IT Contractor - Offer to go Permanent

jos_kel

Hi,
I know this is a good dilemma to have but wondering if anyone, especially IT contractors had an opinion on this.
I am a SQL Database developer earning a daily rate of €420 a day and have been asked by the manager to go permanent with a salary of 75k + benefits.

It's very tempting and I'm probably mad to turn it down.

Jos

L.Jenkins

I do a lot of Contracting in Software Development, no where near what you make per day, but if the Company I'm in offered a salary + benefits, I'd be inclined to take. I'd take it for the sake of some additional security and comfort knowing that I'm permanent, but do what makes you happy.

jos_kel

Thanks for the reply Itzy.
That's my thinking too. If I was offered
65k I might turn it down but the offer seems too good.

xabi

Big enough drop in money but it depends on the perks with the job. Do you have the option to stay contracting?

jos_kel

xabi wrote: »

Big enough drop in money but it depends on the perks with the job. Do you have the option to stay contracting?

I've been here 10 months and can only stay for 18 months. 24 months at a stretch. I can afford to not work for a couple of months between contracts. My son has just started school so the security element is swaying me but it's a difficult one.

xabi

You need to weigh up the security of the perm job versus the extra money and potential time off between contracts. If you like the place and its secure id go with the perm option, maybe push them to 80K.

Gavin "shels"

Tell me to stuff it, but looking at my options for progressing in IT, SQL is one of the avenues I'm looking at. Matter of interest how much experience/level of degree do you have to earn that type of wage?

John_Mc

Assuming you work 220 days a year, you're currently on €92k. It depends on the perks included for permanent staff but health insurance is about 1.5k a year, where is the rest of the money balanced out on?

It sounds like it would be a good move for you but you have room to negotiate for a better salary I think. Also bear in mind that perm is not really that much more secure than contracting.

jos_kel

Gavin "shels" wrote: »

Tell me to stuff it, but looking at my options for progressing in IT, SQL is one of the avenues I'm looking at. Matter of interest how much experience/level of degree do you have to earn that type of wage?

15 years experience. First class hons degree.

jos_kel

xabi wrote: »

You need to weigh up the security of the perm job versus the extra money and potential time off between contracts. If you like the place and its secure id go with the perm option, maybe push them to 80K.

Yeah I was thinking of pushing to 80k to seal it
Btw thanks for all the advice

jos_kel

John_Mc wrote: »

Assuming you work 220 days a year, you're currently on €92k. It depends on the perks included for permanent staff but health insurance is about 1.5k a year, where is the rest of the money balanced out on?

It sounds like it would be a good move for you but you have room to negotiate for a better salary I think. Also bear in mind that perm is not really that much more secure than contracting.

Yeah valid point about security of perm role but was thinking if I get 80k I always have the option of going contracting again if I so wish

db

It all comes down to the benefits. On top of the basic salary you should look for Health Insurance, Pension Contribution, Life Insurance and Bonus which should bring the total package to around €100K. You will also have minimum 4 weeks holiday included. Your contract rate for 48 weeks in a year pays you €100800.

I am permanent at around the same salary with the above benefits and there is no way I would switch to contract for €420 / day.

Mrs OBumble

John_Mc wrote: »

Assuming you work 220 days a year, you're currently on €92k. It depends on the perks included for permanent staff but health insurance is about 1.5k a year, where is the rest of the money balanced out on?

I don't see it as that big a drop when you factor in the cost of paying employer PRSI and covering your own annual leave and training out of that 92k. Especially if it includes decent benefits as well as salary.

syklops

jos_kel wrote: »

Yeah I was thinking of pushing to 80k to seal it
Btw thanks for all the advice

Weigh up the perks of going permanent but don't forget the perks of being a contractor. Do you get your expenses refunded? Travel, meals etc? You wont be getting those refunded as a permanent employee. With a daily rate, you are expected to work the hours you are scheduled to work and no more, with a permanent position, you may be expected to work overtime for free, or you may be given a workload which requires putting in extra time with no hope of remuneration.

