Total annual cost of an employee vs contract?

[yasockie]

Hi.

I am looking to subcontract some of the work and looking at hiring another contractor vs hiring them as an employee.
Given a daily rate of say 300/day, what should an equivalent salary be, given that they can take holidays, medical leave and such which I won't be able to claim from my client?

Is there a calculator that works the other way to typical contractor calculators - i.e. rather than loking at things from contractor's point of view, it looks at how much is an employee costing the company per annum, vs contractor charging the daily rate?

[Patrick@Intouch]

If you were looking at a 12 month period then I assume that you would be looking at getting around 46 weeks work out of them in either situation (keeps things level also).

On that basis you would be paying the subcontractor £69,000 (plus VAT if they register). You would also need to submit intermediaries reports to HMRC which doesn't cost anything but is additional admin.

If you employed the same person on the same basis then you would need to consider employers NI (13.8%) as well as factoring in the cost of potential sick days etc... You would also then need to set up a pension arrangement under auto enrolment and, if the employee doesn't opt out would be making pension contributions at an increasing rate over the next few years. If you wanted to limit your costs to the value of those incurred under the subcontractor scenario then you might consider the £69,000 to be the gross salary plus employers NI, pension contributions (cost of setting up the pension scheme) and factoring in an allowance for sick pay etc...

[northernladuk]

I could be wrong here but you are you should be looking at taking them on as an employee for a subcontracting gig? They'll sue you to high heaven when the work dries up and you stop paying them?

[TheFaQQer]

Is there a calculator that works the other way to typical contractor calculators - i.e. rather than loking at things from contractor's point of view, it looks at how much is an employee costing the company per annum, vs contractor charging the daily rate?

https://www.google.co.uk/search?q=co...yee+calculator

Accounting Services for Business has a free (albeit a few years old) calculator that you can download to see what an employee costs

[WordIsBond]

Employer NI.

Pension Auto-Enrolment.

Statutory Sick Pay.

Statutory Maternity / Paternity Pay.

Paid Holidays (four more of them if the Tories come up with some creative way to lose this election).

Legal review of employment contract.

Payroll.

Health & Safety, Flexible working for parents, policy on things like social media, etc.

Reserve for employment tribunal if something goes wrong.

Etc, etc, etc.

All of which to say, best make sure you know exactly what you are doing.

Why do you think some clients are happy to have perma-tractors around? It's not really the flexibility they are after, or they wouldn't keep the same guys around year after year. It's the hassles, the red tape, all that stuff. If you employ someone, you are taking all that on.

And unless you are sure this contract is for a long time, or sure you'll be able to get another one for your employee when this one is up, you are going to have a problem when the contract ends.

[Chart Accountancy]

Hi.

I am looking to subcontract some of the work and looking at hiring another contractor vs hiring them as an employee.
Given a daily rate of say 300/day, what should an equivalent salary be, given that they can take holidays, medical leave and such which I won't be able to claim from my client?

Is there a calculator that works the other way to typical contractor calculators - i.e. rather than loking at things from contractor's point of view, it looks at how much is an employee costing the company per annum, vs contractor charging the daily rate?

If you subcontract some of your work and the subcontractor is not introduced to work with your client, no need to submit the intermediaries report mentioned above.

If the relationship can be described as one that doesn't constitute employment, it would be less costly to engage them as subcontractors. If they are employed, you will have to deduct employees NICs , income tax and pension contributions from their pay. The cost for your company will be the employers NICs at 13.8% and the employer minimum pension contribution.

It will all depend what payments you agree with the subcontractor, if employed, you would pay them less to factor the employer NIC, the holiday pay, etc. If you have an accountant, if you tell them how much net pay you are looking to achieve, they can work out an estimate of the gross salary and the additional costs for employer NICs and pension contributions, and this will be the overall cost for your company for the employment option.

[m0n1k3r]

I could be wrong here but you are you should be looking at taking them on as an employee for a subcontracting gig? They'll sue you to high heaven when the work dries up and you stop paying them?

Nobody in their right mind would employ a person on a permanent contract for a specific gig. That's what fixed term contracts are for. They are like a permanent contract, but with one extra clause:

"This contract shall end on ... or when the project is ended for whatever reason."

The alternative is a pay by the hour contract, but the fixed term contracts tend to be easier to administer and lead to less discussions ("my day rate is X so why am I not receiving X" etc).

[b r]

Nobody in their right mind would employ a person on a permanent contract for a specific gig. That's what fixed term contracts are for. They are like a permanent contract, but with one extra clause:

+1

Offer it as either Contract or F/T

In my last contract it was offered as a F/T and I just worked out the cost (pro-rata 48 weeks plus NI plus pension and chucked in 4 weeks of unspecified) and then offered the MD a daily rate.

In the end we agreed an hourly rate (as it wasn't going to be full-time). Worked well as I got paid whenever I was there