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, 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

These are discussed in more detail in our article 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.

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, I suspect you would rather stay contracting and are thinking of taking the position to mitigate the risk of being out of work in the future.

If this is the case, I suggest you do the following:

  1. Put yourself on the market and try and get another contract offer. [Do not reveal to agents that you have another offer on the table, otherwise you will not find any interviews.]
  2. If you get another offer then you can use that as a bargaining tool with the existing employer 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. Bear in mind that it is August now, so in 6 months time it will be February and a hotter time of the year for the contract market.

There is one other thing to bear in mind, and that is IR35. If you are currently in IR35 and get a contract outside of IR35 then you will get a significant rise in income, without raising your rate.

Published: Monday, May 15, 2006

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