John_Mc

Mrs OBumble wrote: »

I don't see it as that big a drop when you factor in the cost of paying employer PRSI and covering your own annual leave and training out of that 92k. Especially if it includes decent benefits as well as salary.

Employers PRSI is 4% so that's 3k for a salary of 75k.

1.5k for Health Insurance + 3k for PRSI = 79.5k

The 220 days I used assumes annual leave, bank holidays and the odd sick day.

Unless there's a good pension contribution and/or other perks then the OP has a reasonable case for asking for more money in my opinion.

EunanMac

jos_kel wrote: »

Hi,
I know this is a good dilemma to have but wondering if anyone, especially IT contractors had an opinion on this.
I am a SQL Database developer earning a daily rate of €420 a day and have been asked by the manager to go permanent with a salary of 75k + benefits.

It's very tempting and I'm probably mad to turn it down.

Now that's the type of dilemmas in life I'd like to be having. Tell them its 85k at least, with annual reviews to make it worth your while, and try it for a year or two, and then you can go back to the other. But once you go down the wage slave route, it's hard to shake it off. I bet they've budgeted at about 85k, and are pitching at 75k.

L.Jenkins

John_Mc wrote: »

Employers PRSI is 4% so that's 3k for a salary of 75k.

1.5k for Health Insurance + 3k for PRSI = 79.5k

The 220 days I used assumes annual leave, bank holidays and the odd sick day.

Unless there's a good pension contribution and/or other perks then the OP has a reasonable case for asking for more money in my opinion.

So the OP, given that information, wouldn't be unreasonable to request €80k+ per year, maybe even €85k per year as a minimum starting point.

syklops

Mrs OBumble wrote: »

I don't see it as that big a drop when you factor in the cost of paying employer PRSI and covering your own annual leave and training out of that 92k. Especially if it includes decent benefits as well as salary.

Thats assuming the employer is willing to cover the cost of all the training you deem necessary. When things get tight for a company the training budget is the first thing to go.

vandriver

John_Mc wrote: »

Employers PRSI is 4% so that's 3k for a salary of 75k.

1.5k for Health Insurance + 3k for PRSI = 79.5k

The 220 days I used assumes annual leave, bank holidays and the odd sick day.

Unless there's a good pension contribution and/or other perks then the OP has a reasonable case for asking for more money in my opinion.

Employers PRSI is 10.75%,employees is 4%

jos_kel

db wrote: »

It all comes down to the benefits. On top of the basic salary you should look for Health Insurance, Pension Contribution, Life Insurance and Bonus which should bring the total package to around €100K. You will also have minimum 4 weeks holiday included. Your contract rate for 48 weeks in a year pays you €100800.

I am permanent at around the same salary with the above benefits and there is no way I would switch to contract for €420 / day.

Thanks db, I believe the benefits are substantial, am going to read the official doc today. Just out of curiosity have you contracted before?

John_Mc

A word of caution on db's advice. 4 weeks holidays = 20 days each year which is the minimum by law. It does not take into account bank holidays or being sick so you shouldn't be using it as a baseline to work out your yearly salary on a daily rate.

jos_kel

Speaking to a colleague who was offered the same. He reckons it's too low given our skill set and contractor market rates. Decisions. Decisions.

syklops

jos_kel wrote: »

Thanks db, I believe the benefits are substantial, am going to read the official doc today. Just out of curiosity have you contracted before?

Also, if I were you, I wouldn't be including the bonus as a figure to help you make your decision. The bonus is a bonus and you should treat as such, because I guarantee you upper management treat it as such and in many private sector companies the chances of getting the bonus depend on the mood of the CEO and CFO on the morning of the meeting.

surpy

looking at it in reverse, I'm on just under 80k and would not go contracting for anything remotely like 92k pa.

jos_kel

surpy wrote: »

looking at it in reverse, I'm on just under 80k and would not go contracting for anything remotely like 92k pa.

