.moneysavingexpert.com/discussion/4638145

In my view the first thing to do it sit down and really crunch the numbers. You say that the contract is "much better payed" and most "permies" hear what contractors get and feel envious, but you need to make sure you are comparing like for like.

How is your six month contract going to be paid ? If it's hourly, then you need to factor in that you'll not be getting paid for holdiays, bank holidays or sickness. Does your existing employer give you any perks such as pension contributions, life cover, private medical benefits etc ? work out what they are worth to you and how much it would cost you to replace them yourself. Work out a true hourly rate for your current job for the hours you actually work (factoring in the benefits and the fact that you'll be getting at least 28 days pay a year for days you don't actually work) and then do the same for the contract job (factoring in potential expenses like agency and accountancy fees, public liability insurance, accountancy and sickness insurance etc ) and compare the two. Is the contract positon really that much better paid ? and does the additional payment make up for the lack of security ?

When that initial six month contract is up what are your chances or getting another or returning to full time emplyment ? It's no use getting paid 50% more as a contractor if you then spend three months at the end of each six month contract looking for more work.

The PCG is probably a good starting point for help and advice
https://www.pcg.org.uk/guide

gettingready

P00hsticks - thanks for replying.

It is daily rate, equivalent to over 4 times my current salary(not just 50% more) - that is based on 46 weeks as I get 6 weeks paid A/L where I am which would not hap[pen while contracting so calculated over 46 weeks. So in real life, 6 months of this contract is equivalent of 2 years in my current job - no brainer really, is it?

I got no "perks" with my current job, none at all.

Thanks for the links, will have a look.

Anyone else can advice re ltd/umbrella/paye?

isplumm

Hi,

Have a look here - http://www.sjdaccountancy.com/contractor_calculator/index.html

These are my accountants - they have some good guides for contracting.

Couple of things
1. your contract is as long as the notice period in the contract between you & the agency - so although my contract says 6 months, my notice period is 1 week.
2. Payment schedule - to get paid you need to raise an invoice - watch for long payment terms - my current agent pays 30 days, but I have seen 60 days.
3. I would go with a LTD company - be careful of some umbrella companies who suggest they can pay you a large % of total income.
4. IR35 - if you have a LTD company, you really want to be outside IR35 - so I would get contract checked before signing.

The PCG above will help.

Hope this helps.

Mark

getmore4less

gettingready wrote: »

P00hsticks - thanks for replying.

It is daily rate, equivalent to over 4 times my current salary(not just 50% more) - that is based on 46 weeks as I get 6 weeks paid A/L where I am which would not hap[pen while contracting so calculated over 46 weeks. So in real life, 6 months of this contract is equivalent of 2 years in my current job - no brainer really, is it?

I got no "perks" with my current job, none at all.

Thanks for the links, will have a look.

Anyone else can advice re ltd/umbrella/paye?

Look at your costs if not able to work/comute from current home you need to factor in transport and accomodation.

ok they will mostly come out of gross but even a cheap B&B soon adds up.

gettingready

Mark - thanks a lot for that.

Gettingmore4less - thanks, no extra costs commuting or otherwise, job is in London and I already pay the same amount for a monthly travelcard.

gettingready

Ok, just had few things confirmed.

Payment schedule 28 days.

Notice - 1 week within the first month of the contract, 6 weeks (either way) after the first one month.

Ltd is way to go - with SJD of course (actually a friend works there, dealing with LTD companies)

So.... just waiting for the contract to arrive and will be handing in my notice - in the job I dread going to every day.....

Scared a bit as was in permanent jobs only so far but.....

Thanks for all the advice again.

isplumm

Hi,
If you are going with sjd, then i suggest that you get them to review your contract for ir35 - £180 + VAT I think.

Mark

makeyourdaddyproud

IR35 cannot be avoided if it's his main place of work and with his sole income coming from that contract. If he has other streams of income and does not need to be on site in a regimental 9-5 capacity then the contract could be exempt from IR35.

makeyourdaddyproud

The contract is still worth it even if it is 2x salary. Sniff snifff ... Smells like an IT job...

isplumm

makeyourdaddyproud wrote: »

IR35 cannot be avoided if it's his main place of work and with his sole income coming from that contract. If he has other streams of income and does not need to be on site in a regimental 9-5 capacity then the contract could be exempt from IR35.

Where exactly does it say that in the law?

I have 1 client at the moment & all the other contractors working at the same place have the same - none of us consider ourselves inside ir35.

Of course it is important that the working practises also put you outside ir35 - not just the contract. So if the company treats you as an employee (eg. forcing you to work same hours as permies) then you MIGHT be inside ir35. Need to check each contract - as you might be inside ir35 for one role, but outside for another.

Mark