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  • HR content: How to pro-rata annual salary & benefits to daily consultancy rate?
  • marvinpines
    Free Member

    I’m being ‘encouraged’ to leave my present job but the company want to retain me as a part-time consultant. As there’s sweet FA else available in my noble profession and I want to keep in touch, I’m happy to do so. Any advice on how to factor in holidays, sick pay, pension, death in service, income replacement etc welcome. Not been self employed for 25 years +…

    gusamc
    Free Member

    Charge what the market will bear -ie as much as you can get.

    Use jobserve/various other job sites to see what daily rate for your skillset is. (*short term/infrequent rates are usually higher than longer term fixed period contacts)

    You could offer them a deal for X days a year minimum at Y per day. (and Z more for each day over ) – security of income is a nice thing……

    Read up on Limited Company vs Umbrella Company (*I’d suggest ltd is better in your case – limited liability – but yoi’ll still need prof etc indemnity etc etc insurance).

    (IMHO) It’s difficult do do a straight comparison, as the world of employee is significantly different to Ltd (ltd has much more tax flexibility). As a VERY VERY VERY VERY rough guide in IT((*well certain parts) 400pdish (over 3 month contract) is **about 35-55k salary…… so call 45 as a ready reckoner.

    **EDIT – I’d suggest getting a SIGNED, contract before you leave if possible….

    allthepies
    Free Member

    Read up on IR35 and understand the implications for how you are engaged by your current employer after you’ve left.

    earbyphil
    Free Member

    Just to emphasis, do read up on IR35 and don’t forget you old employer is saving on not paying NI, holiday pay etc, but have to.

    poly
    Free Member

    The cost of a contractor or consultant to do your job bears no resemblance to the cost of being in your job and having all the benefits of being a permanent employee.

    Presumably you are smart enough to be able to work out how many hours you do a year (typically would be just under 2000 hrs a year), and therefore devise an hourly rate based on that. HOWEVER that is not the right way to work out your rate, but its probably what your HR person is going to compare it to. I would suggest as a quick guess you need to double your rate.

    The right way to do it would be work out:

    – How much you want to earn a year
    – How much you want to put into a pension (sensible people suggest 10% of salary is the minimum)
    – How much sickness type insurance might cost (I think this is dependent on age, health, duration, time before it kicks in, how long it lasts etc) – get a quote.
    – Cost of insurance
    – Cost of resources you will need to provide (e.g. laptops etc).
    – Anything else you can think of.

    Now divide that by the number of hours you expect to work each year, if you are looking at working for multiple people as a consultant assume that no more than 80% of your work time is actually earning and 20% is finding new business, issuing invoices etc. Short term projects / contracts need to charge more than long term reasonably secure work.

    Now reverse the calculation for the minimum number of hours they are promising and see if it gives you enough income. Obviously they aren’t suggesting that you go it alone for your benefit – so it will be to let them cut hours / staff at short notice.

    When I was in your shoes, I had some projects / people I liked working for who I would half my rate and work on some sort of deliverable / bonus / sweat equity / success fee basis with and some who I knew would try and screw everything possible out of me and more, or where the work was tedious or tortuous and I would charge them 50% extra.

    glasgowdan
    Free Member

    Don’t you know what your charge-out rate was when employed? The company must have used it regularly to bill your time to clients. I would be aiming for similar to that, IF everything else made sense.

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