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  • FIRST POST
    • GT85N1
    • By GT85N1 18th Oct 16, 8:51 PM
    • 32Posts
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    GT85N1
    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?

    Thanks
Page 1
    • agrinnall
    • By agrinnall 18th Oct 16, 8:54 PM
    • 15,643 Posts
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    agrinnall
    • #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
    • 684 Posts
    • 304 Thanks
    MataNui
    • #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
    • 635 Posts
    • 5,428 Thanks
    fixx
    • #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.
    • GT85N1
    • By GT85N1 4th Dec 16, 5:41 PM
    • 32 Posts
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    GT85N1
    • #5
    • 4th Dec 16, 5:41 PM
    • #5
    • 4th Dec 16, 5:41 PM
    Thanks for replies.

    I've been offered the job at £54,800 as PAYE employed.

    It came up about the ltd company route and they said I could do that for the same rate..

    Seemed odd so I questioned it - explained my points with figures including ENIC, holiday, sick, pension bla bla..

    They said they could cover the holiday with just paying another invoice to cover the period. Still didn't offer a higher number which seemed odd.

    I know I could use the flat rate VAT scheme which could end up making an extra few £K but I'm not too sure it'll be worth the fact that on paper I'm directly PAYE employed with someone..

    What do you think?
    • jobbingmusician
    • By jobbingmusician 4th Dec 16, 7:27 PM
    • 18,035 Posts
    • 18,081 Thanks
    jobbingmusician
    • #6
    • 4th Dec 16, 7:27 PM
    • #6
    • 4th Dec 16, 7:27 PM
    What it costs me to employ someone is:

    Salary
    ENI at 13%
    Pension (3% where I work, 1% this year statutory minimum, will increase in coming years and your company may contribute a lot more than this)
    Provision of desk etc £3.5k (likely to be a lot more in posh company setting)

    Sickness and holiday are budgeted at about 5% of work time each, plus training time.
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    • GT85N1
    • By GT85N1 4th Dec 16, 7:32 PM
    • 32 Posts
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    GT85N1
    • #7
    • 4th Dec 16, 7:32 PM
    • #7
    • 4th Dec 16, 7:32 PM
    What it costs me to employ someone is:

    Salary
    ENI at 13%
    Pension (3% where I work, 1% this year statutory minimum, will increase in coming years and your company may contribute a lot more than this)
    Provision of desk etc £3.5k (likely to be a lot more in posh company setting)

    Sickness and holiday are budgeted at about 5% of work time each, plus training time.
    Originally posted by jobbingmusician
    Exactly - this is why I said that we could work out a rate as ltd that would cost them less overall.. He didn't bite..
    • Pennywise
    • By Pennywise 4th Dec 16, 7:53 PM
    • 8,169 Posts
    • 14,235 Thanks
    Pennywise
    • #8
    • 4th Dec 16, 7:53 PM
    • #8
    • 4th Dec 16, 7:53 PM
    I always say the bare minimum for being self employed as opposed to an employee is a 25% enhancement. That's the bare minimum. 50-100% uplift is far more realistic and common to cover the loss of all employment rights (such as holiday, maternity pay, redundancy, benefits, notice, etc and your extra costs such as bank charges, accountancy, insurance, travel, training, etc.)
    • motorguy
    • By motorguy 4th Dec 16, 9:58 PM
    • 13,804 Posts
    • 7,307 Thanks
    motorguy
    • #9
    • 4th Dec 16, 9:58 PM
    • #9
    • 4th Dec 16, 9:58 PM
    I'd start at double the permanent rate and see what their counter offer is.
    Originally posted by agrinnall
    +1

    That would be my thinking.
    Regards

    Paul
    • agrinnall
    • By agrinnall 5th Dec 16, 10:05 AM
    • 15,643 Posts
    • 11,344 Thanks
    agrinnall
    Thanks for replies.

    I've been offered the job at £54,800 as PAYE employed.

    It came up about the ltd company route and they said I could do that for the same rate..

    Seemed odd so I questioned it - explained my points with figures including ENIC, holiday, sick, pension bla bla..

    They said they could cover the holiday with just paying another invoice to cover the period. Still didn't offer a higher number which seemed odd.

    I know I could use the flat rate VAT scheme which could end up making an extra few £K but I'm not too sure it'll be worth the fact that on paper I'm directly PAYE employed with someone..

    What do you think?
    Originally posted by GT85N1
    If you want the job then it's a no-brainer to be employed if they're not offering a significant enhancement for using a limited company.
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