How to be profitable as a contractor

TELLIT01

IT contract work was very lucrative in the 80s and 90s but far less so since simplified methods of coding came in and almost anybody can do it.  In a very specialised area the money is probably still there.  Like others who have commented, I wouldn't call £100k plus "a really low amount", unless your current job is professional footballer.

Marcon

RobHT said:

Regarding my wishes, there is no salary that can match my expectations, but this thread is not to talk about it.

If you improve your skills you should be able to increase your earnings capability.

JReacher1

It depends what your IT role is to be honest.  I recruit a lot of IT contractors e.g. developers, testers, product managers and the daily rate has grown from around £400 a day to £600 + in the last 18 months.  Everything is much more expensive now and this is in the North.  If you're only being offered £400 a day would be interesting to know what your role is.

RobHT

Sandtree said:

RobHT said:

Grumpy_chap said:

It's perfectly valid to consider contract roles and the OP has assessed they need £700 per day to make that viable for them.

The OP has also found that the market will only pay £400.

That is a large gap that will not close easily, so it is not viable for the OP to take a contract role, unless the OP can present his value-added in a better way that means the potential Clients will pay the required rate to make it viable.

Has the OP assessed the alternative business models for offering contracting services?  Can the OP identify efficiencies that mean they can offer the service at £400 per day market-rate?

If the OP cannot make a viable living on contract, the alternative is to secure regular employed work.

How does the OP make a living at present?

Roughly speaking, I think that up to 700 a day as a contractor, it is better to be employed, let's say with a salary of 100k, which is my current salary average.
But I'd do the same for 800 a day to be honest, it's simply not so much more money on the table to justify the risk and pain of switching job frequently.

Certainly, the way of working as a contractor may be more interesting for engineers or some specific work, I noticed that once you are a contractor, you make the game, which means that you can't end up working on a role you don't want, or doing tasks you are not paid for.
Plus, contractors are NOT easy to find, the competition may not be so high as with a standard employment contract.

It's true though that many of these contractors do several tasks, reason why the range of 400 daily is wrong from both sides (pay + tasks), so you end up being the houseman which is very annoying, especially in IT where there are way too many technologies. You could also accidentally build up a bad reputation.

So you are currently on £100k but think contracting only becomes interesting at £168k (£700/day)? That's not mentioning the potential tax advantages which could make that £168k more akin to £200k+

Rates vary massively by industry, I'd argue more than salaries. Plenty of £700+ developer roles if you know about investment banking/their products... saw a couple at £1,500/day (inside IR35) if you are good with Java and FX

Why 168k look like 200k+ to you?

Sleepysophie said:

From someone who has lived with an IT professional for many years there are certainly different types of contractors. There are many different skills - some of which are in demand, some are over-subscribed. What is your niche? 
If your skills are in demand and there is a small pool of you with those skills and experience I am sure you can decide to charge near enough whatever you wish. However, if you are a contractor with the same IT skills and qualifications as many of the others then the person employing you will be able to shop around and probably get a better deal than the £400 / £600 you quoted. 
So far as the person you mentioned with the large mortgage -
Does he live alone or have someone else helping him with that?
Has he added the property to his business portfolio rather than a personal mortgage?
Did he have a large deposit? 
Is he contracting other people beneath him and therefore earing income from their work too? 
If he has set up as a limited company he may have paid for sickness cover (indemnity)
It might not be as simple as you think. 

Interesting...

Supply and demand is clear, thanks .

I don't think he had a large deposit, he's paying the mortgage by himself, the wife helps at home, which is a job anyway but I'm just saying.

I'm not sure if he can add that property to his business portfolio, and how moreover... What I know now is that if he doesn't own the house entirely, he can't do it. At the moment, the bank is the owner, and probably for good 30 years.

He works alone, no sub-contracting.

I'm sure he is covered regarding illness etc, but it costs an hell anyway , probably is around 650 pounds including a proper PHI.

RobHT

TELLIT01 said:

IT contract work was very lucrative in the 80s and 90s but far less so since simplified methods of coding came in and almost anybody can do it.  In a very specialised area the money is probably still there.  Like others who have commented, I wouldn't call £100k plus "a really low amount", unless your current job is professional footballer.

I need to make the point here.

I consider 100k as an employee better than ~160k contractor pay.

But also 100k don't make sense for me, though this is me.
I see the real life cost here, in total opposite view of the people out there, which probably live in Disney Land or have the house paid from their parents .
So, 100k, outside London, is just the border line for an healthy life, or wealthy life, you name it, as soon as you have an important expense that everyone will face in life, you'll see thousands going away.

Inside London, I need 150k minimum to decently survive, 300k to live decently (most famous magazines report the same so DON'T say I'm crazy), with the only meaning to get out asap before going crazy, probably investing all I take or buy a nice house in a nice village or medium size city, but I'm pretty sure that I'd invest all I take , max I'd buy an house for holiday and rent it out for most of the year, or keep it as a secondary working location.

Marcon said:

RobHT said:

Regarding my wishes, there is no salary that can match my expectations, but this thread is not to talk about it.

If you improve your skills you should be able to increase your earnings capability.

I should...
Based on my forecast, in 3y distance I could get 120k in London, in 5y 150k.
It doesn't mean much, I only say that the opportunity is there, but I always find the best way to get the correct amount asap instead of waiting.

This is a theoretical forecast, what's happening worldwide is way more important and more influent, it will be a crucial discriminant of such outcome.

JReacher1 said:

It depends what your IT role is to be honest.  I recruit a lot of IT contractors e.g. developers, testers, product managers and the daily rate has grown from around £400 a day to £600 + in the last 18 months.  Everything is much more expensive now and this is in the North.  If you're only being offered £400 a day would be interesting to know what your role is.

