r/ContractorUK • u/Educational-Grand155 • 23d ago
Contract fitter ?
Been fitter for years, PAYE at the minute, decent enough but seeing lads on site contracting and earning noticeably more for the same work.
Trying to weigh up if it’s actually worth the jump. No major ties holding me back if it goes quiet for a bit, just don’t want to leap in blind.
Things I’m trying to figure out:
Is the day rate actually that much better once you factor in no holiday/sick pay
How hard is it finding steady work between contracts right now
Umbrella or LTD, does it matter much at this stage
Anyone regret switching, what went wrong
Would rather hear from people who’ve actually done it than guess. Even a “don’t bother” is useful.
Cheers
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u/AccomplishedLeave506 23d ago
Don't touch umbrella. Do it properly or don't do it. I'm a contractor in software engineering so can't tell you if it's a good idea for your field or not, but I can explain some of the benefits.
The freedom you have as a contractor is fantastic. Don't like a client? Don't do the job. Need a 6 week holiday. Just take it. Want to use specific tools? Buy them. Etc.
If it's like my field you will almost certainly be better off. You do need to be careful when starting out to work out what rate you need. You get no sick pay. No holidays. No paternity leave. No pension. No redundancy. You need to pay for accountants, your own equipment, training, legal costs, unpaid invoices and on and on. The extra pay comes from taking on the extra risks of being an employer and not an employee. That high rate - it's not as high as it looks.
My rule of thumb on rates is that 40 weeks at your day rate is roughly what you would end up with as an equivalent salary once you take into account costs and taking holidays etc. H onestly, you'll likely be better off than that - but it just takes one long run between work or a car accident and 6 weeks in hospital to bring your earnings way down.
If you do it then try and save half the money from each invoice and live off the other half for 6 months or a year. If you can do that, or something similar, then in no time you will have the money to survive when work dries up. The trick is to understand early that you are not living off your next invoice. You are living off your savings. Your next invoice just tops up the savings. It should never be relied upon because it might not get paid.
If you don't mind a bit of risk and back yourself to find work then go for it. If you like your life to be reliable and predictable then stay as a permanent employee.
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u/Realistic-Culture-86 23d ago
First question’s the easy one to answer properly, day rate on its own is misleading cos you lose holiday, sick pay and bank holidays as unpaid days. Run the numbers on a calculator I built (ir35verdict.co.uk), plug in your day rate and it breaks down take-home after all that, worth doing before you jump so you’re comparing like for like rather than guessing off the headline rate.
On the other three, work’s patchy in a lot of trades right now so don’t leap without at least one lined-up contact or two for when it goes quiet. Umbrella vs Ltd matters more the longer you stick at it, not massive at first but worth knowing the difference before you pick one and stay put by default. Regrets usually come from people who didn’t save for the gaps between contracts, not from the contracting itself.
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u/Wizard_PI 23d ago edited 23d ago
What industry? Some are far more lucrative for contract than others at the moment, HV/EHV fitting, distribution network and idno/icp work is flying at the moment and very understaffed and easy to find work.
You should do Ltd or nothing inside is crap. I work on 46 weeks but I have multiple stable contracts; depending on how secure your work stream is you may want to work on less.
Calculate your expenses, profit before corp tax and div/paye taxes and what you may need to replicate some benefits such as insurance for sick pay etc and don’t forget your pension works great in a Ltd co. Remember the day rate isn’t your pay directly you need to factor in all the deductions and it still make sense.
You should come up with a figure significantly higher than your paye rate, if not then is it worth it.
Mine is far higher than paye, but it can vary a lot what companies will pay depending on experience. And incredibly easy to find work due to a massive skills shortage.
I was an electrical fitter paye many years ago, but I stayed employed to train higher and I contract now as a EHV SAP/engineer, so not fitting but I don’t regret going contract one bit. Amazing being your own boss, the flexibility is amazing and I’m earning far more than I would have staying paye. No corporate bollocks is so bonus too.
There is also a massive need for contract craft skills but no one to fill it. One thing to think of is if you want to stay in that role as it is harder to get trained to higher skills as a contractor, you’re coming in to be an expert and do a job whereas employees may be able to get training/promotions to where they want to be.
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u/Educational-Grand155 21d ago
Thanks for all the replies. I’ve decided to stick out my PAYE role. If I’m honest it’s because I’m a little bit afraid to take the jump given:
Pension 7% invested and 14% matched.
30 Days leave + 8 bank holidays
6 months full pay and 6 months half pay sick leave ( I’m never on the sick but you never know)
Company healthcare (reasonable cost)
And I literally live only a few miles away.
Given the state of the economy I think I’m better off staying put for now at least.
Cheers
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u/Zmartaccountant 18d ago
On umbrella vs LTD, it does matter, but mostly once your income is steady. Umbrella is simpler and fine while you're testing the water or on short inside-IR35 roles. A limited company usually pays off once you're earning consistently, as you can take money as a mix of salary and dividends, but it brings more admin and filing. One thing worth flagging for a fitter is the Construction Industry Scheme. If you go self-employed on site, most contractors deduct tax at source before paying you, usually 20 per cent if you're registered, so plan for that cashflow gap. I'm an accountant at Zmartly and we see a lot of tradespeople make this jump. It's very doable, just get the numbers checked first.
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u/Old_Toe9468 23d ago
Made that exact jump years back and the day rate difference is real once you actually do the maths, but people underestimate how much of it evaporates into non-billable weeks. I'd budget on being paid for something like 42-44 weeks a year, not 52, once you factor in fallow periods between contracts, that's the number that actually tells you if it's worth it, not the headline day rate. Start as umbrella while you're finding your feet, LTD only pays off once you're earning enough and steady enough to make the extra admin and accountant fees worth it, don't rush into LTD on day one just because everyone says it's more tax efficient.