Hi folks, for someone who hasn't worked as a contractor in IT/Soft Dev what caveats one needs to be fully aware when negotiating the salary at the job entry? If one asked for X amount permanently and the company returns with rather a contract offer, how much more should be added to the Contract to level up the permanent position? Is there a rule of thumb in this ...
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Contract VS permanent position
- Thread starter sonxEr77
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Neilhopwood
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I've been a contractor in IT now for some 6 years. Bottom line is price up your health care, pension, bearing in mind any children or spouse and factor this into your rate calculation.
Secondly you should see what your possible position market hourly rate is and this will give you a good idea as to if its worth going staff or contract.
In SA if you contract to only one customer then for all intent purposes they are seen as your employer and so will tax you at source. The nice thing is the tax from your pension, health care etc. is all deductible so you get a nice fat cheque back from SARS once a year.
Prior to this I have been staff all over the place for years and years. Contract suits me much better.
Secondly you should see what your possible position market hourly rate is and this will give you a good idea as to if its worth going staff or contract.
In SA if you contract to only one customer then for all intent purposes they are seen as your employer and so will tax you at source. The nice thing is the tax from your pension, health care etc. is all deductible so you get a nice fat cheque back from SARS once a year.
Prior to this I have been staff all over the place for years and years. Contract suits me much better.
Roo!
Expert Member
General rule of thumb is perm c2c + 20%, which covers things like leave, sick leave, pension contribution, medical etc.
BobsLawnService
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I disagree. Since contracting carries a much higher risk of not being employed for periods between contracts you should ask for at least 75% more than the permanent offer to build up savings to tide you over between contracts.
In the case of contracting you carry all the risk and you need to be renumerated to reflect that.
Also negatiate a termination clause so that you can pull out of the contract for whatever reason. Most companies will negotiate this but you will need to pay them a sum to terminate the contract.
In the case of contracting you carry all the risk and you need to be renumerated to reflect that.
Also negatiate a termination clause so that you can pull out of the contract for whatever reason. Most companies will negotiate this but you will need to pay them a sum to terminate the contract.
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Last thing that wasn't mention:
When you start out as a developer your salary will climb very quickly. Starting at around R20k p/m for a University grad going up to around R30-40k p/m after the first 1-2 years. Thereafter the salary will rise to about ~700k p/y after the first 5 years of working. If you take contracts from the US your salary will generally be better up to around R1m p/y. Mainly because they pay in dollars/euro/pounds/etc. and they pay similar to what people earn there but our living costs are lower and the rand is weak.
That is for a Java developer.
If you are employed permanent and work at the same company don't except those kinds of salary increases. A contractor should always earn more because of the increased risk. Every time the contract expires it is also renegotiated VS permanent where you get an increase based on what everyone else got + performance (eg. 4-10%).
Some companies, I won't name their names here because I know people there, hire almost exclusively young people. Those companies generally recruit actively at Universities and when you walk into the work place younger people outnumber the older people. The worst kind of warning sign IMHO is that you work with 98%+ young males only. That means not only do the older people leave, they probably work overtime regularly. Women, especially older women are much less willing to work overtime. Most of these companies will also not pay overtime but expect you to work overtime for production deployments.
It is a fact, in IT you work overtime from time to time. Usually when you deploy to production. You generally shouldn't need to work overtime to meet deadlines.
Their retention rate is fairly low because as soon as the worker realises that he/she is being exploited they move on. Generally because the company is not willing to go higher on the salary.
When you start out as a developer your salary will climb very quickly. Starting at around R20k p/m for a University grad going up to around R30-40k p/m after the first 1-2 years. Thereafter the salary will rise to about ~700k p/y after the first 5 years of working. If you take contracts from the US your salary will generally be better up to around R1m p/y. Mainly because they pay in dollars/euro/pounds/etc. and they pay similar to what people earn there but our living costs are lower and the rand is weak.
That is for a Java developer.
If you are employed permanent and work at the same company don't except those kinds of salary increases. A contractor should always earn more because of the increased risk. Every time the contract expires it is also renegotiated VS permanent where you get an increase based on what everyone else got + performance (eg. 4-10%).
Some companies, I won't name their names here because I know people there, hire almost exclusively young people. Those companies generally recruit actively at Universities and when you walk into the work place younger people outnumber the older people. The worst kind of warning sign IMHO is that you work with 98%+ young males only. That means not only do the older people leave, they probably work overtime regularly. Women, especially older women are much less willing to work overtime. Most of these companies will also not pay overtime but expect you to work overtime for production deployments.
It is a fact, in IT you work overtime from time to time. Usually when you deploy to production. You generally shouldn't need to work overtime to meet deadlines.
Their retention rate is fairly low because as soon as the worker realises that he/she is being exploited they move on. Generally because the company is not willing to go higher on the salary.
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I know 2 guys that were recently offered R1m p/y for US contracts, that was before the current rand weakening. The companies weren't willing to go higher but the salaries were around $140-150k p/y IIRC.
Or do you mean the SA salaries?
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That's what i thought R40k sounds like a 4 years exp rather
Ah ok, may be I have it too high.
I know 2 guys from University who have ~1.5 years of exp. both were offered around R35-40K p/m. That was in the Jhb area.
Based it on that because they are the only 2 guys I know with that amount of exp. that recently changed jobs.
There will always be some people earning above the average. Thats why its not correct to base estimates of what someone can earn on the few highly paid individuals you may know. Why a few people are paid more than others depends on their circumstances and the organisation they work in.
When I started in software dev, I moved from the business to IT in the same company. I started on a high salary even though I had no experience and was fresh out of Oracle University courses. The reason being my knowledge of the business and the IT people knew me well, therefore my starting salary in IT is not representative and my salary after 2 years is also not representative. This was actually a concern for me as it meant that it was difficult for me to leave for another IT job, as highly unlikely anyone else would match my salary based on my experience.
EDIT: For the OP. Contracting is high risk, especially in a difficult economic climate. If you have a family to support I wouldnt recommend it if you could get a perm position instead.
When I started in software dev, I moved from the business to IT in the same company. I started on a high salary even though I had no experience and was fresh out of Oracle University courses. The reason being my knowledge of the business and the IT people knew me well, therefore my starting salary in IT is not representative and my salary after 2 years is also not representative. This was actually a concern for me as it meant that it was difficult for me to leave for another IT job, as highly unlikely anyone else would match my salary based on my experience.
EDIT: For the OP. Contracting is high risk, especially in a difficult economic climate. If you have a family to support I wouldnt recommend it if you could get a perm position instead.
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Back on the topic
....by 75%, did you mean 75% more than your ctc?If you are contracting directly with the employer, do they pay tax before paying you or you have to do it yourself?
Back on the topic
If you are contracting directly with the employer, do they pay tax before paying you or you have to do it yourself?
If you only work for one company (75% of income from on source) then they have to subtract tax. If you have more than one source of income and none is more than 75% then you can give them a sworn affidavite (hope spelled correct) and they will not subtract tax. Then you have to register as a provisional tax payer and pay provisional tax 2 a year. Be sure you pay it as the penalties are severe. I learned the hard (expensive) way.
DominionZA
Executive Member
I registered a CC to contract through. Been using it since 2004. I pay an accountant R1k a month to manage the finances. Also registered for VAT.
I currently have 4 contracts, and contract out excess work to mates that also contract.
It beats the cr@p out of perm employment. Could never go back to that way of doing things.
I currently have 4 contracts, and contract out excess work to mates that also contract.
It beats the cr@p out of perm employment. Could never go back to that way of doing things.