What the hell?!?

[Smurf]

...Am I supposed to do?

I've never contracted before but looks like I might have to soon as our department is being 'Downsized' en masse. There's a possibility that there will be hire backs as contractors for the roles and the terms would most likley be...

10,000 retainer per quarter (buys 20 days of our time)
450 per day for every extra day we work in the quarter (not likely to be many if at all)

I'm also up for a permie role that would be around the 60,000 mark, so i don't know which makes more finacial sense as I don't understand the tax and NI for contract work and the IR webite is just confusing the hell out of me

I don't like to pry about the details of the contract work as nothing has been decided yet about redundancies but if a company has you on a retainer would I be able to work for other companies in the time they don't book me for or does it mean I'm at there beck and call at a days notice? I know this may vary between contracts but is there a rule of thumb with retainers?

Thanks guys I'd appreciate any help you can offer, I'd happily code in binary but put a tax form in front of me and my brain turns to mush.

[oraclesmith]

I've never been on a retainer and I doubt many have. It would depend on the wording of the contract and it could easily go either way. Depends on supply and demand as well - ie. if the company have their pick of retained staff they can ask what they like, including exclusivity I suppose. On the other hand, if they can't survive without you and your colleagues, they may agree to them working elsewhere so long as they get first call. I doubt it though. The trouble is, even if you get this concession, you'd have to get ad-hoc work instead of solid 3 or 6 monthers.

As for contract versus permie, it would depend on whether you could avoid IR35 (ie. being a deemed employee). Being as it's your old employer and they're likely to make you work as you used to when you were permies, then I guess not, although some posters here will insist that it's possible. It mainly depends on the contract though.

It sounds like you might clear £60k? on your retainer contract versus £60k on permie. The retainer option presumably means you have a lot of spare time at home which might be useful.

If you're inside IR35 (ie. you are a contractor who looks like an employee) then I would say the permie job is better as the overheads of either running your own limited company or going through an umbrella firm may outweigh any tax you might save. And if you only get the £40k per annum on contract, no extra days, then it's starts to look much worse for contracting. Basically you have a number of fixed overheads - insurance (£500 pa), accountancy (£1k pa) as well to consider, plus umbrella fees if you go this way.

NB. Umbrella's are alternatives to setting up your own limited company - you basically become an employee of the umbrella and they sort out the company admin and invoice the client for you, paying you a salary and maybe dividends. You don't avoid much tax though as the only real concession is being able to claim expenses. Most career contractors go for their own limited company.

If you're outside IR35 (genuinely self-employed) then contract probably a lot better at these level of pay, but non-IR35 might be difficult to swing with your situation. If you only get the £40k per annum on contract, no extra days, then (again) it starts to look much less beneficial versus a £60k permie job.


Remember that as a self-employed contractor you have little in the way of sick pay, maternity pay etc, etc, paid leave etc, and you'd have to fund your pension 100%. You get freedom, can avoid office politics, regarded as a hero etc, etc though. Only in your case you probably don't until the contract is over.

*** All this is just in my humble opinion.

Your best bet is to consult a proper small business or contractors accountant when you get some solid idea of the contracts available, rather than ask a bulletin board.

Whatever you do don't jump before the redundancy payout !!! It has been known....


PS. Never go for any of these offshore firms which offer 80% or more payouts as they are sailing close to the wind with the Revenue. In my opinion.

[malvolio]

Hmm....

Be careful. How can you be made redundant if you are being re-hired to do the same job? That rather implies the job is not actually redundant, which means you are either being wrongfully dismissed or your em,ployer is pulling a fast one with its creditors.

Secondly you will be inside IR35, absolutely no doubt about it - it is precisely this kind of thing that IR35 is intended to hit.

Thirdly, if the gross remains the same, you are about 40% down on net before yuo start if you want to keep parity on the overall package (Health, holidays, car, pension, dah-di-dah). We don't equate hourly rate * 100 to annual permie salary for no reason. Do the sums properly

Fourthly, if you're on a retainer, you will find it tricky to get a parallel contract, especially if you aren't any kind of real niche player.

And finally get real legal advice, individually or collectively. This is all very wrong.

[oraclesmith]

Hourly rate * 100 = annual permie salary. !!

Also, surely redundancy and a retainer or redundancy followed by another permie job elsewhere is going to be much better than pursuing a solo wrongful dismissal claim against a company - what are you going to gain ? - your old job back - and for how long?

I agree, inside IR35 unless they're not doing the old job.

They could be hired back as expert advisers for the remaining staff, rather than straight back into their old jobs, which would satisfy the redundancy issue, make sense of the retainer thing and possibly put them outside IR35. Possibly. Speculation !

[Smurf]

Thanks for the advice guys. The re-hire of some of those being dropped is my guess from the wording of official emails, what the company did in a similar situation before and baseless rumours

The rates were what the last guy got and I believe he avoided IR35 despite doing the same job as before but he got clobbered by NI contrubtions or something.

All that free-time is tempting but I know I'd spend most of it down the pub instead of writing a novel, learning Russian or climbing Monte Blanc.

[oraclesmith]

If he avoided IR35, the he shouldn't be paying much NI. He would probably take a smallish salary plus dividends. The NI is payable on BOTH employers and employees side for the salary, but since most non-IR35 contractors only take £5k-£10k in salary, this won't be much. Reading between the lines, it looks like he got clobbered for NI because he got caught by HMRC and put back inside IR35, which means he would have to pay NI on most of his takings instead of the first few thousand. Maybe.

NB. The NI contribution is the main differentiator between IR35 and non-IR35 calculations.

PS. Your IR35 status would definitely be dodgy and probably wouldn't be worth the hassle you'd get from the Revenue if you held out for it. It might work if you were in control of the contract (ie. your lawyers wrote it) but I guess you'd simply be presented with something to sign.

I did a similar thing. I was made voluntarily redundant and asked to come back on contract, but there was no continuation of service, I was totally in control of the contract and I went back to do a materially different kind of work.

[Smurf]

Actualy I think he was just moaning about paying employer & employee NI, He always was tighter than a gnats chuff. Nice guy though

[oraclesmith]

Yeah, well the Revenue get a bit anxious if you don't give them something !!

[darmstadt]

I've been on a retainer for the last 3 years with a company in the USA and get paid monthly by them. I also get paid by them per systems that I build and for support on systems provided by them built by partners. At the same time I also contract or provide consultancy for other companies although I try to keep that to part time (i.e. 2-3 days a week) or home working. Works fine for me but I don't live in the UK!

[errorista]

i agree with the comments

but might I add that you should accept other contracts in your 'spare' time

having multiple clients is a good IR35 strategy

make sure all your contracts allows you to do this

2c