The way you reported such increase, it seems due to the hype only, not for the inflation, but there's can be some correlation with the shortage of employees, that plays a role for sure.

North where? You didn't specify it.

I wasn't offered 400, I never asked what could be my daily rate, but I know where I stand, in theory...

JReacher1

Manchester. 

The contract market is very buoyant at the moment. 

Sandtree

RobHT said:

Sandtree said:

RobHT said:

Grumpy_chap said:

It's perfectly valid to consider contract roles and the OP has assessed they need £700 per day to make that viable for them.

The OP has also found that the market will only pay £400.

That is a large gap that will not close easily, so it is not viable for the OP to take a contract role, unless the OP can present his value-added in a better way that means the potential Clients will pay the required rate to make it viable.

Has the OP assessed the alternative business models for offering contracting services?  Can the OP identify efficiencies that mean they can offer the service at £400 per day market-rate?

If the OP cannot make a viable living on contract, the alternative is to secure regular employed work.

How does the OP make a living at present?

Roughly speaking, I think that up to 700 a day as a contractor, it is better to be employed, let's say with a salary of 100k, which is my current salary average.
But I'd do the same for 800 a day to be honest, it's simply not so much more money on the table to justify the risk and pain of switching job frequently.

Certainly, the way of working as a contractor may be more interesting for engineers or some specific work, I noticed that once you are a contractor, you make the game, which means that you can't end up working on a role you don't want, or doing tasks you are not paid for.
Plus, contractors are NOT easy to find, the competition may not be so high as with a standard employment contract.

It's true though that many of these contractors do several tasks, reason why the range of 400 daily is wrong from both sides (pay + tasks), so you end up being the houseman which is very annoying, especially in IT where there are way too many technologies. You could also accidentally build up a bad reputation.

So you are currently on £100k but think contracting only becomes interesting at £168k (£700/day)? That's not mentioning the potential tax advantages which could make that £168k more akin to £200k+

Rates vary massively by industry, I'd argue more than salaries. Plenty of £700+ developer roles if you know about investment banking/their products... saw a couple at £1,500/day (inside IR35) if you are good with Java and FX

Why 168k look like 200k+ to you?

Because most contractors I've known are leveraging partner's unused tax allowances etc which means the total take home pay net of tax is higher than if you were an employee earning the same. 

For a start on flat rate VAT scheme £700/day becomes £718.20 so £168k becomes £172k. Plenty of other tricks of the trade... unsurprisingly many now have an EV company car too.

Elliott.T123

RobHT said:

But also 100k don't make sense for me, though this is me.

I see the real life cost here, in total opposite view of the people out there, which probably live in Disney Land or have the house paid from their parents .
So, 100k, outside London, is just the border line for an healthy life, or wealthy life, you name it, as soon as you have an important expense that everyone will face in life, you'll see thousands going away.

Inside London, I need 150k minimum to decently survive, 300k to live decently (most famous magazines report the same so DON'T say I'm crazy), with the only meaning to get out asap before going crazy, probably investing all I take or buy a nice house in a nice village or medium size city, but I'm pretty sure that I'd invest all I take , max I'd buy an house for holiday and rent it out for most of the year, or keep it as a secondary working location.

I think you need a little bit of a reality check here, the average UK Salary is £31,447
To be claiming £100k "doesn't make sense" comes across extremely entitled and very arrogant. I think this forum may be the wrong place for you to be if you don't feel like you can live on less than £150k. A lot of people on here are worried about if they can afford to heat their house or eat next week not can they afford to eat at top restaurants.

As a tech recruiter for over 10 years I have worked with a lot of IT Contractors. The general rule is that contractors get paid between 1.25 - 1.75 times what a permanent employee would depending on skill set but 1.5x is most common.

A lot of people would be very happy to earn £160k (in a more tax efficient way) as a contractor than £100k as an employee (but with benefits on top)
It is a personal choice and no one is forcing you to take a contract role but the fact companies are offering those rates clearly means other people do see the benefits.

Companies will pay what they need for roles, I once had 2 guy who had an incredibly niche skill set who were on £60k a year perm. I got them contract roles paying £1,500 per day, they were the only two in the country with that tech stack and the company poaching them would have lost a contract worth over £500m. Supply and demand, it works.

ElefantEd

Elliott.T123 said:

I think you need a little bit of a reality check here, the average UK Salary is £31,447
To be claiming £100k "doesn't make sense" comes across extremely entitled and very arrogant. I think this forum may be the wrong place for you to be if you don't feel like you can live on less than £150k. A lot of people on here are worried about if they can afford to heat their house or eat next week not can they afford to eat at top restaurants.

Average full time salary is £31k. Many people are part time, and so the average salary is rather less at £24,600. And the median household income is about £31k (there seem to be slightly different figures being bandied about depending on where you look but they are all in this ballpark). So I quite agree that saying you need £100k is absurd. Only about 4% of people in the UK earn 100k+, clearly most people earnign less are not struggling in any meaningful sense!

ElefantEd

Elliott.T123 said:

I think you need a little bit of a reality check here, the average UK Salary is £31,447
To be claiming £100k "doesn't make sense" comes across extremely entitled and very arrogant. I think this forum may be the wrong place for you to be if you don't feel like you can live on less than £150k. A lot of people on here are worried about if they can afford to heat their house or eat next week not can they afford to eat at top restaurants.

Average full time salary is £31k. Many people are part time, and so the average salary is rather less at £24,600. And the median household income is about £31k (there seem to be slightly different figures being bandied about depending on where you look but they are all in this ballpark). So I quite agree that saying you need £100k is absurd. Only about 4% of people in the UK earn 100k+, clearly most people earnign less are not struggling in any meaningful sense!