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    • GT85N1
    • By GT85N1 18th Oct 16, 8:51 PM
    • 30Posts
    • 0Thanks
    Employment Costs/Ltd 'Equivalent'
    • #1
    • 18th Oct 16, 8:51 PM
    Employment Costs/Ltd 'Equivalent' 18th Oct 16 at 8:51 PM
    I've had a bit of a search but haven't found exactly what I was after.. (sorry if this has been covered elsewhere)

    I've been looking around for employment 'costs' for PAYE employees. I've found a few online calculators but looking for some confirmation and further info where possible.

    I've been approached by a company who has asked me to go and work for them. They have asked me to give my salary expectations for both PAYE employed and also as an Ltd contractor (I do have my own Ltd company which I have set up for freelance work though not yet used whilst I'm working full time somewhere else..)

    When say using a calculator at costing for a PAYE employee earning £50k per year, I get figures at £50k + £5,780.54 NI - so the amount paid (i.e what it costs the employer) is £55,780.54, excluding any admin, HR etc bits on top... Right?

    Anything else to consider?

    Also then wondering, if going the Ltd contractor route to get an idea on the overall amounts to invoice so both would be 'comparable' say..

    £55,780.54, take into account holidays that wouldn't be entitled and any potential sick etc - add them up and divide accordingly to give a monthly/daily rate?

    Any advice in guiding my thinking if I'm not heading the right way about it? Anything else to consider/factor in etc?

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    • agrinnall
    • By agrinnall 18th Oct 16, 8:54 PM
    • 15,172 Posts
    • 10,910 Thanks
    • #2
    • 18th Oct 16, 8:54 PM
    • #2
    • 18th Oct 16, 8:54 PM
    I'd start at double the permanent rate and see what their counter offer is.
    • MataNui
    • By MataNui 19th Oct 16, 8:45 AM
    • 662 Posts
    • 285 Thanks
    • #3
    • 19th Oct 16, 8:45 AM
    • #3
    • 19th Oct 16, 8:45 AM
    So you have the NI, Holidays and sick pay. Dont forget employers pension contribution and of course their admin costs would now be your costs (need to budget between £1k and £1.5k for accountancy fees).

    You can add a premium to whatever figure you come up with for the loss of all employment rights.

    As a rough guess i would work on something like this. A low-mid rate for a contract software developer would be about £300 per day (average). Working 46 weeks per year would be £69k Gross. The same software developer (outside of London) would be earning about £35k - £40k Gross as an employee. So really agrinnall's suggestion of double isnt that far off the mark.
    • fixx
    • By fixx 19th Oct 16, 2:25 PM
    • 619 Posts
    • 5,345 Thanks
    • #4
    • 19th Oct 16, 2:25 PM
    • #4
    • 19th Oct 16, 2:25 PM
    My personal rule of thumb (having moved a bit between permanent/PAYE and Ltd contractor) is the contract salary would be roughly 50-100% higher than PAYE.

    I.e. PAYE annual salary of £30k = minimum £45K contract salary (which then gets divided down to a day rate).

    This takes account of company and accountant fees, allowances for holiday, pension, sickness, and a premium for less job security.

    The reason I have included a range is that there are fixed costs to be considered, so the lower the rate, the higher the multiplier i.e. £25K - double it, £75K - add 50%. Roughly.
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