Ask HN: Leaving company but offered a contract role. How much to charge? | Hacker News Reader

Ask HN: Leaving company but offered a contract role. How much to charge?

2 pointsThroaway20230702 comments

I am looking to leave my current role to start my own business. I anticipate this taking a bit more time than my notice period, so I need to earn some extra money, and my current company have offered the ability to contract with them. No one has thrown around any numbers yet but I wanted to build an idea of what was good.

I am currently the head of engineering for a small start up of about 25 people based in London. I joined a few years ago as the only backend developer and steadily built up the team, so I know the system inside out, especially from the backend side. I've got a lot of domain knowledge and specific company knowledge, and am probably one of the most key people in the technical team (for now at least). I'm still hands on and so am still a productive developer.

I've been offered £700/day a couple of years ago from other companies but because of the value I can add, I imagined it would be a lot more than a normal contract rate.

Has anyone had any experience with this before? What would you suggest as a starting point for discussions?

Take your current yearly salary, add 10% for raise.

Take new salary and add business overhead costs of taxes, business insurance, benefits... add this to your salary, this is your yearly loaded costs.

Take your yearly loaded costs and divide by how many weeks you want to work... for example, you want to take 6 weeks off per year, then subtract that from the weeks in a year. This is your weeks worked.

For example(with made up numbers):

Let's say you make 100k/year, want to take 6 weeks off, local business taxes are 25% and insurance is 1k.

  ((yearly_salary * taxes) + fixed_costs) / weeks_worked / days_in_week = minimum_day_rate

Also, Risk.

If you are an employee and you unintentionally screw something up then you may get fired.

As a contractor, if you type a command in the wrong ssh session and take down the production system you may get sued, at which point it really matters if you are working through a limited liability company or you are personally invoicing them.

You have to price in the risk.

A UK limited company involves a significant amount of paperwork and administration. You can do it yourself or pay an accountant thousands a year.

There is monthly and yearly paperwork. There is the pain of the "making tax digital" plan to make companies submit accounts only electronically using accounting software.

A thing that sometimes costs people a pile of money is that VAT is on a rolling year. You can be under the VAT limit in your tax years, but if you invoice over 85K at the end of one tax year and the start of another then they can say "Gotcha! you must pay us 20% of your invoices and a big fine right now!"

There is also IR35. There is some risk of the government saying that you are a disguised employee and demanding a load of extra tax. It depends on things like does the contract say that your company can send anyone to do the work or does it have to be you.

Reply on news.ycombinator.com