Employment Costs/Ltd 'Equivalent'

GT85N1 · 18 October 2016 at 8:51PM

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

agrinnall · 18 October 2016 at 8:54PM

I'd start at double the permanent rate and see what their counter offer is.

MataNui · 19 October 2016 at 8:45AM

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 · 19 October 2016 at 2:25PM

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 · 4 December 2016 at 6:41PM

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 · 4 December 2016 at 8:27PM

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.

GT85N1 · 4 December 2016 at 8:32PM

jobbingmusician wrote: »

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.

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 · 4 December 2016 at 8:53PM

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 · 4 December 2016 at 10:58PM

agrinnall wrote: »

I'd start at double the permanent rate and see what their counter offer is.

+1

That would be my thinking.

agrinnall · 5 December 2016 at 11:05AM

GT85N1 wrote: »

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?

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.

Employment Costs/Ltd 'Equivalent'

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