Reply to: salary vs contracting rate comparison

[MPwannadecentincome]

Expenses aren't income. Don't fool yourself that they are. Subsistence is only applicable if you are working more than 10 hours a day away from home, so also not income. Plus you can't claim money you haven't spent and don't let anyone tell you differently (and watch the news, HMRC are about to land heavily on umbrellas with "interesting " expenses policies)

However as an umbrella user you are funding employers and employees NICs as well as all your own costs out of your gross income and paying fees to a third party to do the (largely trivial) paperwork for you. Employees only have to pay employees NICs and are not liable for expenses or employers NICs (nor holidays, sickpay or training come to that) and tend not to be charged by their empoyers for letting them work there.

End result is you might earn more net pay, but you are actually retaining far less of your gross than any other option. Sad, isn't it...

Ok but how to you compare this on an equal basis? For the same gross cost to the employer or client, the brolly employee is going to pay less tax overall surely as the brolly employee can use more expenses to offset againt the (employer and employee) NI deductions as well as tax deductions, the only time the permie employee wins over a brolly employee surely is when the brolly employee has zero expenses - at least for today's rules - if HMRC crack down then of course the situation may change.

[malvolio]

Aye Expat

So what is there to stop Widget Company XYZ who has thirty machine operatives from deducting employer and employee NIs from their wageslips a la Umberella Mode ?

They do. That's how PAYE works....

[AlfredJPruffock]

No. You are an employee, and the umbrella company is the employee is the employer. As employer, the umbrella pays employer NI.

But where do they get the money to pay that? From your rate, of course. As a result, what is left to pay your salary is less than your contract rate.

Aye Expat

So what is there to stop Widget Company XYZ who has thirty machine operatives from deducting employer and employee NIs from their wageslips a la Umberella Mode ?

[expat]

However as an umbrella user you are funding employers and employees NICs as well as all your own costs out of your gross income and paying fees to a third party to do the (largely trivial) paperwork for you

I have always found that concept difficult to digest - if via an Umberella Company you pay both employee and employer NI - then are you an emploer . an employee - or both ?

No. You are an employee, and the umbrella company is the employee is the employer. As employer, the umbrella pays employer NI.

But where do they get the money to pay that? From your rate, of course. As a result, what is left to pay your salary is less than your contract rate.

[stuart_75]

I'd bin the car/fuel card as that is for employees and push the rate up to compensate for using my own vehicle..

I dont think they will go any higher. They have just took a friend of mine on at £250 and he is supplying his own vehicle. I dont have car at the moment that I want to stick loads of miles on (its only a short term contract) so I thought getting the client to provide one would suit me well.

[AlfredJPruffock]

You're an employee of the umbrella. It's just they don't contribute anything other than admin, and you pay for that as well.

Get your own company, it's the only sensible option these days.

Aye Malvolio

Thanks for your, as ever, sage advice - yes much to be said for the Ltd option these days.

[malvolio]

You're an employee of the umbrella. It's just they don't contribute anything other than admin, and you pay for that as well.

Get your own company, it's the only sensible option these days.

[AlfredJPruffock]

However as an umbrella user you are funding employers and employees NICs as well as all your own costs out of your gross income and paying fees to a third party to do the (largely trivial) paperwork for you

I have always found that concept difficult to digest - if via an Umberella Company you pay both employee and employer NI - then are you an emploer . an employee - or both ?

[malvolio]

Excuse me can you explain this - how would a brolly employee pay more tax - there are expenses an employee could not offset e.g. commuting (subject to 2 year rule) and subsistence.

Expenses aren't income. Don't fool yourself that they are. Subsistence is only applicable if you are working more than 10 hours a day away from home, so also not income. Plus you can't claim money you haven't spent and don't let anyone tell you differently (and watch the news, HMRC are about to land heavily on umbrellas with "interesting " expenses policies)

However as an umbrella user you are funding employers and employees NICs as well as all your own costs out of your gross income and paying fees to a third party to do the (largely trivial) paperwork for you. Employees only have to pay employees NICs and are not liable for expenses or employers NICs (nor holidays, sickpay or training come to that) and tend not to be charged by their empoyers for letting them work there.

End result is you might earn more net pay, but you are actually retaining far less of your gross than any other option. Sad, isn't it...

[KevinS]

I'd bin the car/fuel card as that is for employees and push the rate up to compensate for using my own vehicle..

[stuart_75]

Id like your opinions on my current situation.

I'm currently permie on 38k. I work for a company that imports cheapo teleoms labour from India on skilled work visas. I'm basically treated like a contractor on permie money (ie zero benefits, no car, no sick pay, only 20 days holiday, nothing else)

Ive just been offered a "proper" contracting role on £250 day with a vehicle and fuel card for all business related miles.

Seems like a no brainer to me, so is there any reason I shouldnt take it? Or would I be better off using my own car/van for the role?

Cheers

Stuart.

[MPwannadecentincome]

do you like my new sig

You might have to change it to 1200, 1500 or even 1700 - take your pick - or you could run a poll

[MPwannadecentincome]

It won't work if you use an umbrella, but then you'll be paying rather more tax than a permie anyway so more fool you.

Excuse me can you explain this - how would a brolly employee pay more tax - there are expenses an employee could not offset e.g. commuting (subject to 2 year rule) and subsistence.

I mean who gives a **** what the 'conversion' for contract rate to permie and vice versa is!?

You either want to go contracting and have some independence or you want to be a permie drone.

Salary, benefits etc against rate counts for tulip. Get your mind sorted what you want to do. Dont do one because it pays more money. You'll never be fulfilled that way.

Sorry this is bollocks - some of us were not given the choice, I was made redundant and no permie jobs going - either I took a contract or starved.

[expat]

Contracting: benched so rate = £0.
Permie: outsourced and redundant so rate = £0.

Sorted.


Damn damn damn, I wasn't going to be negative today

[RichardCranium]

Ahem: http://calculator.contractoruk.com/

Yes, sir, but that is your basic free service. It is alright in it's own way, but it is not a premium service. Clearly Sir would enjoy a service where the customer is valued, a special service for the special contractor. We here at www.malvolio-calc.com don't give you an instant, impersonal, computer generated response, oh no. With www.malvolio-calc.com Sir will receive personal attention. Our specialist advisor will provide you with your own results. For a special offer price of just £1 (plus VAT). If Sir would just care to state his daily rate and <smiles sweetly and holds hand out> will Sir need change?