Thanks surpy. Have you contracted before? If so your statement of not going contracting would be telling.

surpy

you're right, I haven't, but the point I'm making is still relevant, if you were in a fixed contract at the salary+package you are being offered, would you leave for the contract rate?

srsly78

syklops wrote: »

Do you get your expenses refunded? Travel, meals etc? You wont be getting those refunded as a permanent employee.

The Revenue doesn't think contractors are allowed those benefits either.

jos_kel

surpy wrote: »

you're right, I haven't, but the point I'm making is still relevant, if you were in a fixed contract at the salary+package you are being offered, would you leave for the contract rate?

That's the question I'm asking myself. Salary is only one factor though. Some people would never consider contracting regardless. I think it's actually a lifestyle choice above all else. You have more independence as a contractor which suits some more than others.
At the moment I'm leaning towards accepting the perm role. Can always go contracting again if I so desire?

jos_kel

srsly78 wrote: »

The Revenue doesn't think contractors are allowed those benefits either.

Yeah revenue have really clamped down on that.

SeanF

I'm in a similar position re contracting vs permanent. I've been contracting since 1999, but I've recently begun to think about going permanent. Does anyone know if you can keep your contracting company "on hold" so to speak, just in case you decide to go back contracting after a year or two?

srsly78

No you still have to file returns every year, even if the returns say 0 on them. Winding up a company is an involved process, need to put ads in the paper announcing closure and stuff like that.

Holiers

Don't forget that a permanent job usually covers sick leave including long term sick leave. Income protection to cover that for a contractor can be expensive. Also consider the Employer pension contribution.

surpy

jos_kel wrote: »

That's the question I'm asking myself. Salary is only one factor though. Some people would never consider contracting regardless. I think it's actually a lifestyle choice above all else. You have more independence as a contractor which suits some more than others.
At the moment I'm leaning towards accepting the perm role. Can always go contracting again if I so desire?

well, if you like contracting as a lifestyle choice, this isn't really a decision.
its comparing apples with oranges. but you can always go back to it in future, just keep up with the market expectations as much as possible.

if you are going on money in the bank, losing just 10k-ish off the gross salary to go permanent is a pretty good deal IMO.

some of the benefits that can easily equate to more than 10k monetary would include:
sick pay
long term illness insurance
life insurance
private pension
social welfare
health insurance
overtime / time in lieu
holidays
shares
car / mileage allowance
company discounts / events
company devices laptop / tablet / smartphone
paid phone bills / mobile / etc
bonus
access to training / certification
travel / expense allowances
flexible working arrangements

i never looked too much into contracting as the rates on offer wouldnt attract me so i dont know exactly how much the self-employed tax benefit is worth.
going on my own (1 module in college!) tax knowledge, its not as much as people would like to make out?

srsly78

Ehh many of those are contractor advantages... Holidays for example, contractors take as much as they want - just not paid is all :P As for "flexible working arrangements" - doesn't get more flexible than being a contractor.

Contractors also get much better travel/expense allowances, so good in fact that the Revenue is always cracking down on them! Can also provide yourself with decent mobile phone / laptop of your choice - not the rubbish companies give out.

Other points are common to both, overtime / time in lieu - lots of contractors get this as well. Also they get invited to company events along with everyone else, although these days many big companies require staff to pay into Sport&Social fund - whether they are permies or not.

One point is true - social welfare. But if you get made redundant from a "permanent" position this isn't much consolation is it!?

surpy

i suppose, its ultimate flexibility being able to just work to a deadline and then quit whenever you want and all that
i was listing it as a benefit that an employee can negotiate. you dont need to be chained to a desk in an office if you dont want to, and that can be worth cash if you are a commuter etc.

in regards travel, is that not included in your daily rate? you pay and then claim back as tax deduction?

srsly78

It depends, you are not allowed to claim travel to your "normal place of work". This is the cause of much debate. Pretty much everyone can avail of stuff like the taxsaver.com scheme tho.

