Contracting for/on behalf of my current firm....thoughts? (Not an IR35 question)

[vwdan]

Hi All,

I'm currently, and have always been a permanent member of staff and for the last 3 years I've been working for a small consultancy firm. I'm technical, so my role has been to go out to customer sites and do installations, upgrades and what have you. I enjoy it here, but realised I was starting to get itchy feet - no surprised given it's the longest I've stayed in one place. After much reading and research I'd decided to quit and go contracting, so I told my boss (without handing in my notice).

Anyway, he threw a bit of a curveball and offered me a chance to stay with the company but with the freedom to, well, do whatever I want. I'd be a PAYE employee, but without a fixed salary - anything I earn is invoiced through them, they charge a management fee on income minus expenses and then pay me. The management fee they want actually equates to a loss for them which means although I'm paying more tax, the difference between running my own Limited company may be negligible. Especially when you take into account the more niche advantages like access to MSDN, an office and keeping my current laptop and development environment. There's also reduced risk because I know they'd let me go back to "normal" if things didn't work out.

Anyway, I still have a lot of work to do on the financials but I was hoping to get some opinions on this concept. Contracting was never about "being my own boss" as such because, to be honest, we have an extremely hands off management approach here. But, I don't know if agencies and clients will like or understand the concept? Or maybe there are a million pitfalls I hadn't thought of?

By the way, the advantage to them is keeping my knowledge and expertise in the company.

I'd really appreciate any thoughts from those in the contracting field.

Thanks,

Dan

[malvolio]

So giving up employment rights and protections, sick pay, holidays, training and pension rights for no gain in income or freedom of action seems like good idea? Also it's not actually a loss to them since you will find you're now funding the Employers NICs contribution and saving them a few grand in overheads.

Yeah, go for it....

[SueEllen]

We keep getting these kinds of posts.

Maybe there should be a sticky informing people that if your current employer wants to take you on as a contractor there is no advantage to you at all.

[vwdan]

So giving up employment rights and protections, sick pay, holidays, training and pension rights for no gain in income or freedom of action seems like good idea? Also it's not actually a loss to them since you will find you're now funding the Employers NICs contribution and saving them a few grand in overheads.

Yeah, go for it....

I'm not with you? The management fee they want to charge doesn't quite cover their NI contributions, leaving them a small loss in pure monetary terms. Also - I gain as much money as I like depending on my charged day rate (Set by me) and how often I'm contracted out (Again, set by me work depending of course). I don't expect to make huge sums, but the hope is it will be substantially more than I'm on now.

Holidays won't be paid, but I can simply not work if I don't wish to - like anyone else here. Sick pay is the same as going alone, as are employee rights.

So, yes I'm giving up a lot of rights - but I don't get any of these rights while Self Employed anyway, so it's not a toss up of "Keep rights vs Give them up".

[vwdan]

We keep getting these kinds of posts.

Maybe there should be a sticky informing people that if your current employer wants to take you on as a contractor there is no advantage to you at all.

I may be misunderstanding you, or perhaps my post wasn't clear (Probably the case) but to clarify - I won't be doing work FOR my current company. I'll be working for my own clients just as I would be if I were self employed.

I'm not trying to defend the concept 100% because I'm unsure myself as to whether it's the way forward, but I can certainly see advantages for me.

[SueEllen]

I'm not with you? The management fee they want to charge doesn't quite cover their NI contributions, leaving them a small loss in pure monetary terms. Also - I gain as much money as I like depending on my charged day rate (Set by me) and how often I'm contracted out (Again, set by me work depending of course). I don't expect to make huge sums, but the hope is it will be substantially more than I'm on now.

Holidays won't be paid, but I can simply not work if I don't wish to - like anyone else here. Sick pay is the same as going alone, as are employee rights.

So, yes I'm giving up a lot of rights - but I don't get any of these rights while Self Employed anyway, so it's not a toss up of "Keep rights vs Give them up".

You aren't thinking about this clearly.

Firstly there is a legal difference between being self-employed and a contractor, and I strongly suggest you look this up.

Secondly if you work for your current employer as a contractor it's a continuation of your previous employment as it's not a redundancy situation. This means you are liable to pay employers NI and employees NI. Your current employer will not pay the employers NI as they aren't legally obliged to.

If they don't make you use a limited company or an umbrella company to work through as self-employed then you are liable for a different class of NI. However as their aim is to save money they won't allow you to work as self-employed so you will have to use a limited company or umbrella company.

[SueEllen]

I may be misunderstanding you, or perhaps my post wasn't clear (Probably the case) but to clarify - I won't be doing work FOR my current company. I'll be working for my own clients just as I would be if I were self employed.

I'm not trying to defend the concept 100% because I'm unsure myself as to whether it's the way forward, but I can certainly see advantages for me.

Your post is clear.

You are a mug if you take this on.

Your current employer is trying to get rid of their legal obligations to you as an employee to save money.

If you want to go down the self-employed route why give them money as a management fee? Sort out your own clients and get a reputation for your own businesses name without having them as a wrapper.

[northernladuk]

Sounds like a load of crock to me. As Mal says you are giving up everything else for no gain and potentially no work if the client doesn't want to give you it. Remember the flexibility you crave works both ways so they have the same flexibility to not give you work and get rid when they feel like it. I don't fully understand how this will work but I am sure there are many other issues with this situation.

Surely how much you are contracted out is set by them, not you. You are the supplier.

Why not just bin them off altogether and do it properly?

[malvolio]

Your post is clear.

You are a mug if you take this on.

Your current employer is trying to get rid of their legal obligations to you as an employee to save money.

If you want to go down the self-employed route why give them money as a management fee? Sort out your own clients and get a reputation for your own businesses name without having them as a wrapper.

Agreed...


You want to be a contractor, fine, go and be one. If you can get clients on your own terms and by your own effort, also fine. If so what does your employer bring to the party exactly? Contractors work for themselves, nobody else. It's rather the point of why we do it.


However, are your employer's clients buying your skills or your employers? (Think carefully before you answer that one). If you won't get clients other than by being an ersatz employee of your current employer then you lose out, badly.


No matter how good the relationship, companies exist to make money. If you think someone is offering you free money, they aren't: there will be an up side for them or they wouldn't bother. In your scenario, you do all the work, you bring in the income, they get a fair sized chunk of it for doing nothing they aren't already doing with much reduced risks and overheads.


You may be happy with the idea, just don't ask any of us to work that way.

[vwdan]

Secondly if you work for your current employer as a contractor it's a continuation of your previous employment as it's not a redundancy situation. This means you are liable to pay employers NI and employees NI. Your current employer will not pay the employers NI as they aren't legally obliged to.

If they don't make you use a limited company or an umbrella company to work through as self-employed then you are liable for a different class of NI. However as their aim is to save money they won't allow you to work as self-employed so you will have to use a limited company or umbrella company.

My employer WILL pay the NI - from the management fee, that has been agreed. In this instance, the company would be the umbrella company - I don't see any tax implications here. I'll pay more tax than running a Ltd Co. (What I mean when I say Self Employed, by the way), but the idea is that it will be offset by not requiring my own insurance and accountancy. This isn't a profit making exercise for my company and I do believe that.