Comparison of Total Remuneration Package

focus123 on 11/10/2024 - 10:30
Last edited 11/10/2024 - 12:50

Hi All,
One of my friends (A) is contracting in IT and he gets 90 dollars per hour including super and works 40hr weeks.
Another friend (B) is in a permanent full-time job and works 36.75 hours a week. he gets 122k per year plus 17% super and he is eligible for 6 weeks of annual leave and 2 weeks sick personal leave.

Friend A says his job is better because he gets a higher dollar amount yearly.
Friend B says his job is better because he works less hours per week and have leave and higher superannuation.

For me, they both look to be around the same hourly benefit (considering A is working the same number of weeks as B).

Does anyone have an idea if my calculation is correct or wrong (excluding 8 weeks from the contractor work when calculating the hourly benefit)?

Thanks in advance.

Financial

Comments

  • Paul Atreides on 11/10/2024 - 10:38

    annual leave inclusive of public holidays?

    • focus123 on 11/10/2024 - 10:51

      No, 6 weeks of annual leave is separate from PHs

  • holdenmg on 11/10/2024 - 10:39
    +7

    The answer is it doesn't impact on the Space-Time Continuum.

    They are both correct.

  • singlemalt72 on 11/10/2024 - 10:48
    +12

    Friend A has higher earning potential depending on how much vacation time and sick time he uses - even using 6 weeks leave and 2 weeks of sick leave p.a. he is at 904044 weeks = $158,400 of course he can take more or less leave and change this - also there are public holidays he is not paid for if not working them

    Friend B is Earning $122,000 *1.17 = $142,740 - you could calculate out that he has more personal time working a 36.75 hour week for work/life balance - approx 140 hrs a year (worth $12,600 at friend A's rate)

    There could be other benefits B has that A has not - Leave loading, parental leave, access to long service leave, study leave, termination and redundancy pay entitlements, greater job security and others.

    • focus123 on 11/10/2024 - 12:57
      +1

      Very few in IT stay in a single company to get the benefits of LS leave.
      I know a guy who accumulated so much LS leave and then he went on a 3 month holiday and after he came back he was made redundant.
      There was another guy who spent about 20 years in the same company in varying roles and then got redundant in a restructuring.

      • trapper on 11/10/2024 - 13:30
        +11

        I know a guy who accumulated so much LS leave and then he went on a 3 month holiday and after he came back he was made redundant.
        There was another guy who spent about 20 years in the same company in varying roles and then got redundant in a restructuring.

        Both of those are wins.

        Being made redundant near or at the max redundancy pay out is as good as it gets, this is ideal really.

        Then start building it up again at the new job, hopefully lining up another big payout in ~10 years.

        • onetwothreefour on 11/10/2024 - 13:46

          I would love to be made redundant, been at my job over 10 years so it would be a nice payout but it's not going to happen.

          • justworld on 11/10/2024 - 13:58
            -4

            @onetwothreefour: Only happens if you're shit. The good ones get kept on.

            • onetwothreefour on 11/10/2024 - 14:21
              +2

              @justworld: I am living proof that's not true haha

            • try2bhelpful on 11/10/2024 - 16:30
              +2

              @justworld: That is rubbish. When companies decide to outsource functionality then you get mass redundancies occurring. Also manager’s will often give redundancies to people who put their hands up because there won’t be a fight.

            • arkie0 on 11/10/2024 - 18:36

              @justworld: That's not true

              Sometimes we payout the person who is on the higher pay for a similar job.

              Sometimes we just get payout of the newest person.

      • gromit on 12/10/2024 - 16:25

        Man I would be so happy if I got made redundant in that way. walk straight into a Cyber or IT contract with a huge payout to boot. taking some LSL early next year, maybe I will get lucky.

    • grr1701 on 13/10/2024 - 10:34

      Permanent role versus “being let go” at the drop of a hat? I’d go permanent.

  • overthinking on 11/10/2024 - 10:51
    +3

    imo just use https://paycalculator.com.au/ and try to figure this out yourself

    it depends on the number of public holidays and leave that the contractor takes.

    all I will say… Friend B has the better job, presumably an A06 public servant based on your description.

