Secured a contract role, suggestions required.

[O_Relly]

Hello friends,

I have been offered a contract position for 6 months based out of London. I have also cleared telephone round for a permanent position based out of Edinburgh, the f2f is being scheduled.

The contract role pays about 25% more than the permanent position, but this will be levelled, considering the cost of living in London.

My Tier 1 runs out in 12 months, it makes more sense to take up the permanent (provided I clear personal round) as my extension will become secure. The risk with contract is that, if it doesn't get extended in 6 months, then there might be a gap of couple of months before I secure my next role, which can pose a problem for extension.

Other points,

1. My wife is also pursuing her job search and it makes sense to be around London as options are more.

2. The contract role is with a well known international brand name and the work is good, while the permanent role company is a good company to work for, am yet to find out more in detail about the work.

Are there other points I should consider before making the decision to go for the contract role or the permanent position ?

I know all of this is only valid if I clear my personal round with permanent role company.

Would really appreciate your valuable suggestions and opinions.

Thanks,
OR.

[kenfrapin]

Let me keep the end goal as eligibility for Tier 1 extension and reply to your queries. When you said the contract offer pays 25% more, did you mean on a 12 month basis or just a monthly basis? This is quite important because working for 12 months at 25% less per month compared to your contract is a far better option.

Just as you said, after 6 months, there is no guarantee of extension and if you are jobless even for 1 month, then that extra 25% will end up worthless. Also note that in a permanent job, you actually only work 11 months a year due to annual leave while in contracting, no work no pay, no matter when that happens.

To help you on the permanent role, I'd suggest asking for a bonus component or a relocation bonus as its up north - bottom line, which is my assumption, you are trying to ensure your salary will suffice to extend your visa so if you can achieve that with the perm role then nothing like it. If you are confident of your contract extending then that will always be the best option because your partner has 100 times more chances of getting a job which helps your finances and savings.

I accept its a tough choice but know your end goal and it will help decide which option to take
All the best

KP

[O_Relly]

Thanks Kenfrapin for taking time to read and respond with a detailed reply. Although the agent mentions that there is all likeliness that the contract can be extended for another 6 months, there is no guarantee.

Ok, will weigh my options before deciding.

[mulderpf]

Some other considerations:

Getting paid 25% more for contracting isn't really in your favour.

Firstly, take into account paid holidays and bank holidays, which for people in the highly skilled category is usually 25 + 8 days = 33 days (may be less, but not less than 28 days total). That makes up a difference of 13% on average.

Then there's the NI contributions - as a contractor, out of your rate you have to pay both your own and the employer contribution (double contribution). That's about another 10 or 11%. Making it 24%??? Really rough calculations....

So given that 25% more as a contractor is really just the same, is it worth the uncertainty of continued employment, the bother to have to take unpaid holidays and save up for it, the fact that when it comes to cutting staff, contractors are first to go etc etc - is it worth it? Also consider that some companies won't touch you if you have contracting experience (not now, but going forward). I know so many people trying to get out of it...

But, you then add that it's in London and yes, it's easier finding something else and something for your wife. So you have some thinking to do.

Another point to consider is that effectively you would be earning the same, but cost of living is cheaper in Edinburgh.

I have not done contracting before, but have been warned about it during my recent job search. So I'm not an expert in that field at all and I know many contractors out there will disagree with me.

Perfect world situation: permanent role in London.

[Aani]

Hi,

Just as a word of caution, Read the clause for Termination in your contract agreement or ask the agent for. If it says " 1 week notice from either party for termination of contract" then you are at risk.

There is a chance that contract gets terminated with 1 week notice even though it is not 6 months completed. I have personally faced this situation. I am not saying that it could happen in your case. But there are chances !! So 6 months is also not guaranteed Period. One must think like this when doing contract job.

I have also been into the situation where the contract got extended and worked for 9 months. So it all depends. No one can predict the future.

With the options you have and keeping Extension in mind If I were you I would go for Permanent as there is no risk, security of job, peace in mind not to worry about next contract though money is less its OK. Sometimes we have to least prioritize money I believe.

Wish you good luck.

Regards,
Aani

[O_Relly]

Thanks mulderpf and aani for taking the time to read and providing your valuable inputs. It does seem like a permanent position is safer and a better bet. I was wondering if I was correct in assuming the NET calculation in contract roles, were as below.

