Why do companies hire employees?

TBagpuss

Lomast said:

Others have covered the issues with hmrc, but the company do not really save money, when I used to contract I was being paid roughly 40% more per hour than permanent employees to cover having to pay my own tax ni pension etc

Yes, we currently have some self-employed locums as we are recruiting for a hard to fill role and it is massively more expensive than employing someone . Depending on the type of work you do you may not be able to find an appropriate freelancer when you want them, you may have to pay agency fees on top of paying the freelancer.

Elliott.T123

Devongardener said:

Under HMRC rules you cannot be self employed if you only work for one organisation, your have to have other “customers”.

As one other poster said, not entirely true. I have a 1 man Ltd Co and currently only provide services to a single customer.

This customer has no control over how I do anything, do not dictate my hours, place of work, provide me any direction other than an end goal they would like achieved, do not provide me any equipment. They simply state, can you find us someone for this job and then I either do or don't. 

There is no doubt that I am self employed, I am a long way outside and IR35 rules but I only have 1 customer. I could have others if I put the time in to find them, but this customer keeps me busy enough to pay the bills so I am happy. (Yes I know it is a risk and if I lose them then I am in trouble but that is a calculated risk I have chosen to take) 

D924

Lomast said:

Others have covered the issues with hmrc, but the company do not really save money, when I used to contract I was being paid roughly 40% more per hour than permanent employees to cover having to pay my own tax ni pension etc

The company could save money if the workers were willing to swallow these costs and effectively work below minimum wage.

Which is what I was considering offering in this impossible job market. But HMRC says no.

Elliott.T123

The other major factor it comes down to is control.

If an employee is genuinely self-employed the company has less control. Someone earlier in the thread used retail workers as an example so lets stick with that. If someone was truly self employed they could work for Asda Monday, Sainsburys Tuesday, Tesco Wednesday. The business would have less control over scheduling them etc.

It all comes down to types of jobs, certain jobs just do not make sense to be self-employed / contracting other jobs it makes total sense. For example if a small business wanted some marketing support but on an ad-hoc basis employing someone would be mad, but someone on a self-employed basis who could come in 1 day this week, 3 days next week, not at all the week after would be perfect.

Lomast

D924 said:

Lomast said:

Others have covered the issues with hmrc, but the company do not really save money, when I used to contract I was being paid roughly 40% more per hour than permanent employees to cover having to pay my own tax ni pension etc

The company could save money if the workers were willing to swallow these costs and effectively work below minimum wage.

Which is what I was considering offering in this impossible job market. But HMRC says no.

I am confused why anyone would consider that, I guess in some parts of the country work might be hard to find but certainly where I am there are plenty of minimum wage jobs available to start tomorrow 

StevenB12

From my experience in this because we hire a lot of gangs and self employed crews, generally it's because those who are self employed etc want to charge a lot more than what the company would pay their employees on the books. 

As an example I'm on the books 

I get a high hourly wage

I get a company vehicle to use as personal and a company fuel card, I get full pay even if we don't work due to weather etc, health benefits such as paid dentistry and so on. 

We've just interviewed a 3 person crew to carry out the same work that me and my crew do who are on the books..

They wanted almost triple the wages, they wanted to be supplied with a works van, fully insured, fuel card, supplied with equipment and tools etc. 

I suppose it depends on the field you work in, but from my experience self employed always want more than those employed through the company. You'd quickly see a lot of construction and utility companies go out of business if they were strictly using self employed. 

That's why a lot of agency workers are complaining about rates dropping at the moment in construction. 

DullGreyGuy

StevenB12 said:

From my experience in this because we hire a lot of gangs and self employed crews, generally it's because those who are self employed etc want to charge a lot more than what the company would pay their employees on the books. 

As an example I'm on the books 

I get a high hourly wage

I get a company vehicle to use as personal and a company fuel card, I get full pay even if we don't work due to weather etc, health benefits such as paid dentistry and so on. 

We've just interviewed a 3 person crew to carry out the same work that me and my crew do who are on the books..

They wanted almost triple the wages, they wanted to be supplied with a works van, fully insured, fuel card, supplied with equipment and tools etc. 

I suppose it depends on the field you work in, but from my experience self employed always want more than those employed through the company. You'd quickly see a lot of construction and utility companies go out of business if they were strictly using self employed. 

That's why a lot of agency workers are complaining about rates dropping at the moment in construction. 

It's natural that a freelancer is more expensive per hour than what you pay an employee however what you pay for an employee is more than just their salary. 

As a contractor I have to pay my own employers NI, pension, sick pay, holidays, equipment, training courses, professional memberships, bonus, private medical, childcare and those are all costs that get passed on to my client with a higher cash element than an employee gets. At the same time I have a 1 week notice period so if they decide they dont like me they can get rid of me easily but at that also means I can disappear easily if I get a better offer or dont fancy the next piece of work they are offering. 

There are many out there that argue that contractors and perms cost basically the same when you considered an employee's fully loaded salary. Personally I think the gap is smaller than the headline numbers would suggest but contractors do cost more. We however get risk money, worked on a project 2 years ago that was supposed to be 12 months long, there were two contractors and the rest of the team were perms. After 3 months an alternative option presented itself bringing the project down to further 3 months. Us two contractors were served our weeks notice, the perms (all over 2 years tenure) all went back in the pool... speaking to one of them about 6 weeks later they were still not on a new piece of work and were twiddling their thumbs. 

Brie

An easier option for many companies is to get an agency to provide staff.  That way there's no obligation to keep someone on, no payroll issues, less benefits to be paid - just a set hourly fee invoiced for however many people for however many hours for however many weeks.  

The reason why many companies don't do this is to retain staff and knowledge.

DullGreyGuy

Brie said:

An easier option for many companies is to get an agency to provide staff.  That way there's no obligation to keep someone on, no payroll issues, less benefits to be paid - just a set hourly fee invoiced for however many people for however many hours for however many weeks.  

The reason why many companies don't do this is to retain staff and knowledge.

I've not dealt with Agency staff from an employer's perspective for a LONG time... NMW didn't exist when I did.

They were similar to contractors in the sense there was little commitment from the ultimate client perspective however we paid the agency about double the salary of a perm (obviously a perm costs more than their salary) and we were agnostic to what the agency happened to pay their staff. This naturally was also before compulsory pensions etc so the agency people really cost the agency little more than their salary + employer NI if they hit that level.

The agency staff were just message takers, 10 minutes training on how the phone worked and then out there. By comparison order staff was 3 weeks training and enquiries 6 months.

General_Grant

Elliott.T123 said:

Devongardener said:

Under HMRC rules you cannot be self employed if you only work for one organisation, your have to have other “customers”.

As one other poster said, not entirely true. I have a 1 man Ltd Co and currently only provide services to a single customer.

This customer has no control over how I do anything, do not dictate my hours, place of work, provide me any direction other than an end goal they would like achieved, do not provide me any equipment. They simply state, can you find us someone for this job and then I either do or don't. 

There is no doubt that I am self employed, I am a long way outside and IR35 rules but I only have 1 customer. I could have others if I put the time in to find them, but this customer keeps me busy enough to pay the bills so I am happy. (Yes I know it is a risk and if I lose them then I am in trouble but that is a calculated risk I have chosen to take) 

Does the single customer pay (A) you, Elliott.T123, or (B) to the account of the limited company?
You and the limited company are separate legal entities.
So if the answer to the above question is B then the single customer is a customer of the limited company not your customer.  I don't see how this means you are self-employed.