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Payment frequency- Inside & Outside IR35

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    Payment frequency- Inside & Outside IR35

    Hi All,

    Apologies as I’m almost certain this will be a duplicate post, but I’ve searched and can’t find it.

    My understanding is inside IR35 roles are paid weekly and I’m assuming outside IR35 roles are invoiced after 30 days, with a 30day period for payment, so ~60 days until first payment.

    In your experience, is the statement above correct?

    I’m about to accept my first contracting role, the offers I have are two offers on the table, one £500/day outside and the other £600 inside.

    I’m trying to figure out which one to accept and the payment frequency is a big factor for me as it’s my first role. I don’t have a war chest saved up specifically for this, but I do have access to funds if I did need to use them. Just I’d prefer not to be waiting 60+ days for my first payment.

    thanks

    #2
    Originally posted by JackD View Post
    Hi All,

    Apologies as I’m almost certain this will be a duplicate post, but I’ve searched and can’t find it.

    My understanding is inside IR35 roles are paid weekly and I’m assuming outside IR35 roles are invoiced after 30 days, with a 30day period for payment, so ~60 days until first payment.

    In your experience, is the statement above correct?

    I’m about to accept my first contracting role, the offers I have are two offers on the table, one £500/day outside and the other £600 inside.

    I’m trying to figure out which one to accept and the payment frequency is a big factor for me as it’s my first role. I don’t have a war chest saved up specifically for this, but I do have access to funds if I did need to use them. Just I’d prefer not to be waiting 60+ days for my first payment.

    thanks
    Nope payment terms will depend on the agency so can be:-

    weekly billing 7 day terms
    weekly billing 30 day terms
    Monthly billing 7 to 15 day terms
    Monthly billing 30 day terms
    Monthly billing 45-60 day terms (paid when we the agency is paid)(.

    As for outside and inside IR35 - the important factor for me would be - how much travelling does the contract entail because with an outside contract that comes out of the £500 a day fee while inside the costs would come from your post tax income (i.e. from the £300 or so you got after tax).


    merely at clientco for the entertainment

    Comment


      #3
      Originally posted by eek View Post

      Nope payment terms will depend on the agency so can be:-

      weekly billing 7 day terms
      weekly billing 30 day terms
      Monthly billing 7 to 15 day terms
      Monthly billing 30 day terms
      Monthly billing 45-60 day terms (paid when we the agency is paid)(.

      As for outside and inside IR35 - the important factor for me would be - how much travelling does the contract entail because with an outside contract that comes out of the £500 a day fee while inside the costs would come from your post tax income (i.e. from the £300 or so you got after tax).

      Thanks, so the billing / payment terms don’t change based on inside/outside, rather agency to agency?

      For outside roles, are these still paid via an agency not directly from invoicing the business?

      Comment


        #4
        Originally posted by JackD View Post

        Thanks, so the billing / payment terms don’t change based on inside/outside, rather agency to agency?

        For outside roles, are these still paid via an agency not directly from invoicing the business?
        Payment terms are based on what you can negotiate.

        Comment


          #5
          Originally posted by cannon999 View Post

          Payment terms are based on what you can negotiate.
          I’m slightly confused based on the previous response too - negotiate with whom? The hiring company or the agency? Is there a need for an agency for an outside role? I assumed not but after the last comment I’m unsure

          Comment


            #6
            Originally posted by JackD View Post

            I’m slightly confused based on the previous response too - negotiate with whom? The hiring company or the agency? Is there a need for an agency for an outside role? I assumed not but after the last comment I’m unsure
            You negotiate payment terms with whoever pays you..

            Comment


              #7
              Originally posted by JackD View Post
              I’m slightly confused based on the previous response too - negotiate with whom? The hiring company or the agency? Is there a need for an agency for an outside role? I assumed not but after the last comment I’m unsure
              There are certainly outside roles that go through agencies; I'm in one right now. As with any contract, it depends whether the end client wants to review all the CVs themselves or get a recruitment agency to filter them into a shortlist. You can also go direct if you advertise and they come to you (e.g. if you're a web designer).

              Whether you go direct or through an agency, there will be a contract that you sign. For instance, here's a quote from the Hays key information document:

              "How often you will be paid:
              The employment business will pay your personal service limited company weekly in arrears, subject to your timely submission of an authorised timesheet. Further information regarding timesheet submission will be provided before the start of an assignment"


              If you don't like the payment terms, you can ask to change them; that's where the negotiation comes in.

              It might help us if you could be more specific about your situation. Did the outside offer come from a client? Whoever it came from, have they given you any documents to review? It would be reasonable to ask to read the documents before you accept the offer.

              Comment


                #8
                Originally posted by JackD View Post
                I don’t have a war chest saved up specifically for this, but I do have access to funds if I did need to use them.
                Just as an extra thought on this (based on your other thread), are you still in a permie role at the moment?
                Perm employee looking to transition into the contracting world - Contractor UK Bulletin Board

                If so, I'd be very cautious about jumping into a contract without a warchest. Here's a cautionary tale from my own experience:
                * I rage-quit my permie role, then I was on the bench for 2 months before I landed my first contract.
                * That lasted for about 3 months, although I finished a few days earlier than expected because I had to go into hospital for emergency surgery. (As a permie, that would be a paid holiday. As a contractor, it meant that I couldn't bill for those days.)
                * I was then on the bench for another 3 months before I got my second contract.

                So, that's 5 months out of 8 when I had zero income. By the end of that, I was basically running on fumes: I'd maxed out my overdraft and my credit card, and the bank had started to refuse my direct debits. As I've posted elsewhere, I was literally living in a tent for the first few months of my second contract, because I couldn't afford to stay in a hotel.

                Fortunately, I've had back to back contracts since then, so my finances are now in a much healthier place. However, just be aware that this new contract could go wrong. If you quit your permie job, then the contract gets cancelled, and you don't have any savings, what will you do? It would be safer to build up a warchest first, then look at contracting.

                Comment


                  #9
                  Originally posted by cannon999 View Post

                  You negotiate payment terms with whoever pays you..
                  The force is not strong with this one.
                  'CUK forum personality of 2011 - Winner - Yes really!!!!

                  Comment


                    #10
                    JackD, please take this with the best intentions. If you've not been able to grasp payment terms, even after the very clear answer to your first post, then seriously consider whether contracting is for you. It's not just like being an employee but paying better, it is running a business with some serious responsibilities. Whilst the upsides can be fruitful, there are also potential serious downsides. Jumping in without fully understanding the risks, based on your own circumstances, is not a decision to be taken lightly.

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