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Contractor doctor: is it worth going permanent after contracting?

Dear Contractor Doctor

I've been contracting with the same client for around 15months. I came in direct so I started on a very low rate, the rate is still very low compared to market rates. Now that my renewal is up they have offered me a permanent position, which is a 35% reduction in income. Is it worth sticking with contracting, for another 6 months and possibly asking for a higher rate or shall I accept the permanent offer?

Thanks in advance for your advice.

[Name supplied]

Contractor Doctor says:

Common reasons for contractors going back to permanent work are:

  • Bored with doing the same type of work
  • Tired with all the constant reading/learning outside of work.
  • Desire to settle in one location
  • A lull in the market and more secure work being attractive
  • Changes in personal circumstances requiring more secure work
  • A desire to move up the ladder into management, which normally requires being employed
  • Potential advantages associated with company life cover

These are explored in more detail in our guide advice on going back from contracting to permanent

Financial issues more commonly come into the decision when justifying the move back to permanent - i.e. if the money is about the same as contracting. You will of course get other perks, including some rights to sick pay, and so on, but they aren't that substantial. The main rights as an employee are the protections related to the secureness of the work - employees cannot as easily be terminated with good reason and due process.

If you are interested in going back to permanent for the reasons above and are not concerned about the drop in pay (taking into account other benefits) then perhaps you should take this option.

However, if you would rather stay contracting and perhaps taking the position to mitigate the risk of being out of work in the future, then you could consider the following:

  1. Put yourself on the market and try and get another contract offer.
  2. If you get another offer then you can use that as a bargaining tool with the existing client to stay with them for another 6 months contract. You are then in a win - win situation.
  3. If you do not get another offer and you have not got close to getting one then it might be worth taking the permanent position. You could try and hold out for another 6 month contract and stay in contract.

And of course, the other aspect to consider is IR35. If you are currently inside IR35 and can get a contract outside of IR35 then you will achieve a significant rise in take home pay, without raising your rate.

Good luck with your contracting!

Updated: 17 April 2018

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