Reply to: Permanent FTC or inside ir35?

[malvolio]

Not all permies have 3 month notice periods a lot have a month. That's why I never understood contracts where they want a month's notice.

If you notice, a lot of the queries we get from permies looking to go contracting are asking about their 3 month notice period. Perhaps only the more senior roles are the people thinking they could be a contractor?

No matter. Contractors neither want nor need a notice period. The fact that they have them in the contract (and that they are routinely negated by other performance clauses) show how little UK industry - and especially HR and the agencies - understands what contractors are.

[SueEllen]

..and for the reasons i've given earlier.

Incidentally, two cost elements for permies and FTCs that don't work for contractors are efficiency - permies average 80% productive effort, contractors 100% - and notice periods - a three month notice period is a risk that carries a cost.

Not all permies have 3 month notice periods a lot have a month. That's why I never understood contracts where they want a month's notice.

[malvolio]

That makes sense.

The only real knowledge I have there is when my wife did a maternity cover FTC. The rate was very similar to the perm position but I have seen FTCs advertised for projects before not just for interim positions.

..and for the reasons i've given earlier.

Incidentally, two cost elements for permies and FTCs that don't work for contractors are efficiency - permies average 80% productive effort, contractors 100% - and notice periods - a three month notice period is a risk that carries a cost.

[jayn200]

From what I've seen the above is wrong. FTCs are not used to get contractors in. It's a temporary perm position. There is very little correlation between FTCs and contracting even inside IR35.

Budgets often come out of different pots for FTCs than contingents and they are used to fulfil different requirements.

Trying to compare or argue the two is pointless.

There maybe companies that use FTC to get contignets in I'm sure but it's not the norm.

That makes sense.

The only real knowledge I have there is when my wife did a maternity cover FTC. The rate was very similar to the perm position but I have seen FTCs advertised for projects before not just for interim positions.

[northernladuk]

Yeah exactly... FTC is usually flexibility of a contractor at perm rates.

If they are doing an FTC it's probably because that's what they have budget for. If you need a contractor and market rates are 500 but you only have budget for 300 just list it as FTC for 60,000.

If they were to convert it to inside contract I doubt they will give you that 200 a day uplift... They'll likely keep it so they have same cost and you will net similar.

From what I've seen the above is wrong. FTCs are not used to get contractors in. It's a temporary perm position. There is very little correlation between FTCs and contracting even inside IR35.

Budgets often come out of different pots for FTCs than contingents and they are used to fulfil different requirements.

Trying to compare or argue the two is pointless.

There maybe companies that use FTC to get contignets in I'm sure but it's not the norm.

[jayn200]

Management overheads, office space ...

There are a whole host of things that you need to cover the cost of for employees that don't exist for contractors who you can usually leave to it.

Please tell me how recasting a Fixed term contract as inside ir35 will eliminate those costs.

Do you ask the inside ir35 contractor to pay for your overheads? your office space?

[eek]

Please show me your calculation for 100% markup on employment that exists in FTC that doesn't exist in inside ir35 contract.

Pension = 3%
Employer NI = 13.8%
Apprenticeship Levy = 0.5% (Not always applicable)
Leave = 12.7% (33 days on average although minimum legal entitlement is 28 days so could be 10.8%)
Benefits package = 1% (Assuming 600 per annum health benefit package per 60k FTC salary)

That is a grand total of 31%. Could be as low as 28.6%


There are a lot of costs associated with employment that apply to both FTC and inside ir35 contract those are:
Recruitment fees
Any overheads
Management/training
IT/office Equipment/User Licensing

Those last all apply to all inside ir35 contracts and all FTCs so you cant consider them when making a comparison.

Management overheads, office space ...

There are a whole host of things that you need to cover the cost of for employees that don't exist for contractors who you can usually leave to it.

[jayn200]

You don't properly understand the cost of employment. In a technical role, £300 a day to the worker is around £500-600 to the company, slightly less for FTCs but not much. Lack of budget is not the issue. Fear of (non-existent) consequences of using external contractors is the main one. Legal and insurance cover for man-management or commercially risky roles is another.

Please show me your calculation for 100% markup on employment that exists in FTC that doesn't exist in inside ir35 contract.

Pension = 3%
Employer NI = 13.8%
Apprenticeship Levy = 0.5% (Not always applicable)
Leave = 12.7% (33 days on average although minimum legal entitlement is 28 days so could be 10.8%)
Benefits package = 1% (Assuming 600 per annum health benefit package per 60k FTC salary)

That is a grand total of 31%. Could be as low as 28.6%


There are a lot of costs associated with employment that apply to both FTC and inside ir35 contract those are:
Recruitment fees
Any overheads
Management/training
IT/office Equipment/User Licensing

Those last all apply to all inside ir35 contracts and all FTCs so you cant consider them when making a comparison.

[eek]

You don't properly understand the cost of employment. In a technical role, £300 a day to the worker is around £500-600 to the company, slightly less for FTCs but not much. Lack of budget is not the issue. Fear of (non-existent) consequences of using external contractors is the main one. Legal and insurance cover for man-management or commercially risky roles is another.

Come April those consequences may no longer be non-existent. That is what most companies are working on the basis of and why I'm implementing what I'm currently working on.

[malvolio]

Yeah exactly... FTC is usually flexibility of a contractor at perm rates.

If they are doing an FTC it's probably because that's what they have budget for. If you need a contractor and market rates are 500 but you only have budget for 300 just list it as FTC for 60,000.

If they were to convert it to inside contract I doubt they will give you that 200 a day uplift... They'll likely keep it so they have same cost and you will net similar.

You don't properly understand the cost of employment. In a technical role, £300 a day to the worker is around £500-600 to the company, slightly less for FTCs but not much. Lack of budget is not the issue. Fear of (non-existent) consequences of using external contractors is the main one. Legal and insurance cover for man-management or commercially risky roles is another.

[jayn200]

Things might have changed but FTCs used to be when they wanted a contractor but are trying to get them on the cheap when the market is tulip

Yeah exactly... FTC is usually flexibility of a contractor at perm rates.

If they are doing an FTC it's probably because that's what they have budget for. If you need a contractor and market rates are 500 but you only have budget for 300 just list it as FTC for 60,000.

If they were to convert it to inside contract I doubt they will give you that 200 a day uplift... They'll likely keep it so they have same cost and you will net similar.

[rootsnall]

No way will it become one - if they wanted a contractor they would be hiring one.

Things might have changed but FTCs used to be when they wanted a contractor but are trying to get them on the cheap when the market is tulip

[malvolio]

Well, the role is opened as a FTC, but I'm of the mind to ask whether it could actually be an 8 month contracting position instead.

It's an employment contract offer but with a fixed end date and a few restrictions around redundancy and pension rights. It is not a contract in the sense you are using.

No way will it become one - if they wanted a contractor they would be hiring one. I've spoken to several companies offering FTCs and none would consider using a contractor instead: mainly, it has to be said, because HR teams simply fear claims of excess taxation and/or employment rights.

Also I suspect the rate on offer will not cover that for an equivalent contract.

[northernladuk]

Permanent FTC? What's one of those when it's at home?

[Eirikur]

Well, the role is opened as a FTC, but I'm of the mind to ask whether it could actually be an 8 month contracting position instead.

Too much of a hassle for the employer. And by asking the question you will reduce your chances of getting the role. I would just take it as is (if nothing else in the pipeline), it's only 8 months, but with holidays pension plan etc.