Contract Job / Paid by the hour

Annando

Hello

I was wondering if any one could help with this...
Up till now OH has been working full time on a permanent position, he has recently been made redundant and has had some trouble getting a new job. He is an electronics engineer with 20 years experience. He has just applied to do an Msc in electronics as he feels that he might be lacking some of the latest skills required and needs a refresher course. He would like to work at the same time as he is studying and was thinking of going for contracts jobs (usually advertised as being paid £x/hour) but has no idea how they work.

1- Usually these seem to be fixed term contracts (3 or 6 months). They are usually advertised by agencies. Who pays the agency fees? You or the company who will employ you?

2- Do you make your own time table and hours of work (are you freelance) or do you still have to work the same hours as the people on permanent contracts that work from 9 until 5? What I mean is your schedule / timetable flexible?

3- Tax wise, are you considered a PAYE or do you have to register as self-employed?

Any info and feedback is greatly appreciated Thanks in advance!

Emmzi

1. The company. Sometimes you're directly employed by the agency and they take a cut of your hourly rate. Sometimes the company pay you and they get a finder's fee.

2. Not usually. Your timetable is whatever the company says it is. If you want truly own hours, you tend to need to go find jobs yourself, stick an advert in yell.com, etc; but it's rare. Take it he can't study in the evenings?

3. Depends on the contract.

mrtg0525

Annando wrote: »

1- Usually these seem to be fixed term contracts (3 or 6 months). They are usually advertised by agencies. Who pays the agency fees? You or the company who will employ you?

IME you (as the contractor) invoice the agency, who in turn invoices their client (who is the company the contractor actually works at/for). The agency normally takes a cut out of the money they invoice their client. You don't see how much the agency fees is, but on the other hand you know exactly what you are getting.

Well, at least that's the way it is in IT and I believe in most other fields as well.

Annando wrote: »

2- Do you make your own time table and hours of work (are you freelance) or do you still have to work the same hours as the people on permanent contracts that work from 9 until 5? What I mean is your schedule / timetable flexible?

That very much depends on the client - with my current the schedule is fairly flexible as long as I turn up for the meetings that I have to attend. Which is quite handy because I'm anything but a morning person. In other companies they expect you to be there at a certain time.

The main difference between permanent employment and being a contractor is that you're usually paid out of a different cost centre (and also easier to hire/fire).

Annando wrote: »

3- Tax wise, are you considered a PAYE or do you have to register as self-employed?

Welcome to the minefield that is contracting .

Usually you're self-employed but depending on your contract you may well fall under IR35 and thus be treated like a PAYE employee (in other words, you get all the downsides of being an employee and none of the upsides).

If/when you get the contract, you need to get it checked over by someone who's an expert in IR35 (but have a look at the Professional Contractor's Group website, they've got a list of things to look for that is accessible by non-members, or at least it was the last time I looked).

Gordon B was going after the so-called umbrella companies in the last budget so it seems that a lot of the 'easier to manage' ways of contracting are being seen as ripe for plundering by the IR.

Anyway, when it comes to working out the rate, you need to keep in mind that you've got higher overheads than an employee - for starters, you'll be paying both employer's and employee's NI contributions, corporation tax (currently 19%, soon to go up to 22%) and various other shenanigans you don't have to bother with as an employee. OTOH you're able to treat certain 'normal' expenses as company expenses (like travelling to and from the client's site, for example). Nevertheless it's important to figure in the overheads when you're looking at the feasibility of a rate.

Oh, and the most important advice if you're a contractor is - get a good accountant. Not an OK one, a good or a brilliant one. You'll need him/her - that's something else that goes into your 'overhead', but it's probably the most important choice you are making.

BrunoM

Do note though, that there is a big practical difference between being a "proper contractor" as per mrtg0525's post above, and being someone working on a temp contract through a recruitment agency like Reed, Adecco or many others.
In the latter case you're PAYE, you get statutory holiday allowance accrued, and you just submit a timesheet of hours worked once a week or month. It's a lot simpler though usually not flexible.

Annando

Thanks for answering my questions.
This seems to be much more complicated than I initially thought.
He wouldn't be able to study in the evenings, it is a full time one year Msc or a part-time 3 years :eek:
He was made redundant in Novembre, but has been looking for a new job since Septembre last year. Because all the jobs he was being offered at the time involved relocating, and he was studying for a BA in Music at a local Uni, we decided it would be best to first finish the BA and then continue job hunting. (I know sounds complicated, but he had started doing this BA part time 6 years ago, seemed stupid to give up months before graduation!). So now he has completed the BA in Music and has his Bsc in Electronics too.
He's been looking for a job since April and although he has had many interviews nothing has materialised into a job offer so far...so getting worried...
Sorry for the rant...
Thanks for your replies!