IT Contractors

[jon86]

At my company, the contractors working in the offices here are paid around the same per day as good fulltime engineers. However, the contractors don't receive any biannual stock and cash bonuses, 401k match and generous medical insurance benefits, they get very little notice period if the company wants to get rid of them (whereas the company offers permies a pretty good notice period for involuntary terminations) and the pay bands are very much fixed. From what I can tell, the contractors at my company are given a set of terms and a choice to take it or leave it, and I would imagine that in the US, companies like Google, Facebook, etc, offer pretty-much the same to their contractors, other than the fact that they get free food and use of more on-site amenities. Also, fulltime staff can get opportunities to travel, training and conferences, etc. For some people (like it was for me), this alone can be worth many tens of thousands of pounds per year. This is why so many contractors want to rollover to being permanent employees. I am confident that I have the skillset to match the contractors' skillsets that we have in my team, but it just makes no sense to switch (not that I could from a visa perspective, even if I wanted to).

If I was to ever have to go back to the UK, I would give contracting a serious thought. It seems that contacting over there is much more lucrative.

 

[Schnippzle]

Certainly appears to be very different in the states, maybe the UK contracting market will be heading in the same direction eventually?

 

[dowie]

The difference with the states is that IT roles are much better paid over there.

In the UK you'll find some areas in finance where perm IT staff can earn more than contractors, other than that it is usually contractors earning more.

 

[Chris1712]

Yeah salaries are at least double what they are here, not really comparable. An average contractor in the UK would be about the same as a U.S. Permie in PPP$

 

[anything I don't mind]

I have always said that IT is underpaid in the UK. Crazy that we are not earning more money doing server support when recruiters always saying how they struggle to get anyone decent and these companies are making millions. I think secretly (well not always so secret) everyone hates IT department and wish they didn't have to pay them anything.

 

[dlite]

Do we have software industry in UK worth mentioning? Or in Europe for that matter?

By this I mean software industry where the end product is software (or SaaS), not just parts for other industries? Ie. something that scales like software can scale, instead of something that is a part of very physical BMW where the scaling is naturally bound to BMW sales, which for obvious reasons can't scale like software sales can?

Where are European software companies/products worth mentioning? I can't think of other "product" companies than SAP that are worth mentioning in the same league as the likes of Microsoft, Oracle, Google, IBM, Amazon, Facebook, LinkedIn etc...

When our IT is just an extension of our traditional industries, it will never scale like the US software companies -> our IT employers don't have the profit margins to pay the kind of salaries compared to the States. Not that they need to, since competition willing to pay high salaries just doesn't exists on this side of the ocean.

Contracting in Europe lets you extract a bit more of your own productivity in exchange of the risk you carry yourself. In US the insane profits margins of these "real" software companies mean that they can pay enough to attract top talent, while in Europe top talent makes most money by being contracted by banks / oil industry / telcos.


This is very raw thought, maybe you can point out flaws in my thinking?

I used to do contracting, but took a permanent position a while ago to get some stability, instead of living from a suitcase and overnighting in hotels / temporary lodgings...

 

[anything I don't mind]

Do we have software industry in UK worth mentioning? Or in Europe for that matter?

By this I mean software industry where the end product is software (or SaaS), not just parts for other industries? Ie. something that scales like software can scale, instead of something that is a part of very physical BMW where the scaling is naturally bound to BMW sales, which for obvious reasons can't scale like software sales can?

Where are European software companies/products worth mentioning? I can't think of other "product" companies than SAP that are worth mentioning in the same league as the likes of Microsoft, Oracle, Google, IBM, Amazon, Facebook, LinkedIn etc...

When our IT is just an extension of our traditional industries, it will never scale like the US software companies -> our IT employers don't have the profit margins to pay the kind of salaries compared to the States. Not that they need to, since competition willing to pay high salaries just doesn't exists on this side of the ocean.

Contracting in Europe lets you extract a bit more of your own productivity in exchange of the risk you carry yourself. In US the insane profits margins of these "real" software companies mean that they can pay enough to attract top talent, while in Europe top talent makes most money by being contracted by banks / oil industry / telcos.


This is very raw thought, maybe you can point out flaws in my thinking?

I used to do contracting, but took a permanent position a while ago to get some stability, instead of living from a suitcase and overnighting in hotels / temporary lodgings...

Even if you take out silicon valley and successful .com companies liek apple and facebook. US IT staff still earn more working at banks and law firms and the rest. They are just much more valued over there. In the UK for some reason they refuse to pay IT staff that are not contractors a reasonable salary. Strange they are willing to blow £800 a day without a second thought on a contractor but then pay their internal IT staff peanuts by comparison. Some where in the middle might offer better results.

 

[danielanthony]

Hasn't been mentioned yet but the tax advantages contractors have enjoyed seem to be coming to an end:

http://www.accountingweb.co.uk/article/new-guidance-changes-agency-tax-rules/553609

The government has said that it will take action against temps who are sub-contractors. The Pay As You Earn and NIC rules for temps currently don’t apply if the worker is not obliged to provide personal service, accepting that a self-employed worker finding work through an agency is still self-employed and should be taxed as such. But that will change from 6 April 2014.

Plus the rules on claiming expenses are changing too.

So, great daily rates but paying 47% tax...

 

[dlite]

Even if you take out silicon valley and successful .com companies liek apple and facebook. US IT staff still earn more working at banks and law firms and the rest. They are just much more valued over there. In the UK for some reason they refuse to pay IT staff that are not contractors a reasonable salary. Strange they are willing to blow £800 a day without a second thought on a contractor but then pay their internal IT staff peanuts by comparison. Some where in the middle might offer better results.

