Crackdown on personal service companies could raise £400m in tax

[LondonManc]

As a PM I have run projects with a mix of internals and contractors, by the time the internal rate is put in the sheet alongside what the contractor is costing the gap is reduced though the contractor is higher especially much higher compared to a contractor sourced through an agency.

Are you suggesting that a direct contractor costs more than one sourced through an agency?

[MarkT]

Are you suggesting that a direct contractor costs more than one sourced through an agency?

Don't think that's right at all.

I use a blended rate for perms (£250pd) and one for contractors (£500pd) We do cost more.

The difference is that we aren't going to be here in a years time, so our CFO doesn't mind 10x the amount compared to the perms. So while he could have twice the amount of contractors to perms, he'd have to keep those perms and if he wanted different skills, he'd have to train them.

This way, he can bin VBA devs and hire Java Devs, or if he's having an issue with project management, hire some PMO or PMs and cut back somewhere else.

He can't do that with a perm workforce, this needs to be outlined to HMRC, by ClientCo's, probably via the CBI, asap.

[d000hg]

With regards to the PAYE rate, once the day rate has had employees and employers NIC deducted (don't kid yourself that the employer is going to foot the NIC bill - not on top of your current rate, for sure!) along with income tax......i'd be very surprised if there was much left between permie and a contractor with apparent zero employment benefits.

I don't agree with that.

Based on the below, which would you choose......permie with 6 weeks holiday, sick, pension etc, or contract with zero benefits.

Based on 15/16 Tax Rules

Contractor @ £500pd x 47 weeks - £117,500
Employees NIC - £5,600
Employers NIC - £15,095
Tax - £39,900
Take Home - £56,900

Employee On £85,000
Employees NIC - £4,971
Employers NIC - £0
Tax - £23,403
Take Home - £56,600

I really hope I've missed something here, but I don't think I have.

To me you've missed that £85k is a very high salary, surely even in London - not comparable with £500 day rate?

Round here day rate for a developer seems to be in the £300-400 range but there are few developers on more than £40k for instance. I didn't do the sums but I'm sure I'd be taking home a fair bit more as a contractor.

[xar18]

I don't agree with that.

To me you've missed that £85k is a very high salary, surely even in London - not comparable with £500 day rate?

Round here day rate for a developer seems to be in the £300-400 range but there are few developers on more than £40k for instance. I didn't do the sums but I'm sure I'd be taking home a fair bit more as a contractor.

I agree. Contract business analysts outside London are circa £325 - £450 a day with perm salaries being up to £35k/£40k, down to low £20k's for the lower end of the scale.

So contract rates are at least twice, but more like 3 times the equivalent.

As a business architect the role maximum is about £60k, and the contract rate again is double this.

[MrO666]

I agree. Contract business analysts outside London are circa £325 - £450 a day with perm salaries being up to £35k/£40k, down to low £20k's for the lower end of the scale.

So contract rates are at least twice, but more like 3 times the equivalent.

As a business architect the role maximum is about £60k, and the contract rate again is double this.

Not sure where you people are based.......but low 20's.....why bother....sit on a helpdesk for the same money and zero agro.

Certainly in the city 75 - 90 is an achievable salary for an architect, senior PM or senior DBA.

[BlueSharp]

Don't think that's right at all.

I use a blended rate for perms (£250pd) and one for contractors (£500pd) We do cost more.

Current gig the contractors have a lower internal cost then the Perms, the day rates are market average as well. I think it's done this way to keep internal head count artificially low on the perm side.

[m0n1k3r]

Not sure where you people are based.......but low 20's.....why bother....sit on a helpdesk for the same money and zero agro.

Certainly in the city 75 - 90 is an achievable salary for an architect, senior PM or senior DBA.

The City is not representative for the private sector as a whole, even in London.

Agencies tend to suggest annual base salary / 125 = rate to the contractor, with some variations.

[LondonManc]

The thing that many miss out in this is the levels of people. In perm world, you get Junior Business Analyst, Business Analyst and Senior Business Analyst. In contract world, you get a Contract Business Analyst.

If a JBA earns 20-30k, a BA earns 30-40k and the SBA 40-50k, what rate should the contractor get and who are you comparing them to? It seems that expectations dictate that contractors are all senior-skilled so should all get top rate. Perhaps once we get separate rates for different levels of contractor, we may see a better picture forming.

[d000hg]

Not sure where you people are based.......but low 20's.....why bother....sit on a helpdesk for the same money and zero agro.

I don't know about low 20s for a BA or experienced developer, though for helpdesk or web-dev or graphical designer I wouldn't be surprised.

Certainly in the city 75 - 90 is an achievable salary for an architect, senior PM or senior DBA.

Yeah, but that's only small proportion of people. A good developer can get £500/day in London (maybe more) but you're not going to easily find an £80k salary as a developer even in London.

[xar18]

The thing that many miss out in this is the levels of people. In perm world, you get Junior Business Analyst, Business Analyst and Senior Business Analyst. In contract world, you get a Contract Business Analyst.

If a JBA earns 20-30k, a BA earns 30-40k and the SBA 40-50k, what rate should the contractor get and who are you comparing them to? It seems that expectations dictate that contractors are all senior-skilled so should all get top rate. Perhaps once we get separate rates for different levels of contractor, we may see a better picture forming.

Couldn't agree more. I am struggling with this very issue on my team at the moment. The rule seems to be 'if I have been a BA for more than 3 years in am a senior BA', it doesn't seem to relate to experience.

I have a mix of perm and contract BAs working for me at all levels and I agree with the broad salary bands. A London based perm 'lead' BA can get £50k, but I have a junior BA in Edinburgh on £23k. By comparison I have just released lead BA contract roles paying up to £440 in London, and an Edinburgh based BA role at £342.

My point being that for BA roles at least, the contract market is always much higher than perm.