Much of the stuff you listed is subject to benefit in kind, and as such is not an allowable expense - rather it gets taxed just like a bonus payment.

surpy

i mean international travel, I'm abroad 3-4 times per year at summits, trainings, etc and the company pays for it.
how would that work for a contractor?

srsly78

Contractors can claim the flat-rate civil service subsistence amounts, e190 per overnight in London for example. This is supposed to cover food+accomodation. If you can sort out somewhere to stay for cheap then this is money in your pocket.

http://www.revenue.ie/en/tax/it/leaflets/it54.html

surpy

I wasn't aware of this, you bill the company for that amount and its standard across the industry or varies company to company ?

srsly78

You can either reimburse yourself the amount shown on receipts, or you can claim the flat-rate allowance. This refers to the contractor dealing with their own limited company. Usually there would be an increased daily rate payable from the customer for work abroad.

Permies can also in theory claim the same, but their companies won't usually let them use the flat-rate. So yes it's standard and codified in law.

Flat-rate simplifies administration, don't need to keep all receipts - just need proof of the travel. Similar arrangements exist in many countries, I guess this is why conferences held on tropical islands are popular

surpy

so the 190 is just "tax deductible" rather than an amount paid. depending on whether travel is a big part of the job, an employee would seem to get a better deal here, being paid normal salary and given a corporate card for flights, accomodation and food etc?

also, just saw your edit on the earlier reply, so didnt want to ignore them

Can also provide yourself with decent mobile phone / laptop of your choice - not the rubbish companies give out.

true, i guess that depends on the company

Other points are common to both, overtime / time in lieu - lots of contractors get this as well. Also they get invited to company events along with everyone else, although these days many big companies require staff to pay into Sport&Social fund - whether they are permies or not.

i wasnt aware of that, had assumed contractors were just given set amounts of work. would it be common to get overtime? what do they do if there is a hold up in a project, do they cut your hours? guess they cant just move you to another project the way internal staff would?

One point is true - social welfare. But if you get made redundant from a "permanent" position this isn't much consolation is it!?

[/QUOTE]
better than nothing, i guess? ive heard lots of self employed bemoan the lack of social welfare so it must be worth something. ability to negotiate a redundancy package or make an internal move if you are appropriately skilled also come into it

srsly78

Strangely contractors are entitled to redundancy too, this is why many companies terminate them before they hit 2 years! This is another controversial area. Working for the same customer for so long can be regarded as disguised employment in theory - could go to court.

Contractors usually have to fill in timesheets with their hours, whether you can do extra hours or not depends on contract. There is no unpaid overtime that's for sure.

Social welfare only lasts for 9 months now, then it's on to the same means-tested payment that even self-employed people can get.

Mrs OBumble

srsly78 wrote: »

Ehh many of those are contractor advantages... Holidays for example, contractors take as much as they want - just not paid is all :P As for "flexible working arrangements" - doesn't get more flexible than being a contractor.

Maybe you've had it lucky.

But most contractors I work with take less holidays, because they're scared that they might not find work after this contract ends - or that if they're seen as not interested, someone else will get the next contract.

On the other hand, as an employee my manager is required to make sure I take a minimum number of days annual leave each year, required to give me two weeks at a stretch if I want it, and usually willing to give me extra unpaid leave as well.

Mrs OBumble

surpy wrote: »

i wasnt aware of that, had assumed contractors were just given set amounts of work. would it be common to get overtime?

It depends.

Some daily-rate contractors are very strict about working hard for 8 hours a day, and then stopping. To get a longer day out of them, ever, you have to put more money in the meter (so to speak).

Others take a more holistic view, averaging their daily hours over their invoice period, and often doing some unpaid hours.

My observation is that the latter group are more likely to have their contracts renewed.

(And yes - this is based on recent experience with a group of DRCs in a multi-national here in Ireland.)

surpy wrote: »

what do they do if there is a hold up in a project, do they cut your hours? guess they cant just move you to another project the way internal staff would?

It depends on the terms of your contract, of course, but usually there is a "either side can cancel with one week's notice" clause.

