Consultancy rate / permanent salary

NickK

NickK

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scorza said:
Read up on IR35.
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This. You will need someone with some accountancy knowledge.

I know a contractor that does his own because (a) his wife is an accountant and (b) he runs/does finances for his Tennis club too. However he is an exception to the norm!
 

NickK

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MacRS4 said:
I meant in terms of salary comparison.

Somebody on a stated salary (PAYE) of 72k also has the hidden cost of approx 9k on top of that - the real cost being 81k then.

Low salary+Dividends does of course reduce your NI, but I wasn't referring to that setup :)
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Actually it's about ~23%, whereas france would be closer to 40-50% social cost when all factored in.

I know this from board level discussions when deciding office locations.

You will need to ensure that:
a) you have your living costs (home, car, kids, holiday, savings etc)
b) you have your NI, Pension costs in there - do not skimp period.
c) you have the ability to build a 6 month buffer to cover the time between contracts (note usually the client or you can terminate the contract in a very short period of time as a clause in the contract). This is a value and a risk so you should not skimp on this.
d) factor in costs each year for training - you must keep up with the current things. It maintains your value. (include the cost of days off attending the courses/exams too)
e) you have your running costs (this may be as a % if you go through an unbrella company).
f) Factor in that you will need more security to be accepted for a mortgage. Usually 2 years of continuous income (see part c).
g) you will need to ensure that any costs to solve IR35 are covered.
h) Your holidays aren't paid
i) Your insurance for house etc if it covers income breaks may need to be reviewed (read - higher premiums).
j) if you're renting - you will need to ensure your business address is your accountant. Some rental agencies have clauses to prevent businesses being run out of their properties.

Just some thoughts..
 
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gambitt

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Don't forget to include sick days/holidays which you are obviously not paid for when contracting. I use 210 working days a year as a conservative estimate.

This contract wouldn't be for IBM would it? ;) I heard they are hiring.
 

Teledude

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gambitt said:
Don't forget to include sick days/holidays which you are obviously not paid for when contracting. I use 210 working days a year as a conservative estimate.

This contract wouldn't be for IBM would it? ;) I heard they are hiring.
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Mostly perm roles there although I got a call about a 2month vmware gig there this morning ;)
 

MacRS4

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NickK said:
Actually it's about ~23%, whereas france would be closer to 40-50% social cost when all factored in.

I know this from board level discussions when deciding office locations.

You will need to ensure that:
a) you have your living costs (home, car, kids, holiday, savings etc)
b) you have your NI, Pension costs in there - do not skimp period.
c) you have the ability to build a 6 month buffer to cover the time between contracts (note usually the client or you can terminate the contract in a very short period of time as a clause in the contract). This is a value and a risk so you should not skimp on this.
d) factor in costs each year for training - you must keep up with the current things. It maintains your value. (include the cost of days off attending the courses/exams too)
e) you have your running costs (this may be as a % if you go through an unbrella company).
f) Factor in that you will need more security to be accepted for a mortgage. Usually 2 years of continuous income (see part c).
g) you will need to ensure that any costs to solve IR35 are covered.
h) Your holidays aren't paid
i) Your insurance for house etc if it covers income breaks may need to be reviewed (read - higher premiums).
j) if you're renting - you will need to ensure your business address is your accountant. Some rental agencies have clauses to prevent businesses being run out of their properties.

Just some thoughts..
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I was explicitly talking about Employer's NIC. Of course I understand there's other bit - hell I've been a contractor since 1994 I'd have hoped to have gotten the hang of it by now :)

I was just saying that a 72k contact gross when treated as PAYE is nothing like a paid salary of 72k/year from a permie position.
 

Hatter The Mad

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britboy4321 said:
Unfortunately without any smartypants tax avoidance, you have to pay MORE than someone on PAYE. As you have to pay some tax as an 'employer' (employer NI) and some MORE tax as an 'employee' (employEE NI) - even though you're 'employing' yourself.
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I don't think this is the case... a contractor doing self assessment doesn't have to pay employer's NI to 'employ himself'. SA tax payers as a worker entity pay a lot less tax than anyone on PAYE for that reason.
 

MacRS4

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Hatter The Mad said:
I don't think this is the case... a contractor doing self assessment doesn't have to pay employer's NI to 'employ himself'. SA tax payers as a worker entity pay a lot less tax than anyone on PAYE for that reason.
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Contractors typically work through a limited company - they're an employed director of that company. When they pay a salary that salary attracts employer's NIC.

So yes, you (well, the company) does have to pay employe's NIC. I think you're referring to self-employment rather than a traditional contractor.

Most of the companies I work for would not touch a self-employed person with a barge pole due to liability issues. It may not be right, but it's certainly the practical outcome.
 
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