Contract vs Employee

noblet

I'm looking at a 1 year position (with possible extensions) - it's being advertised on either a contract or employee basis.
I've never worked as anything other than an employee - should I consider the alternative?

Have a mortgage, considering a family down the line (maternity?).

isplumm

Hi

I think you need to give more details?

If you go for contract, then you will need to set up a LTD company OR go for an Umbrella company. I wouldn't think about LTD unless your daily rate is above about £225.

If you go down the umbrella route, then you will be able to claim some expenses - but you will be an employee of the umbrella company - be careful of which umbrella company you pick - someone like Parsol are ok - never used them.

If you go down the employed route, then you just go PAYE - no claiming of expenses etc.

I would add the figures up & see which is best - remember that you will need to pay for the umbrella company - something like £25 pw.

Mark

HappyMJ

isplumm wrote: »

Hi

I think you need to give more details?

If you go for contract, then you will need to set up a LTD company OR go for an Umbrella company. I wouldn't think about LTD unless your daily rate is above about £225.

If you go down the umbrella route, then you will be able to claim some expenses - but you will be an employee of the umbrella company - be careful of which umbrella company you pick - someone like Parsol are ok - never used them.

If you go down the employed route, then you just go PAYE - no claiming of expenses etc.

I would add the figures up & see which is best - remember that you will need to pay for the umbrella company - something like £25 pw.

Mark

Just wondering but why £225?

I set up a Ltd company on a daily rate of £120 and I believe I saved a lot more than going through an umbrella.

MataNui

Accountancy costs can be much higher if you trade as a limited company but i think 225 is a bit of a high limit.
It depends on the exact nature of the job but in a lot of cases simply being able to claim the travel costs can easily make up for the additional costs.

so long as your looking at grossing around 25k (ish) you should be about the same employee or ltd. As the income rises the benefits of trading via a ltd company rise. (All that is assuming there are no employee perks like pension. death in service benefit etc).

toffifee

I hope the company is paying a higher rate if you go the contract route, to make up for the lack of paid holiday, paid sick leave, subsidised healthcare, or any other perks that you would get as an employee, and therefore the lower cost to the employer. Not to mention that the employer would not have to pay employer's NI if you are a contractor.

Going through the umbrella means you will have to pay employer's NI (about 10% I think) in addition to their fee. The umbrella company I use lets me claim tax relief on travel and subsistence for the first two years of a contract, so from that point of view there's no advantage to limited.

If you use the ltd company route, you'd need to look at whether you're caught by IR35 (is the job you're doing basically that of an employee in terms of them telling you want to do, and when, and you not being able to send someone else in your place - I'm simplifying greatly). If you are, a big proportion of the advantage of using a limited company disappears i.e. you can't pay yourself minimum wage (with tax and NI being applied) and then give yourself the rest of the money as dividends (with less tax/NI to pay - I'm hazy on the details - I am caught by IR35).

I suggest that when you find out the salary and the contractor rate you work out your likely IR35 status and set up some spreadsheets with the various options to see how the numbers stack up.

I work through Parasol and I've never had a problem with them.

isplumm

Hi

Read this http://www.sjdaccountancy.com/about/ourservices/ltd_vs_umbrella.html?gclid=CjwKEAiAmeyxBRCJxoKk7IWLl2oSJABvZjhhanC-lL0kDajdMlwQLdDRSHdu5ix6qDa60lagTMW6DRoCn4_w_wcB

Mark

isplumm

HappyMJ wrote: »

Just wondering but why £225?

I set up a Ltd company on a daily rate of £120 and I believe I saved a lot more than going through an umbrella.

Indeed - I suspect the rate should be about £100 a day or £25k a year.

Mark