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Thread: Contracting - Engineer career wise

  1. #1
    Formerly known as Andehh Andeh13's Avatar
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    Contracting - Engineer career wise

    Hi guys,

    I was made redundant last week and have been job hunting like an absolute demon. Initially I wasn't considering contract work, only permanent but with a few contractors suggesting I look closer into it I have come back with some serious thinking to do.

    A couple of big companies have got back to me (Aston Martin the main one) keen on interviewing me for a contract role, similar to what I have done for the last year. However, having never contracted before I am looking for suggestions.

    They are offering £25/h which is more then I am on currently, but with no idea of how that would work out at the end of the month (ie what I'd see) i am not able to fully work out the risks/benefits involved. I would be doing around 20miles to/from the workplace, and claim back lunch etc but am struggling to calculate the end of month pay check.

    Can anyone talk me through their experience of contracting, how they went about doing and give me a rough ball park figure as to what I could expect at the end of the month (pension/student loan aside anyway).

    Many thanks

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    cat /dev/null streetster's Avatar
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    Re: Contracting - Engineer career wise

    Hmm... how much more per hour is it? I'm currently contracting, but unless it's ~double your salaried hour rate then it might not be worth it at the end of the day - different tax implications (own company vs umbrella), no pension (if you have one with your current place), no holiday allowance (any leave is unpaid), you're easier to fire, no 'career' progression per se within the contracting company...

    The increased income would have to offset the risks of contracting, and the real possibility that you'd be out after 3 months, or 6 months, or maybe 2 weeks if things go pear-shaped...

    Though I know there are many guys on Hexus who have been contracting for years and years and will have much more sound advice than my quick 3min snippet

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    Re: Contracting - Engineer career wise

    I remember doing a fair bit of research when I was looking at contracting. One of the main things is whether you would come under IR35 or not. If you do, then the final salary will only be a little better than a normal PAYE. If the job falls outside, then you can make quite a bit more IF you're willing to do the research and invest a bit of time into it (forming your own Limited Company and so on). I believe I read a fair bit of useful info from this site: -

    http://www.sjdaccountancy.com/about/ir35_advice.html

    Unfortunately, I can't remember all the info and where I got it all from. It might not be a long term commitment, but it sounds like it would be more than adequate as a filler until something more permantent comes up. Remember, it works both ways, you'd be able to leave at short notice as well!

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    Pork & Beans Powerup Phage's Avatar
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    Re: Contracting - Engineer career wise

    Also - Many contract roles turn into perm ones. Congrats on the interviews !
    Society's to blame,
    Or possibly Atari.

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    Re: Contracting - Engineer career wise

    So assuming £25/hour and an 8 hour day. You'll be looking at £200/day. Assuming you work 20 days / month for 10 months - remember you'll want ~ 4 weeks holiday, then you have public holidays and sickness. It works out at about £40k gross.

    Out of that you also need to find:

    Accountants costs (probably ~ 1k)
    Insurance (probably ~1k)
    Contract reviews (to check if you're in or out of IR35)
    Pension

    You'll also be responsible for the employers portion of NI as well as your own, and PAYE, oh and corp tax on any profits you make.

    On the plus side you can claim back for company assets/expenses (laptop, broadband, mobile, some travel - depending on circumstances) out of the gross.

    It all depends on your attitude to risk. I've been contracting for over 7 years with no significant period of down time (longest is about 3-4 days), but I've seen others who have been out of work for anything up to 12 months. I work in IT contracting though, so I can't really offer any specific advice from an engineering perspective.

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    Formerly known as Andehh Andeh13's Avatar
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    Re: Contracting - Engineer career wise

    Thanks for the responses guys, I would go from around £15.50 up to £20 an hour. I would probably go down the Umbrella route, so they sort it all for me for approx £100 a month.

    I'm still struggling to get my head round this IR35, and whether I can avoid it (ie paid more) via an umbrella company?

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    mush-mushroom b0redom's Avatar
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    Re: Contracting - Engineer career wise

    If you use an umbrella company, you are de facto inside IR35. You will be able to claim basic expenses, but everything else will be subject to standard NI + PAYE.

    Check this out:

    http://www.contractorumbrella.com/calculator.html

    For a rule of thumb.

    *disclaimer* - I have never used an umbrella company, and I have no association with, or knowledge of Contractor Umbrella - it's just the 1st hit which came up. If you do go down this route, do your own research.

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    Re: Contracting - Engineer career wise

    According to that calculator, you'd be getting £668 a week going the umbrella route, after tax. I presume your £15.50 an hour is before tax? If so, it looks like you'd be a fair but better off, if you're going to get £25 an hour and work a 40 hour week...

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    Formerly known as Andehh Andeh13's Avatar
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    Re: Contracting - Engineer career wise

    So an umbrella company basically does ALL the paper work, insurance and so forth for a fee of around £100 a month? The company you work for pay them, then they pay you? it does seem quite lucrative...

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    Re: Contracting - Engineer career wise

    No. An umbrella does your paperwork, and bills the customer and then passes the income to you, minus fees and various taxes. You will still need to buy your own insurance etc.

    DO NOT FORGET THAT THE CALCULATOR DOES NOT INCLUDE HOLIDAYS / SICK PAY.



    If you don't work, you don't get paid. You have no employee rights at all. Generally you can be told on Friday, "Don't come in on Monday." For whatever reason your customer deems fit.

    I'm not saying don't do it, I'm saying if you do it, do it with your eyes open.

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    cat /dev/null streetster's Avatar
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    Re: Contracting - Engineer career wise

    I'm currently contracting abroad so my situation is slightly different... but for you, generally, you'll likely be able to retain a higher percentage of your salary by setting up your own Ltd company - but you'd have to ensure you aren't going to be tripped up by any of the IR35 legislation... Probably worth speaking to an qualified accountant who will be able to give you specific advice, review your contract etc. and help you with any related paperwork...

    £15/hour -> £25 is not a bad jump, another thing to consider is how valuable your skillset is deemed; seems b0redom has, to quote Liam Neeson in Taken, "a very particular set of skills; skills [he has] acquired over a very long career", which means companies will be after his expertise and thus he's only had a few days of downtime in 7 years... You want to remain valuable during your contracting period (if this means doing training, then you'll have to cough up to keep up-to-date), otherwise if your contract isn't renewed you might struggle to find a new placement.

    BUT, another thing is... if you're going from no job to a job, then go for it - much easier to get a job when you've already got one

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