First Timer - quick question

[miketheman]

Hi

I'm london based and about to embark on my first contract. I'm hoping you sure footed experts can help me sift through some of the hoops I need to jump through to become a successful contractor.

My full time employer has agreed for my request to go contracting, and will serve as my first contract. There is a lot of background that I'm not going to go into too much detail about.

Essentially they don't want to pay me more than what they pay for me at present. I realise if I was approaching the open contracting market my rate would be a lot higher, but initially I'm OK with this as my company is helping me in a number of other ways.

So, I'm looking at trying to reach an acceptable figure - which I see as being my Gross Salary. Largely they agree, but the final sticking point is whether or not my employers NI contribution should be included in the Gross Figure. They're kind of looking at the figure as being my Salary plus benefits whereas I'm simply saying it should be Gross salary - i.e. what does it cost them every month taxes included.

The reason I'm thinking the Employers NI contribution should be included is that even though there are ways for me to be Tax "agile" with my salary and dividends etc once I'm setup as a limited company, if for whatever reason I chose to pay myself a full salary, My limited company would also need to pay the Employers NI contribution.

Is there anything else I need to think of? My Employer will argue differently I'm sure but I'm trying present the best argument I can?

Thanks in advance

Mike

[Platypus]

I'd advise posting this in Business/Contracts.

In General, you'll just get a load of abuse and

In Business/Contracts, you'll get useful answers.

[Arturo Bassick]

Don't do it.
Look up IR35 Friday to Monday converts.
You would be taking on the all the risks that your employer currently wears for no benefit.
The only way you can make this pay better is by using your Ltd Co to reduce your tax burden.
Your employer makes radical gains.

You would be letting our side down.

If you want to go contract then jump ship and get a proper rate.

[snaw]

Don't do it.
Look up IR35 Friday to Monday converts.
You would be taking on the all the risks that your employer currently wears for no benefit.
The only way you can make this pay better is by using your Ltd Co to reduce your tax burden.
Your employer makes radical gains.

You would be letting our side down.

If you want to go contract then jump ship and get a proper rate.

What he said.

There's a reason contractors have a higher day rate than permies. You may find out the hard way one day unfortunately.

[Zippy]

Oh dear. You are not embarking on your first contract, you are working for your employer for less money, security and benefits. Why on earth are you doing this?
You will not be able to take divis, you get no holiday pay, sick pay, training ......

I can't imagine you are serious but, if you are, then think again.

[chef]

So, I'm looking at trying to reach an acceptable figure - which I see as being my Gross Salary.

AND THEN SOME !!!!

explain to your current full time employer that there are many many differences between full time permie and contractor and the reason for your rate rise is that you also are now paying:

-your pension,
-your medical cover,
-your holiday pay,
-your car allowance,
-the extra 21% (? not sure as havent worked via ltd in a while) corporation tax,
-your legal expenses ensuring the contract is above board (and not just because they say it is)
-National insurance
-your employers liability insurance of the single company employee (you)
-all other business insurances
-your accountants fees
-the licensing for your software
-your hardware (irrelevant if they say you use client pc's, you are an IT contractor, a laptop/computer is therefore your tool, you'll need to purchase one and that is split up into your daily rate to ensure you can maintain a respectable level)
-any/all training courses that are required to keep up your job
-your company headed paper
-your company website
-company mobile phone
+ the not too small figure that you are now easily disposable (i.e your contract notice) , i.e you want more money than a permie with benefits BECAUSE you are easily disposable

ALL of these figures are effectively included in your rate

look at it this way, when you ask for a plumber to come fix your overflowing bathroom do you call him and start to discuss the differences in his NI allowance????? No, why? because he is providing a service. If however you owned a plumbing firm and was negotiating a new employee then you are legally obliged to pay NI. You are now firmly in the first category of providing a service and not in the business of discussing whether a contract would include NI "benefits" or not.