And it's not only holdups: in multi-nationals, internal budget cuts can see contractors and agency workers gone within days.

surpy wrote: »

...better than nothing, i guess? ive heard lots of self employed bemoan the lack of social welfare so it must be worth something. ability to negotiate a redundancy package or make an internal move if you are appropriately skilled also come into it

To clarify re welfare:

If a contractor is working as an employee of an umbrella company, then they (the contractor) has the cost of "annual leave" and class A employer PRSI take out by the umbrella company. So each month they get

the amount they invoiced
MINUS their personal tax (PAYE, PRSI, USC)
MINUS their employer tax (PRSI at 10 or 11%)
MINUS the agency fee

(and possibly minus VAT ... I'm not quite sure how this works).
And because they've been working as an employee, if laid off they qualify for Job Seeker's Benefit (assuming they meet various other rules too) - and this is an entitlement that lasts for 9 months.

(I have no idea how the umbrella companies handle the redundancy situation - because there clearly isn't cash to pay for it. Possibly they put their employees on fixed term contracts, and after the 4th year (when a CID becomes required) will no longer have you on their books.)


But if the contractor is truly self employed, they don't qualify for Job Seeker's Benefit. They can apply for Job Seeker's Allowance. This is means tested, not an entitlement, and is based, on various factors including how much you earned last year, how much you have in cash, and a calculated "cash equivalent" value of assets (with a few execptions like your home if you live in it, and your car). Most contractors I know would not qualify initially, anyway, because they're not going to let their personal cash-reserve get that low.

surpy

very interesting post there.

they're not going to let their personal cash-reserve get that low

info i have been given in the past, to go "full contractor" route, suggests a 30-40% increase in the base salary of a permanent employee (at a minimum) in order to have the same quality of life and level of financial security.

this is the basis for my initial comment that, would you have any thoughts on that?

Mrs OBumble

I've been told roughly 50% - to cover the risk of being months out of work between contracts. And make sure you have a decent whack of savings in the bank (say six months worth of living expenses - at a standard of living that lets you be a credible candidate for contractor roles), in case your very first contract goes belly-up.

Also make sure that during the first year you are putting cash aside for the provisional tax payment that will be due: having to pay last year's actual tax and this year's provisional all at once can be crippling unless it's planned for. (If your accountant doesn't help you plan for this - fire them and get a better one.)

srsly78

Most IT contractors operate through a limited company, and thus operate PAYE. The provisional tax thing is for sole traders.

Contractors is a very broad term of course, at the lower-end it is pure exploitation. At the higher end it is fatcats in RTE.

Elessar

Keep in mind a lot of companies "expect" you to put in overtime over your base hours, often unpaid. At a salary like that I'd say they would definitely expect it.

I know in the company I work for (perm), it's seen as standard to work late, and weekends, in some areas. All of which is unpaid and no time in lieu is given. An IT guy here last year gave his manager a bill for overtime he had to do on a weekend and was laughed at (he left shortly after!). People do it however, and it's seen as customary! Whereas for a contractor (we have a lot, coincidentally), they are paid by the hour/day and leave when they are not paid.

It's very tempting for me (only starting in IT) to move into contracting, but I can see each has their benefits. You can always do it for the year and leave if it's not for you.

NGC999888

srsly78 wrote: »

Contractors can claim the flat-rate civil service subsistence amounts, e190 per overnight in London for example. This is supposed to cover food+accomodation. If you can sort out somewhere to stay for cheap then this is money in your pocket.

revenue.ie/en/tax/it/leaflets/it54.html

This is brilliant if you get yourself a contract in London (very easily done) and are based in Ireland.
Fly over Monday morning and back on Friday.
Much higher contract rates in London than Dublin (Double easily), and a nice wedge in your pocket too in expenses. And sometimes when you are coming to the end of a contract they will ask you to renew and offer you the sweetener that you can work from home in Dublin say every second week, so now you are only away 4 nights in 14 and getting paid double what you would get here.

Elessar

Sorry to bump this - just wondering what the OP did in the end?

jos_kel

Elessar wrote: »

Sorry to bump this - just wondering what the OP did in the end?

I went permanent after. I'm always of the opinion that the difference between perm and contract is overstated. It's more of a lifestyle choice and what suits at any given time.