Hi all, interested in your thoughts on this...
I'm finalising a renewal with MyClient who I've been with through a few extensions over time. This extension will take me beyond change in IR35 regime, hence instead of being via MyCo I will now be going through a brolly - so, not quite an 'extension' but it'll be a gap-free transition from one basis to the other.
I have no concerns about historical risk from going 'outside to inside' same client, because I've chosen to operate inside IR35 my entire contracting career (yes, I know it's different to the overwhelming majority of you; an informed choice at every stage on my part and I don't want to litigate it yet again! but mentioned as key to what comes next).
The financial difference between inside IR35 via MyCo and inside IR35 via brolly isn't big (key difference is brolly margin; reduced flexibility on pension; loss of the 5% allowance I currently get within the IR35 calculation - but major impact isn't financial to me; it's loss of control, flexibility etc that comes with MyCo). Since I'm not losing out much financially and already on a decent rate, I decided not to negotiate on rate for this extension, though I know I probably could've done. I wanted to focus on flexible working instead, which they agreed to - this was important to me and I didn't want to muddy waters also asking for more money.
What I'd conveyed to the agent was I'd agreed to a 6 month 'extension' on current rate (agency is one of the big boys and is the client's sole approved partner for all resourcing needs - though I'm the only contractor at this client).
Through a quirk and via my 'boss' at ClientCo, I've recently found out the agent has told them the pay rate for me will increase beyond what they were expecting. Digging into it, it turns out it will be:
My current day rate
Plus: 13.8% on top 'for Employer's NICs'
Plus: agent's flat margin
(+VAT)
I obviously knew the agent has a margin, but my expectation for this extension was MyClient would continue to pay the same as now (including margin, VAT) and I'd simply continue to be paid my current day rate, only since that this would go to the umbrella company what I personally would receive from brolly would be net of:
Employer's NICs
Employee's NICs
PAYE tax
Brolly Margin
(I'm ignoring messing about with pensions, apprenticeship levy etc for now to make it simple)
This is pretty much what happens now - it's a lot more flexible for me and I'm in control of it, but the EERs NICs I pay from MyCo in respect of my salary do effectively come out of 'my current day rate'.
As it happens, the client is willing to swing for the extra 13.8%. But what interests me now is how they've even been asked for it, given what I told the agent. If "my current day rate +13.8%" is ultimately what gets paid to the brolly for me per day, I will be 13.8% better off than I thought I was going to be when I agreed to this extension. It's not actually what I intended, but obviously that would be A Good Thing. On the other hand I can't really work out how this has happened, so it makes me suspicious the agent is attempting to pull a fast one of some kind (it's only because of the situation I'm in with my MyClient 'boss' that I know all this - in the normal course of events I wouldn't (and shouldn't) have known this (I even know what the margin is now too!) So I'm thinking, perhaps the agent is treating this as 'extra margin' and only planning on passing on 'my current rate' to the brolly?? But as I write that I think - that'd be a pretty big misrepresentation to the client...
I'm wondering if, if this was a new contract being advertised for inside/ umbrella that the 'standard' way the rate would be advertised to candidates would be a 'pay rate' equivalent to the gross salary for a permie job i.e. gross of employee PAYE & NICs but with expectation being clients will cover the Employer's NICs on top? In which case, perhaps the agent has just followed this approach and I'm just going to be better off than I thought as a result?! Their margin is flat so there's no apparent incentive for them to negotiate up my rate...
I need to find a way to dig into this with the agent without dropping the client in it for how much I know. But in the meantime, would be grateful if any of you have any thoughts to offer, particularly on whether my idea about what might be 'standard' approach to describing rates when advertising new roles at the moment is accurate or off-base.
I'm finalising a renewal with MyClient who I've been with through a few extensions over time. This extension will take me beyond change in IR35 regime, hence instead of being via MyCo I will now be going through a brolly - so, not quite an 'extension' but it'll be a gap-free transition from one basis to the other.
I have no concerns about historical risk from going 'outside to inside' same client, because I've chosen to operate inside IR35 my entire contracting career (yes, I know it's different to the overwhelming majority of you; an informed choice at every stage on my part and I don't want to litigate it yet again! but mentioned as key to what comes next).
The financial difference between inside IR35 via MyCo and inside IR35 via brolly isn't big (key difference is brolly margin; reduced flexibility on pension; loss of the 5% allowance I currently get within the IR35 calculation - but major impact isn't financial to me; it's loss of control, flexibility etc that comes with MyCo). Since I'm not losing out much financially and already on a decent rate, I decided not to negotiate on rate for this extension, though I know I probably could've done. I wanted to focus on flexible working instead, which they agreed to - this was important to me and I didn't want to muddy waters also asking for more money.
What I'd conveyed to the agent was I'd agreed to a 6 month 'extension' on current rate (agency is one of the big boys and is the client's sole approved partner for all resourcing needs - though I'm the only contractor at this client).
Through a quirk and via my 'boss' at ClientCo, I've recently found out the agent has told them the pay rate for me will increase beyond what they were expecting. Digging into it, it turns out it will be:
My current day rate
Plus: 13.8% on top 'for Employer's NICs'
Plus: agent's flat margin
(+VAT)
I obviously knew the agent has a margin, but my expectation for this extension was MyClient would continue to pay the same as now (including margin, VAT) and I'd simply continue to be paid my current day rate, only since that this would go to the umbrella company what I personally would receive from brolly would be net of:
Employer's NICs
Employee's NICs
PAYE tax
Brolly Margin
(I'm ignoring messing about with pensions, apprenticeship levy etc for now to make it simple)
This is pretty much what happens now - it's a lot more flexible for me and I'm in control of it, but the EERs NICs I pay from MyCo in respect of my salary do effectively come out of 'my current day rate'.
As it happens, the client is willing to swing for the extra 13.8%. But what interests me now is how they've even been asked for it, given what I told the agent. If "my current day rate +13.8%" is ultimately what gets paid to the brolly for me per day, I will be 13.8% better off than I thought I was going to be when I agreed to this extension. It's not actually what I intended, but obviously that would be A Good Thing. On the other hand I can't really work out how this has happened, so it makes me suspicious the agent is attempting to pull a fast one of some kind (it's only because of the situation I'm in with my MyClient 'boss' that I know all this - in the normal course of events I wouldn't (and shouldn't) have known this (I even know what the margin is now too!) So I'm thinking, perhaps the agent is treating this as 'extra margin' and only planning on passing on 'my current rate' to the brolly?? But as I write that I think - that'd be a pretty big misrepresentation to the client...
I'm wondering if, if this was a new contract being advertised for inside/ umbrella that the 'standard' way the rate would be advertised to candidates would be a 'pay rate' equivalent to the gross salary for a permie job i.e. gross of employee PAYE & NICs but with expectation being clients will cover the Employer's NICs on top? In which case, perhaps the agent has just followed this approach and I'm just going to be better off than I thought as a result?! Their margin is flat so there's no apparent incentive for them to negotiate up my rate...
I need to find a way to dig into this with the agent without dropping the client in it for how much I know. But in the meantime, would be grateful if any of you have any thoughts to offer, particularly on whether my idea about what might be 'standard' approach to describing rates when advertising new roles at the moment is accurate or off-base.
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