I find it quite natural that if there are companies that can extract good profit (productivity) from the work of talented people, they pull up the salaries in the whole industry.

If you as a company don't pay reasonably competitive salary compared to .com's in silicon valley, you can't hold your talent. Of course the cost of living in Mountain View / Palo Alto / Santa Clara / Cupertino is super high and companies elsewhere can pay less and still be competitive but they still have to compete with the total package offered by these silicon valley powerhouses.

 

[rickjames]

At what age do people wind up going into contracting? I'm 27 and only really starting my certification world now; planning some Microsoft stuff and then maybe something cloud/exchange based, no set plans yet. Might try get to grips with Linux at some point on the side.

 

[jon86]

The difference with the states is that IT roles are much better paid over there.

In the UK you'll find some areas in finance where perm IT staff can earn more than contractors, other than that it is usually contractors earning more.

Yeah salaries are at least double what they are here, not really comparable. An average contractor in the UK would be about the same as a U.S. Permie in PPP$

I have always said that IT is underpaid in the UK. ...

Indeed.

In my company in the US, IT engineers are paid broadly similar to software engineers that are writing SaaS systems, firmware drivers, mobile apps, etc. There is some variance but it's not often more than 15 - 20%. If you're a smart IT engineer with a good 10 - 15 years experience, perhaps working on complex problems like managing a global MPLS WAN infrastructure or global live streaming system with tens of mirror servers, powered by Akamai, you could be a 'senior staff' engineer, and likely be earning $180k - $200k, which around £120,000. Someone who is very good and has 15 - 20 years experience could be a 'principal' engineer, and would likely be earning $200k - $220k, or £140,000.

I am a 'staff' engineer in the US and am earning a good 25% - 30% more by being in California, USA than I was when I was based in Cambridge, UK. My outgoings are a bit less too!

 

[Chris1712]

How did you move over there? It's definitely high on my list of things to do! I figure in about 3 years I'll have enough experience to go for the 'risk' of contracting, but my other option is to try and get to the US. I do work for a company with US offices but there's very little engineering their, mostly in europe.

 

[Basher]

How did you move over there? It's definitely high on my list of things to do! I figure in about 3 years I'll have enough experience to go for the 'risk' of contracting, but my other option is to try and get to the US. I do work for a company with US offices but there's very little engineering their, mostly in europe.

It's much easier if you get sponsored over there by your employer.

 

[FishThrower]

if your thinking about starting contracting and leaving a perm job... I wouldn't bother to be honest, you were 5 years too late.

the gravy train is coming to a end thanks to the Torys trying to force all contractors in IR35, and adding a dividend tax. from April next year its going to have a huge impact on contractors, a lot of them will go back to perm.

PS. MSPs are parasites in business....

 

[dlite]

What is the effective tax burden on full time employment?

Ie. if you take-home is £3500/month, how much does your employer pay including all the compulsory pension contributions etc? And how many hours / days per year you'll end up working for this? I'd guess something like 220 days or 1760 hours per year.

And how much a contractor needs to invoice per year to be able to earn the same?

* What is MSP? Microsoft Student Partner?

 

[Schnippzle]

if your thinking about starting contracting and leaving a perm job... I wouldn't bother to be honest, you were 5 years too late.

the gravy train is coming to a end thanks to the Torys trying to force all contractors in IR35, and adding a dividend tax. from April next year its going to have a huge impact on contractors, a lot of them will go back to perm.

PS. MSPs are parasites in business....

There are enough loopholes around IR35. A carefully worded contract will greatly help with this and to be honest a solicitor well versed in these dealings can help. The savings will pay for the solicitors fee very quickly and you can use the template contract for future employment.

 

[Basher]

What is the effective tax burden on full time employment?

Ie. if you take-home is £3500/month, how much does your employer pay including all the compulsory pension contributions etc? And how many hours / days per year you'll end up working for this? I'd guess something like 220 days or 1760 hours per year.

And how much a contractor needs to invoice per year to be able to earn the same?

* What is MSP? Microsoft Student Partner?

Managed Service Provider.

 

[BusError]

if your thinking about starting contracting and leaving a perm job... I wouldn't bother to be honest, you were 5 years too late.

the gravy train is coming to a end thanks to the Torys trying to force all contractors in IR35, and adding a dividend tax. from April next year its going to have a huge impact on contractors, a lot of them will go back to perm.

PS. MSPs are parasites in business....

From my calculation, I'm going to be hit by about 4 to 4.5% more tax; it's still wildly better than perm, and I can easily get a raise of that amount to compensate...

Check contractorcalculator, they've put online a form that calculates it for you

 

[dowie]

if your thinking about starting contracting and leaving a perm job... I wouldn't bother to be honest, you were 5 years too late.

the gravy train is coming to a end thanks to the Torys trying to force all contractors in IR35, and adding a dividend tax. from April next year its going to have a huge impact on contractors, a lot of them will go back to perm.

PS. MSPs are parasites in business....

tis probably still worthwhile for some - in quite a few areas contract rates are significantly higher

i.e. senior consultant/business analyst with knowledge of some financial application or other earning say 70k might well find they'd get 600 a day as a contractor

 

[NickK]

That, plus at the next round of layoffs, they'll get rid of a few perms, will get a hiring freeze and will have to take on contractors to do the work

Exactly what happened at my two current jobs! The fact that I'm vastly more expensive than a perm doesn't seem to count.

Not complaining

Contractors work given a CAPEX contract - a fixed budget. This means that new build software etc and fixed pieces of work associated can be put in as capex vs opex.

Permys on the other hand are OPEX for the majority.. but most organisations attempt to find ways for charging as capex depending on the task.

There are taxation and perceived uncontrolled risk implications between capex and opex hence the push to make everything a capex expenditure.