In my experience, a company that pays 400-500£ per day for a contractor, will pay 80-90K£ per annum for a permanent employee. Once you account for VAT and corporation tax, the only difference comes from not paying NI and income tax. Inside IR35, if my calculations are correct (and they may not be), 500£ per day are equivalent to 90K£ per annum.
£20k of income(sans VAT) per month is barely possible. If you're at the level of being paid £45k - you will not earn £20k per month during first year. £20k per month is ~ £900 per day @ 22 days per month, and that is paid to very well known consultants.
But what I will agree with is that the disparity of contractor pay and permanent pay in UK is staggering.
European permanent salaries have been coming down. UK contractors take home less now than they did 5 years ago due to taxation changes (IR35).
The tax changes have also made the market a bit strange where rates are still advertised at £500 a day even though, contractor takes home significantly less money. These have not gone up inline.
In the UK you could make good money but the trick is to be a consultant and bill your employer through your Limited company.
At one place where I worked with a permanent contract, the consultants were billing at 800-1200 gbp per day depending on seniority. There was agency cut of course but overall they made real well. this is when working at the same office at the same hours right next to me, just like an employee.
I haven’t been in the UK since a while so I hear that now things changed so you can no longer pretend to run a company when being essentially an employee.
I wouldn't say more in line necessarily, unless you work at the big banks in a profit center. Contractors can make anywhere from £300 to about £750 a day unless they land on an extremely profitable niche, which is great money for the UK but not the kind of insane rates SV engineers can get. Of course, cost of living is lower too, especially up north where I am.
From what I've seen, I think that's possibly a touch low for experienced contractors. At least in the financial world, the £500pd upwards mark seems to be quite common - which is around £115k GBP/$185k USD assuming 11 months work a year (500 * 232).
However day rates in excess of £500 are normal outside of London (£750 in London) so if you can deal with all that it can be lucrative.
Of course that depends on the type of work you do, your skill and experience level, and the type of client you work with.
In the UK what that day rate is worth also depends on whether you are working inside or outside IR35 and if inside whether you're working through an umbrella company or the client is paying their own taxes. Your £750 and your friend's £750 might give you very different amounts of real money left after taxes and costs.
I've seen mid-level tech jobs in London banks for £146k which come with 34 days off including state holidays like new years day, christmas, etc
£146k for a full time contractor on 226 days a year isn't that much at all - £650 a day, which is in the "Senior developer" range [0]
With 30% tax in the US and the cost of health insurance, that would be $68,400
For a staff employee on £146k (which is quite achievable in finance), taxes would be 39.5%, or $79k in tax [1] (there's also local property tax, but that's in the ballpark £1k-3k a year depending on the size of your house). Tax could be potentially lower as a contractor if you're clever about distributing your income, but I know they've been clamping down on some avoidance schemes.
No idea what a HSA account is, I guess some form of pension plan? That tends to come off pre-tax.
Devops contract rate seems to be around £450/day (at the low end). Assuming 21 days per month and 2 months off per year, you'd be looking at £94500 revenue. As a contractor you could expect to pay as little as 25% total tax, but if we assume 30% you're looking at taking home £5.5k per month. Which is a grand more than an £80k salary (with an extra month off).
If you're married and have your SO as a shareholder, thus splitting the tax load you can almost match a £200k salary on a day rate of ~£700 (I have seen a few devops type roles getting up towards that figure).
So, I agree that £250k salary is very top end, but there are certainly contracts in the finance industry that pay enough to get you close if you change the way you're paid.
Depends where you live, in the UK I pay a flat 20% (after income and expenses). My monthly costs in London add up to about $2k. So that leaves me about $15k. Not quite as much as the OP but give me a couple more years of experience and I'll be able to put my rates up.
I contracted for about 10 years in the UK, finance mostly. Had my own Ltd, took home about 65% of my day rate. No funny business, happened to move clients about every two years which helped for IR35.
Nothing more complicated than that. Yes that means I paid 35% tax, which is pretty much the equivalent I would have paid if I could have ever found anyone who would pay me my day rate as a salary.
1. I believe in a progressive tax system and public services
2. I don't believe in working for an umbrella based in Norther Cyprus which is owned by a Trust of which I am a trustee which pays me loans on a semi-regular basis of 80-88% of my day rate with absolutely zero tax paid by me.
HMRC is cracking down on IT Contractor loans anyway, and quite a few people are rightly being hit up for quite large amounts of tax.
If the UK public had any idea how many (roughly 50k contractors in the City) avoided paying so much tax (billions) while they were being mugged by PAYE there would be a total bun fight.
Me. I'm still wealthy, my dad was a teacher, my mum a stay-at-home mum. Went to state schools, drove on state roads, took the benefit of people who actually paid tax.
To all the "I could pay some of my extra money to a charity / local school" brigade. Sure, but you never did - you parasite. Feel free to thank me for providing all those public services for you if you like.
I have a few friends in London, contracting whilst working a Single Person Business (lacking the proper terminology). Super high wages £500 - £700 per day, whilst having an effective tax rate or 13%. Boom.
I think regardless of the tax benefits discussed in this thread, even with an equal playing field you will earn significantly more than your permie peers.
You can get 50k if you're lucky in London, but you can earn 500 a day as a contractor.
500 * 230 conservative work days per year = 115,000 NET
Senior/Lead UX designer at a big corp in London: making ~£115k/yr (~€130 at mythical exchange rates), salaried, before tax.
Actually took a pay cut, used to be a contractor with a day rate ranging from £600-750 which had me averaging approx £150k/yr and paying much less tax. Considering going back to that soon, although a bit worried about Brexit uncertainty, but right now I'm seeing plenty of contractor roles offering that much, a few up to £1k/day.
48 weeks * 5 days a week is really best case scenario.
You have included 4 weeks of holiday, but not sickness, training courses, conferences, company admin, next contract sales and worst of all bench time between contracts.
My calculation are you are down to 45 weeks after 5 weeks holiday and UK bank holidays. Add 5 days for illness, 7 days for courses and conferences, 1 day a month for admin, 3 days every 6 months for sales, and suddenly you are down to 39 weeks. Add at best 2 weeks of bench time as lining up new contracts perfectly is tricky and you are down to 37 weeks.
£350 * 5 * 37 = 64,750 before tax.
Then it is the whole consideration of whether you are within IR35, which basically taxes you more than a normal employee, and is very difficult to not be within if freelancing on longer contracts in the UK.
Then accounting, insurance, hardware costs etc.
You would have to be on some real long term contracts without benchtime, no illness, no training and no expenses to get towards you numbers.
Working in Shoreditch myself I know most of the decent developers with 10 experience around here are earning a lot more than a contract guy would make on £350 per day.
Is that more expensive than the UK? Over about £40k you've got a 42% rate here (not including the employer NI either), and a 32% rate between abut £11k and £40k.
Interesting. I've just converted it back to a salary figure for the UK. As a salary that works out at £58,000 - which is considerably higher than the average salary in this part of the UK.
However, given in practice it's essentially contract work it's about 30% less than average contracting rates.
If they manage to get paid work equivalent to working full time though, they'll be earning a fair whack more than me, so good on them.
Whether it seems reasonable or trustable probably depends an awful lot on where you are based.
It's not that hard really in the UK. Salaries are shit, and my advice to anyone looking for work into the UK is to be a contractor. I was effectively on £100'000+ at 23 in the UK as a contractor.
British and American companies are structured quite differently. As a contractor in the UK, you effectively have the same rights as an American employee.
If you look on the job boards for contract work, hardly any of it (prior to corona) was under £500pd.
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