  • Dollar General on 11/10/2024 - 10:54
    +16

    Bank says friend b is better off when applying for a mortgage & in Australia, that’s all that matters

    • AlanHB on 13/10/2024 - 09:12
      +1

      Maybe once upon a time, but I just refinanced my property with CBA on my contract income and it was easy. I am technically classed as a casual worker, paid daily.

      When I initially enquired if it was an issue, they said it was not, that it was pretty commonplace particularly due to the amount of IT workers in the same position.

  • 87percent on 11/10/2024 - 11:09
    +4

    Contracting has always been more lucrative, but they can get rid of you overnight. Also, i know of at least 2 companies that shut down their contractors over Christmas for over a month

    • coffeeinmyveins on 11/10/2024 - 11:32

      Covid has shown us that layoffs happen just as much to permanent positions too.

      • 87percent on 11/10/2024 - 13:14
        +2

        at least with permanent, they give you notice

        Friend was put on the bench a couple of weeks ago from his contract, was told to not log on in the morning at 6PM the night before

        • Ade99 on 12/10/2024 - 08:44
          +1

          Can happen to perms too…..

          • WhyAmICommenting on 12/10/2024 - 17:10

            @Ade99: But mandatory 2 weeks pay or something I think?

          • gromit on 13/10/2024 - 14:45
            +1

            @Ade99: yep but as perm you have entitlements that a contractor is not eligible for, like mandatory notice periods, redundancy payments etc etc. As a contractor you can get a call in the afternoon not to come in tomorrow.

    • jv on 11/10/2024 - 15:23
      +1

      but they can get rid of you overnight.

      Depends what the contract says…

    • R4 on 13/10/2024 - 05:07

      I'm a contractor and have always worked this way - there have been times where I've been kept on and permanent staff have been given the elbow.

  • p1 ama on 11/10/2024 - 11:10
    +4

    This is an age-old question.

    Almost invariably, contractors will get paid more, even once you factor in the public holidays and leave.

    It depends on how much you value (and need) the stability and job security of a full-time permanent role. The expectations from contractors and employees are also very different at most organisations, however, that's a different topic that varies case-by-case.

    FWIW, at an organisation I previously worked at, we restructured and got rid of a whole bunch of contractors (basically 70-80% of the contractors in a particular portfolio), and all of the full-time permanent staff were kept on. It's difficult to get rid of full-time staff - the legal protections, enterprise agreements, the ongoing nature of responsibilities, even on a personal level, it is difficult. Contractors are seen as dispensable and "they're going to go anyway" is a common mentality for getting rid of them.

    Also some level of ceiling with contractors - it works out well if you're a techincal expert, but you won't have the same opportunities for promotions or moving into management roles.

    Not advocating for either, but all of my contractor friends are always harping on about these comparisons, none of my permanent full-time friends care.

    • coffeeinmyveins on 11/10/2024 - 11:32
      +3

      Also some level of ceiling with contractors - it works out well if you're a techincal expert, but you won't have the same opportunities for promotions or moving into management roles.

      McKinsey has entered the chat

      • p1 ama on 11/10/2024 - 11:48
        +1

        McKinsey consultants are not individual contractors, completely different career pathway.

    • freefall101 on 11/10/2024 - 13:06
      +11

      Always works the same way. Business is told to reduce FTE to bring the budget down or cannot get new FTE approved because of budget cuts. Once they get into the year and realised they're under staffed, they get contractors because it's easier to get a contractor signed off than an out of budget FTE. Once a contractor is in, keep rolling them over and getting reapprovals from lower level managers.

      A couple of years later the CFO notices that the budget is never hit because there is $xx million being spent on contractors, big 4 firm is bought in to oversee a restructure who says "fire or convert all the contractors" then collects a cheque for $20m, and it all starts all over again.

  • Baysew on 11/10/2024 - 11:15
    +3

    Is friend A in an industry super fund, and friend B isn't?

    • holdenmg on 11/10/2024 - 11:42
      +1

      I tried that whole "compare the pear" thing at the Fruit and Veg shop.
      I'm still not rich. :+(

      • Antikythera on 12/10/2024 - 18:45

        have you tried CTPAS? (compare the pear as a service)

        stand in store and offer your comparison skills for a fee.