For example, if the rate is at GBP 33 / hour. If calculated for a 7.5 work day accounts to 247.5 / day and for 20 days works out to 4950(gross) / month and 59400 / annum(for the sake of calculation).

When I use the below calculator,
http://www.ir35calc.co.uk/PAYE_NI_Net_S ... lator.aspx

The Net monthly income is 3422 and if I deduct Employers NI of 608 from that(Like mulderpf pointed out, the employers contribution also has to be paid out by the contractor since there is no employer), then it works out to 3422 - 608 = 2814(Net).

Am I calculating it right or are the tax calculations different for contract ?

[mulderpf]

Too much to calculate - just look at this and compare your permanent income to contractor income in terms of what you will get out (approximately - there are lots of things that can be done to optimise it) and remember it doesn't take into account the other benefits like stability etc.

[O_Relly]

@mulderpf
I am more inclined toward permanent, however I will know my situation soon and should have more information with regard to the role and nature of work etc. Just wanted to make sure I was doing my calculations correct (approximately close). I take it from your post that it is correct Thanks, this will help.

[O_Relly]

Hello friends,

There is an update with my current circumstance.

1. The contract turned out to be for 12 months with a slight increase in rate.
2. I have indication that I have cleared my f2f for the permanent position based out of Edinburgh and hope to have offer details tomorrow, which includes relocation charges, annual vacation, pension & insurance, and few other benefits.

Now, that my extension worry is out of the picture in either case, important points to consider,

1. Security that comes with the permanent role as opposed to the risk of being in a contract.
2. Contract (london based) pays approx £750 more. Another very important aspect to consider!
3. More options for my partner being in the London area.
4. If I choose contract, risk of being unable to move back to a permanent role.

Now I am really in a fix. Your suggestions and opinions will greatly help with my decision making.

Regards,
OR.

[kenfrapin]

you are still not clear on what your end goal is here
1. Are you ensuring you have sufficient points and earnings for extension/PR - if so, the 12 month contract achieves that and a lot more. Do not calculate salary after tax. Everything here looks at your total package without any tax deductions
2. Are you looking for long term stability- if so, the perm job in a lovely city like Edinburgh is a good offer.

Think of the above and be clear on what your end goal is. Once you know that, realize the below as they are only secondary to your main objective
1. Being in London is definitely a better option to increase your partners chances of a job though we dont know what she does so maybe even Edinburgh will open doors
2. Contracting pays a lot more and in your case there is no comparison so the contract is economically the best option given it places you in London
3. Dont worry so much about becoming a contractor - its not the end of the world!!! Contracting for 12 months does not mean you will lose all chances of securing a permanent role later, dont discount the fact that the company itself may ask you to become a permie after 12 months

Once again, read the above only AFTER you know what your end goal is. To end on a better note, you are not in as bad a situation as you think you are....the chips have fallen where they should and you can have your cake and eat it too, so just take a minute and decide for yourself what's best for you in the long term

KP

[O_Relly]

@ kenfrapin

Thanks again mate

You probably missed this line,

Now, that my extension worry is out of the picture in either case,

My extension is secure now. Now my other goal is definitely stability, but it seems to come at a very expensive cost. My partner has banking, insurance and retain experience with mainframes technologies.

[kenfrapin]

Well, from the 4 points you put and asked, it sure seems like you werent clear of your objectives.
If your extension is secured with either roles then my advice would be to take the London contract offer
1. Contract pays decent
2. Possible 12 month duration which is not common
3. Further options for your partner to secure a decent per role or a well paying contract
4. More options for you to network, look for other options during your the tenure of your contract

While its great to have a perm role, its all down to how you decide to roll the dice. This is one instance where the factors favour you so I dont see why you should give up the London offer

KP

[O_Relly]

Thanks Ken for that.

I did decide to take up the contract and have completed a month now already. It's all ok so far, and I believe I have made the right choice.

A few facts,

1. Among the other contractors I met in my team , there are 2 key senior resources who have been here on contract for the last 7 years and 4 years respectively. But the average time I see a contractor spending here is between 1 and 3 yrs. Also, they are performing various key roles from scrum master to architect to managers, so yes it works well in this specific company.

2. I also hear it is not like this in general in other companies outside where I work, and that contractors are always on the run, expected to contribute faster and quicker as they are paid by the hour.