Salaried vs Contracting take home pay

[angryInch]

I am currently in salaried employment but thinking of taking the leap into contracting (IT). However I have 2 questions that someone who has contracted for a while may be able to help me with.

1. Firstly, I am wondering what rate I would have to charge to give myself a comparable income. Currently my take home pay would be about €3k per month. What sort of daily rate would a contractor charge to get the same. Just looking for a rough idea of what I should be asking for. I know this is all very vague and there are loads of factors to consider, but I am just looking for a very rough idea. (Looking for answers like "I am currently contracting at x daily rate and by the time VAT/TAX/etc are paid I have about y in take home pay”)
   
2. I am currently negotiating with a company for a 6-month contract (this is the reason I am wondering what rate I should be asking for). I have read that to register as a sole trader (self-employed) then you really need to be working with multiple clients, is this true in anyone’s experience because it would make my tax return much easier if I could avoid setting up a Limited Company.
   
3. When a contractor talks about rates, are they generally quoted ex VAT?

Any help would be appreciated.

 

[Joe1234]

Currently my take home pay would be about €3k per month.

What tax credits and cut off point have you? Are you single or married? If married, what way are the tax credits and cut off points split between yourself and your spouse?

It is impossible to answer your questions without this and other information. What other expenses will you incur when self employed? Motor Expenses? Insurance? Equipment repairs? Registration fees? Accountants fees? etc.

 

[RainyDay]

Don't plan to match your current salary. Even if your only objective is to match your current lifestyle, you will need to build things like sick pay, holiday pay and employer pension contributions into your calculations.

 

[OtherMe]

Try to find out what the going rate is for your discipline and don't take anything less. This should be considerably more than what you would earn as a permie, if not then you're on a nice salary so don't bother with contracting You can find the going rates in salary surveys done by agencies (I don't have a link sorry). Whatever you do don't take less than the going rate. You are not being employed, you are negotiating a business deal. Anything less than the going rate and you are being ripped off. Also don't be afraid to ask for more if you feel the job deserves it. Don't feel guilty, they will work you to the bone, treat you like a 2nd class citizen and get their monies worth.

As I've found out after a year of contracting there are a lot of negatives (both financially and in terms of rights) and that is why you will find the more experienced contractors pushing for higher rates.

Also it is important to factor in downtime, not just in between contracts but imminent unemployment will constantly loom over you. At any stage they can decide there's not enough work to warrant having you and you'll be dropped....be prepared for this. Set aside a months salary at least.

 

[efm]

Try to find out what the going rate is for your discipline and don't take anything less. This should be considerably more than what you would earn as a permie, if not then you're on a nice salary so don't bother with contracting You can find the going rates in salary surveys done by agencies (I don't have a link sorry). Whatever you do don't take less than the going rate. You are not being employed, you are negotiating a business deal. Anything less than the going rate and you are being ripped off. Also don't be afraid to ask for more if you feel the job deserves it. Don't feel guilty, they will work you to the bone, treat you like a 2nd class citizen and get their monies worth.

As I've found out after a year of contracting there are a lot of negatives (both financially and in terms of rights) and that is why you will find the more experienced contractors pushing for higher rates.

Also it is important to factor in downtime, not just in between contracts but imminent unemployment will constantly loom over you. At any stage they can decide there's not enough work to warrant having you and you'll be dropped....be prepared for this. Set aside a months salary at least.

Spot on! In fact I would say you need to set aside at least three months salary just because of the potential lag time in taking up a new contract after finishing an old one.

Also, don't underestimate the cost to you for the items RainyDay mentioned. Another potential cost is Income Protection Insurance ie if you got sick or injured and couldn't work you'll need some income.

After all that is covered off you'll go and work and get slagged for the huge rates you are charging - a lot of permanent salaried people don't appreciate the monetary cost of things they take for granted; like pension, death in service benefit, sick and holiday pay, etc etc