  • Jaduqimon on 11/10/2024 - 11:51
    +10

    Tell both your friends they are bordering the poverty line compared to typical ozbargain users.

  • sumyungguy on 11/10/2024 - 11:56
    +3

    Friend A is 20% ahead on hourly rate, but earning pretty much the same per annum if choosing to work the same number of hours as Friend B (with A taking only 5 days sick leave and contractually receiving nothing for public holidays)

  • netjock on 11/10/2024 - 12:45

    Why are you even worried?

    Unless they are paying you a fee?

    • focus123 on 11/10/2024 - 13:21

      Because they are both good friends and can refer me should I decide to move on from my current role.

      I know friend B enjoys his reduced work hrs and he uses nearly all 6 weeks of his annual leave plus at least few sick leaves per year (in addition to the public holidays). So he literally works about 43 weeks per year if we consider about 10 days of public holidays(52-6-2-2) for a package closer to 143k.

      Friend B relies on public holidays mostly and takes 3-4 weeks of leave per year for recreation and sick. based on that his package is higher but he has to work more hrs every day and has less possibility to take long breaks due to the risk of losing the contract.

      • netjock on 11/10/2024 - 13:25

        Pick your preference

  • joka on 11/10/2024 - 13:23
    +2

    Are you asking this because exams are coming up soon?

  • arkie0 on 11/10/2024 - 13:26
    +1

    I very recently did the exact same comparison when I got 2 job offers within the same week, 1 was contract, 1 was on going.

    Use https://paycalculator.com.au/ - change the pay cycle to daily. Put in $90 as the pay daily rate, tick the including super box.

    Under annual leave you can change it to how much annual leave the on going role gets… in my case I would have for like 70 days annual leave (including if I took all my sick days).

    Then you compare it with the ongoing one (though the annual one doesn't give you the option of putting in 6 weeks leave, as I was comparing with my old job aswell which had 5 weeks leave + 5 weeks sick leave)

  • vorsprung on 11/10/2024 - 13:29
    +1

    Money isn't everything. Having worked IT in both the public and private sectors, they both have their ups and downs. It's probably more attributed to the organisation size though.

  • justworld on 11/10/2024 - 13:57
    +2

    The permanent employee is slightly better off.

    If your permanent friend works full-time 36.75 hours a week, then that is a total of 42 weeks * 36.75 = 1544 hours per year.
    (A year has 52 weeks, less 2 weeks for public holidays, 2 weeks for sick leave, and 6 weeks for annual leave).

    Your contractor mate can earn $138,960 in that same timeframe. Once GST is taken out, that's $126,327.

    Your employee mate gets $122k + 17% super = $142,740 base package.

    So the employee mate is getting $16k more in true remuneration than the contractor, plus has the advantage of long service leave.

    Generally, if you are going to contract, the hourly rate needs to be 50% higher than your employee rate to make it even worthwhile.

    I've calculated for myself as a contractor that every $100 I bill is equivalent to around $70 in employee earnings.

    • FiDad on 11/10/2024 - 14:15
      +1

      How do you assume $90 per hour amount include GST? They could be a PAYG contractor like I am

  • Ozbar Gain on 11/10/2024 - 15:39
    +1

    Which of your friends have the best car?

    • 0 0 0 on 12/10/2024 - 08:34
      +1

      Heh, bought two German luxury cars when contracting, now I'm perm had to struggle to buy a Korean car.

      But hate the maintenance costs of the luxury cars so glad I've switched to Korean

    • May4th on 12/10/2024 - 15:39

      poor measure of 'wealth'
      probably the permanent guy who is more likely to get a car loan.. and be all the poorer for it

  • pharkurnell on 11/10/2024 - 15:51
    +1

    Who enjoys their job the most
    who travels the least?

    Is money really everything at work?

    • vorsprung on 11/10/2024 - 19:30

      No idea why you got downvoted and I didn't… have an upvote.

    • 0 0 0 on 12/10/2024 - 08:36

      I loved my contracting job and also travelled more when contracting esp during peak periods because of extra cashflow.

      I also love my perm job too. So not really a differentiating question to ask.

