Can you keep a secret? I need to share something with you that might land me in a bit of bother with my employer. It is this: I’d like to be a consultant. Again.
I might work as Director of Bids for the UK’s second largest defence contractor, have circa 130 people working in my teams and manage an eight-figure budget, but seniority isn’t everything. I don’t earn nearly as much as you might think. In fact, my contract Bid Co-ordinators earn more in a day than me. Hardly fair, is it, given that they are the most junior people in my teams? Actually, it’s nothing to do with fairness; it’s about being smart.
I’d like you to think that I’m smart, given that I’m completing a doctorate in my spare time, but you and I know that I could be much smarter – and richer – if only I was braver. Taking the leap of faith into the contracting market would see me comfortably earning more than £1,000 a day and paying only 20% tax. I’ve done it before, when I worked as a consultant, but while that life pleased my bank manager and inflated my ego, it caused all manner of problems at home. Why? Because while some people seek riches and status, others prefer a quiet, easy, secure life.
The cashflow issues associated with providing consultancy and contract services can prove tricky, with some corporate clients insisting on six-month payment terms. This is no use when the ‘rainy day fund’ is low and bills still need to be paid. My time as a consultant proved too much for my wife to bear, given that we were in the process of buying a house and that I was the main earner, so I had to cut short my consultancy career to save my marriage. After 12 months of glamorous jet-setting and working with the smartest and nicest people of my career, I had to jack it all in and get a regular job. How unexpectedly unexciting, unchallenging, stable, slow and mind-numbingly uninteresting. I felt like a racehorse chewing on last year’s hay.
Of course, it’s not all about money, or status, or the opportunity to make a difference on a vast scale, or to know that I’m correctly valued in the workplace (am I selling it to you?). It’s about doing what’s right for us and those at home. And, of course, regular employment encourages and enables levels of laziness that cannot be accommodated when employed by the day. My earnings are not linked to my output. I simply work through my job list and, so long as my employer is happy, collect my salary and bonus package. What a nice, safe, musky mouthful.
And I might have missed the goldrush, too. Things will change in April next year with the enforcement of IR35 tax rules. No longer will consultants or contractors be able to work for a single agency or client and still claim the corporation tax benefits. Instead, the agency or client will be obliged to take the tax and national insurance payment as PAYE, effectively reducing the contractors’ earnings to reflect the same 40-50% tax burden as others in their salary bracket. Will those who are currently contracting take the hit on their earnings? I doubt it. There will inevitably be ways around the ruling, or day rates will be increased by 50% to cover the difference. But would you, as a hiring manager like me, accept paying nearly £200k a year for a Bid Co-ordinator? Me neither. It might just see the collapse of the contractor market and a return to traditional employment.
Make hay while the sun shines. Who knows, you might be eating it next year.
This article was written by Nigel Hudson.