2nd example, you ask a builder round to give you a quote for laying some decking in the back garden, do you expect to start discussing if you wil pay his employees NI as part of the rate or not? No, he'll give you a price for what he believes it will cost, you then negotiate about quality of materials, time used, exactly what services are provided, any guarantees etc. NOT NI "benefits" your not paying for his staff.. FFS

3rd example, you call up sky and ask them to send a man around to install and configure your new sky+ box as you are too stupid .. "oh but the price you charge me, will that also include your engineers NI? Im not sure I want to pay his NI on top you see.. what, there's a fixed price? oh well I hope that meets the absolute bare minimum it costs you to pay him and nothing else for your company profits and to ensure sky runs well and therefore can invest in company maintainance etc. can you send me a breakdown of all your costs for that 1 engineer and we can discuss it further. ###k off? well that's very rude, what do you mean your rate for call out is £x and that's it, pay it or ###k off? ahh ok, your not my old employee then.. right thanks" FFS

[Churchill]

Mike, just what do you think you're getting out of the new relationship with your ex-employer?

[miketheman]

OOh, hornets nest ....


Thanks for the replies, let me try explain a bit further....

I'm actually moving back to South Africa, and my employer and I have decide to keep me on and see how that works.

They're not keen if that means me simply charging them a london market rate salary ... it's just not going to happen. Largly it helps me soft land in SA, and see how it works out and if it doesn't it gives me some space to look for a local position.

When looking at the rate, they're happy to include all my benefits ... So, at the moment thats:

Salary
Pension Contribution
PHI
Life Cover
Medical Aid (BUPA)
And Anuual Leave 25 Days etc

They're also talking about covering certain expesnes related to my job like:
Computer + Software
Internet Line
Business Mobile phone contract
Flights to the UK for certain meetings etc potentially quartarly but maybe less


However there are some expenses they are suggesting I pickup:
Training
Liability Insurance
Accountants Fees


We're trying to decide whether or not adding Employers NI contribution to the pot is essential ... now obviously I think so, but I need a valid reason other than simply going back with "Because stuff will cost more" ...

I could also do this through an Agency by that's looking like 8.5% Fee and a contract I'm not surte I really want to get stuck with.

Hope this makes sense ... I appreciate it's not a "true" jump ship approach, but it's going to be a much better position than simple going back to SA with no security blanket.


Thanks again ...

[Churchill]

OOh, hornets nest ....


Thanks for the replies, let me try explain a bit further....

I'm actually moving back to South Africa, and my employer and I have decide to keep me on and see how that works.

They're not keen if that means me simply charging them a london market rate salary ... it's just not going to happen. Largly it helps me soft land in SA, and see how it works out and if it doesn't it gives me some space to look for a local position.

When looking at the rate, they're happy to include all my benefits ... So, at the moment thats:

Salary
Pension Contribution
PHI
Life Cover
Medical Aid (BUPA)
And Anuual Leave 25 Days etc

They're also talking about covering certain expesnes related to my job like:
Computer + Software
Internet Line
Business Mobile phone contract
Flights to the UK for certain meetings etc potentially quartarly but maybe less


However there are some expenses they are suggesting I pickup:
Training
Liability Insurance
Accountants Fees


We're trying to decide whether or not adding Employers NI contribution to the pot is essential ... now obviously I think so, but I need a valid reason other than simply going back with "Because stuff will cost more" ...

I could also do this through an Agency by that's looking like 8.5% Fee and a contract I'm not surte I really want to get stuck with.

Hope this makes sense ... I appreciate it's not a "true" jump ship approach, but it's going to be a much better position than simple going back to SA with no security blanket.


Thanks again ...

Sounds like you won't be employed in the UK so why does NI contributions figure in this at all?

[Zippy]

That changes the picture a little. Your problem will then be to get a realistic price on the other benefits you receive. Pension/life etc should be easy (their HR dept have the costings, even if you don't).
Other problem is the value of your computer/software/connecton. It is not unreasonable for a client to expect you to provide this yourself (but it should still be tax deductable??).
If your normal place of work will be SA and the client expects you to occasionally travel to the UK, then they should pay your expenses on an as required basis.

On an unrelated note - posting this in general will elicit robust replies.