    • Ade99 on 12/10/2024 - 08:48

      Which will help you get your next gig? Being a perm and working on the "new release" or temping on old / obsolete versions ……

  • kanad on 11/10/2024 - 21:53
    +2

    Use this calculator
    https://www.contractorpermie.com

  • 0 0 0 on 12/10/2024 - 08:32
    +1

    Contracting is great depending on your life stage and risk profile. If you can, do it in your younger years when you have little or no dependants (i.e. before kids). Build up savings or pay off your house, buy nice things for yourself.

    Switch to perm once you have dependants or need stability.

    Contracting can give you financial freedom but can come with added stress if you're in an organisation that has policies to restrict contract extensions.

    I used to contract and would rarely take leave. When it came to Christmas shutdown I didn't mind paying a premium for expensive airfares and accommodation for overseas holidays as it would cost me more in lost income to take leave during other times. Working more days per year also directly translates into more money. This can add up very quickly. Want to buy the latest $2k flagship phone? No problem, just work two more days and tax deduct it.

  • May4th on 12/10/2024 - 14:56

    generally annual/personal/LSL and PH plus super (the usual 10.5%) would be a bonus of around 30% of base rate as a rough guide, with public servant bonus on super I'd say you'd have to earn 35% on top of base rate as a contractor to match it. this obviously depends on whether you get to use your personal leave etc as well.

    no reason why the friend on a cushy public sector job can't take up additional contracting side gig to make extra cash, with the added security of a permanent PT position, which is favoured by banks for loans. I'd take job 2 in a heart beat

    • rickdwp on 12/10/2024 - 16:29

      no reason why the friend on a cushy public sector job can't take up additional contracting side gig to make extra cash

      Yeah nah actually that is almost guaranteed to be against their employment contract. If they wanna go work for Maccas flipping burgers, no problem or moonlight as a mechanic, all good - But doing the same/similar job for other entities will require approval as a full time employee to show it's not going to put you in a position of competition or compromise with your employer

      • May4th on 12/10/2024 - 19:28

        fair enough, depends on your life and career stage I guess. also if you are game, lots of people doing 2-3 remote jobs on reddit without telling other employers.. if you want to live life on the edge

  • rickdwp on 12/10/2024 - 16:26

    They earn basically the same. How many coffees a week they purchase at the cafe will determine who has more $$ at that rate.

    It's really personal preference, I lack the ability to bullshit and sell myself so contracting will never be for me - In saying that though, In my experience you can get away with being pretty bad at your job and still get work as a contractor but you won't last long in full time permanent. Most IT contractors I've met are completely full of shit, they claim contractor is the best and don't know how anyone could work 9-5 blah blah, and then a couple of years later they take a full time position somewhere.

    I have experience and qualifications that could earn me 30% more contracting then full time, but screw that. I've been at my workplace for 8 years, salary has doubled since I started which yeah is basically only 'inflation' thanks to this countries (and the rest of the western worlds) screwed housing situation but I have pretty decent job security, and in the unlikely event of redundancy it's a 3-6 month severance package / transition plan which suits me just fine. Throw in long service (which I have - side note it's BS that long service isn't portable in every industry), generous maternity/paternity leave, flexible WFH, flexible hours, upskilling all paid for - I'm good. If I was single, childfree, no mortgage might be a different story but i aint so full time suits me fine, just fine.

  • mousie on 12/10/2024 - 16:54

    I contacted for a decade in my early late teens to early 20s.

    Coin is better.

    Perm is better with dependants with stability.

    Contractors you can write more things off on tax particularly if you invoice.

    Perm is also better if you want income protection insurance packaged in super.

  • SuperLate on 12/10/2024 - 22:44

    Monetarily:

    Before tax, permanent is better -> good for Australia's development and we thank that friend for the contribution.

    After tax, contractor is better -> good for personal development and we hate that friend.

    • Considering contractor gets equivalent total work hours to that of permanent.
  • SlickMick on 12/10/2024 - 23:52

    By my calcs the permanent has it better: higher hourly rate when considering leave entitlements.
    Is he entitled to overtime? A few hours overtime per week and he'd bring home more.

    Some people would rather the contract. Working those extra few hours per week, and hope you don't get sick so working a few extra weeks per year, could bring home substantially more. But I presume the contract can be ended with hours of notice instead of weeks, some people feel that permanent jobs are more secure.

