Contractor becoming employer

[gbom]

I am an engineering contractor who has a supplier agreement with a client for the provision of a suitably qualified engineer (ie me) to undertake analysis works.

I am considering employing (PAYE or Ltd) an engineer to fulfil this role leaving me available to service other clients with the aim of growing my company.

Does anybody have any experience / advice on taking this leap.

Any help is much appreciated

[Louisa@AardvarkAccounting]

Assuming you have a Ltd - as you say there are two routes:

Ltd to Ltd with the engineer that you will be sending to your client. Your company will then just pay their company. I assume he will be left to his own devices and you will not be controlling the work that he does. He would then be a subcontractor.

Or if they will be an employee of your company (you'll effectively be controlling them), then he'll need to be added onto the payroll with PAYE deducted.

Either way the contract will still remain between your Ltd company and the end client. Then you will have another agreement with the engineer.

Plus, you'll need to look at your business insurances to make sure you have enough cover as well

[gbom]

Assuming you have a Ltd - as you say there are two routes:

Ltd to Ltd with the engineer that you will be sending to your client. Your company will then just pay their company. I assume he will be left to his own devices and you will not be controlling the work that he does. He would then be a subcontractor.

Or if they will be an employee of your company (you'll effectively be controlling them), then he'll need to be added onto the payroll with PAYE deducted.

Either way the contract will still remain between your Ltd company and the end client. Then you will have another agreement with the engineer.

Plus, you'll need to look at your business insurances to make sure you have enough cover as well

I am not sure if there would be enough margin to subby the work as a similarly experienced guy to myself would be required. He would therefore be looking at a similar rate to that of my agreement. Plus, I wouldn't want to relinquish some control of the contract. My preference would be to take on somebody more junior who I can manage and supervise to an extent. This would have to be full time for a period and so I would take a hit, moving forward I would like to think I could make more of my time available to other clients. So I am kind of decided on how I want to go with the contract. I am more looking at the management of the whole thing, "selling" my new employee to my client, recruitment, contracts etc.

I am torn between it being a great opportunity to grow and more hassle than its worth.

[jmo21]

I am not sure if there would be enough margin to subby the work as a similarly experienced guy to myself would be required. He would therefore be looking at a similar rate to that of my agreement. Plus, I wouldn't want to relinquish some control of the contract. My preference would be to take on somebody more junior who I can manage and supervise to an extent. This would have to be full time for a period and so I would take a hit, moving forward I would like to think I could make more of my time available to other clients. So I am kind of decided on how I want to go with the contract. I am more looking at the management of the whole thing, "selling" my new employee to my client, recruitment, contracts etc.

I am torn between it being a great opportunity to grow and more hassle than its worth.

Well, consultancy companies exist, and must have started somewhere, you just need to figure out how to do it, how much it will cost etc

How quickly do you think you could hire a junior level person like this?

Would your client be happy you subbing in a junior and paying top whack? It happens with the big consultancies, but you won't have their deep pockets behind you.

[northernladuk]

IMO if you are just stabbing at the odd opportunity then I'd be leaving it well alone. Try get an introduction fee from an agent or your client and then leave it.

If you are thinking big and are becoming a small consultancy and offering up managed services they it could be a goer and I don't blame you for trying.

It does sound, however, it's the former. If you were going down the consultancy route you should have a business plan and strategy to sell this and pull it off. The fact you are asking here tells me you haven't.

I would be surprised if every contractor has been tempted by this idea but when you understand the complexities and risks it ceases to be attractive.

[gbom]

IMO if you are just stabbing at the odd opportunity then I'd be leaving it well alone. Try get an introduction fee from an agent or your client and then leave it.

If you are thinking big and are becoming a small consultancy and offering up managed services they it could be a goer and I don't blame you for trying.

It does sound, however, it's the former. If you were going down the consultancy route you should have a business plan and strategy to sell this and pull it off. The fact you are asking here tells me you haven't.

I would be surprised if every contractor has been tempted by this idea but when you understand the complexities and risks it ceases to be attractive.

Thanks for that. You're right, that's pretty much where I am. I want to grow into a consultancy its just how and when to make the jump. The contract I am on at the moment has significant amount of work on it, 12-18 months. 95% of the work could be done by somebody more junior than myself.

Prior to engaging with this client I was working on small ad-hoc projects which game my way from previous clients. Basically I could undercut consultancies with overheads for jobs with 40 hours to them. In those 3 months I was invoiced the equivalent of about 4-5 months on my current contract. The problem being it was very ad-hoc.

The way I am thinking is taking somebody on to fill this role gives me 12-18 months whereby I can grow my consultancy by getting out and meeting clients, tendering for work etc.

Servicing the current client ties me up during office hours. Actually doing additional work is something I continue to do on an evening and weekend its just communication with other clients is extremely difficult and I believe its preventing me from taking that next step.

[northernladuk]

Doesn't sound like a plan to run a successful consultancy to me but I'm just a bum on a seat.