When I wrote “A Career with Microsoft Power BI” I gave some examples working out the difference between Inside IR35 Contracts and Permanent roles, and provided a link to our Take Home Calculator (UK), however I didn’t go into the details.
When I work with people during life coaching sessions, things are easier to explain, as I can simply ask you about your reason for asking the question, goals, and unique circumstances which all take part in getting a simple and quick answer, however I don’t have this information so let me try to answer the question by covering all scenarios I can think off.
Inside IR35 day rate vs permanent salary
Below is a table that gives you 3 scenarios (1st column) and provides you with a summary for day rate, take home, salary (no benefits) and salary (+15% benefits).
The 3 scenarios are generalized and include 3 factors: bench time (time between contracts), claimable expenses and non claimable expenses.
Before I go into the details to explain each option, please have a look at the table below:
The column Day Rate should be self-explanatory as it’s simply the rate you take or plan to take as a contractor, take home simply gives you amount of money you get after expenses (including non claimable expenses, as these can be high).
Salary (no benefits) simply states how much salary you need to earn to have the same take home and salary (+15% benefits) shows that with this salary + 15% of benefits (bonus, pension etc.) you will get equivalent of take home.
For contracts we have bench time which is time between contracts, and it’s worth being realistic here. In our first scenario we have no bench time (240 days a year) which is ok for very long term contracts, and in 2nd and 3rd scenario we put 1 month bench time (that excludes holidays, off-sick) so essentially 220 days a year.
We put claimable expenses as just 1k (accounting etc.) and this usually is not much higher for Inside IR35 contracts as typically the costs are low.
We also have non-claimable expenses and this can be a major factor for Inside IR35 contract as you cannot claim anything you want, and may be even restricted on travel related expenses which can be very high and therefore make a big difference.
You can see the 10k non-claimable expenses for 300/day makes salary with 15% benefits and 1 month bench time only £31,300 permanent equivalent.
Is Inside IR35 better than permanent employee
As you can see there are a few different factors which can make a big difference, so saying this may be better or worse in your case it’s difficult, without knowing your exact circumstances and preferences, this is much easier to work out during my life coaching sessions.
You can try out different scenarios using our Take Home Calculator (UK)
In my book “A Career with Microsoft Power BI” I also show how to identify demand for contracts in different regions and this is also a major factor when considering contracts, as bench time can vary quite a bit.
About me: Owner of a Power BI consulting business (Katie & Emil LTD) specializing in “Flexi Team” remote Power BI longer term contracts; globally (£270+/day) & in the UK (£360+/day) (LinkedIn, Website).