    I left a permanent contract for the security of a permanent job and have regretted it every day. Permanency isn't necessarily a plus, and job security doesn't mean much when you don't want to stay.

    I don't think it's the remuneration that would determine which of those jobs is best.

  • Aerith-Waifu on 13/10/2024 - 00:12

    I have concluded that friend A and Friend B are friends with benefit……………full stop!

  • Succulent on 13/10/2024 - 10:31

    Another benefit of permanent full time is, they can take long leave anytime they want for vacations where the rate is cheaper or during low season. Where contractor usually can only take long leave during christmas break to make the best of their non paid days. This means contractors would spend more money in flight and accommodations during peak season (which could be doubled) and always deals with crowded holiday destinations.

  • darkmattersunB6c0MV on 13/10/2024 - 11:05

    Is the offer A PAYG or invoicing? If the latter, then A or the contracting is better. Otherwise, Permanent is better.
    I worked as a contractor for around 12 yrs in Oz, but decided to go permanent in 2018.
    Before coming to Oz, I was largely permanent.

    As a contractor, you are expected to be top of your game- I was paid top dollars for my expertise- in early 2006 I was paid $80 per hr PAYG, plus OT if I wanted (good at that time, esp since I was just reestablishing myself).

    As permanents, you get much better exposure, get seconded to other roles, get trained by the organisation, can get subscriptions like Gartner and access to ISO standards etc, better job security etc.

    But if you are good, you are never without a job even in contacting. Mostly, I could start a new role on a Monday if my contract was ending on a Friday (over time, I started to take a week off between contacts). You don't have to deal with dirty politics (the higher you go in a permanent role, the more politics you will experience- if you are just concerned with work, contacting is nice).

    Real benefits come when you are invoicing.(not PAYG).

    Permanent staff have better growth over the years.
    As a contractor, it was frustrating to see people with very little knowledge getting promoted to senior roles, with very little practical experience and technical understanding.
    I would say start off with contacting and land a senior role as a permanent in a decade.
    But if you land a job in tier 1 consulting firm as a permanent, that is the best ;-)
    (Even tier 2 consulting like EY, Deloitte, PwC or Accenture are good).

    • focus123 on 14/10/2024 - 23:59

      My Perception of consulting firms is that consulting firms promote people quicker to get a higher billing rate from the client, so yes people say that big consultancy firms are good for career growth. However, that growth is mainly driven by the consultancy firm's need to get a higher billing rate for their employee.
      I am not saying that everyone who climb the ladder fast are bad, but bad apples also ride the tide of promotions for high billing rate

      • darkmattersunB6c0MV on 15/10/2024 - 00:31
        +2

        In Tier 1 Consultancy, the "bad apples" will be filtered out pretty early.
        The work is relentless and you have a predetermined growth plan based on performance.
        They are smaller, leaner but more productive.

        That is why Mackenzie, BCG and Bain (Tier 1) are 3X + more expensive as compared to EY/ Deloitte (Tier 2) in Management Consulting. I have seen the difference in work, esp. the use of company specific data to support recommendation, instead of being generic based on industry best practices.

        So, any non performer would not last more than a couple years.
        BTW, even the non performers are still better than average.

        More possible in the big 4 tier two consultancy, but in this market even they are being very careful with people on the bench- be productive and meet targets or face the axe.(When the market is good and margins are high, everything is rosy.).
        Of course, it depends on the sector too, and the niche skills.

        Anyway, agree that consultancy experience earlier in career is good for future growth. It also establishes good work ethics and culture.

        • 0 0 0 on 15/10/2024 - 08:27

          Yes this. I'd hire a contractor with a tier 1 or 2 consulting background much more easily than someone without. Having been down this exact path and also observing a lot of duds in the workforce, it helps with a little more confidence.

  • gromit on 13/10/2024 - 14:40
    +2

    Friend B has the marginally better deal. Contracting comes with Financial Risks and as such to be equivalent you need to be earning a significantly larger overall package. As it stands Friend A is slightly ahead which is not a good situation for a contractor, if you were choosing between the 2 roles you would not choose the contracting one without a larger boost to pay.

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