Reply to: Newbie NI question

[joe2014]

You're typically looking at somewhere between 40% and 100% uplift, according to various discussions and scenarios that I've just looked at.

There's a reasonable looking calculator here - it may be a few years out of date so the percentages are different, but it's a good starter for working out how much a permanent employee costs a business.

Thanks, that calculator is very good for calculating the approximate cost of an employee to a business but it assumes a huge amount of benefits and it takes into account costs like workstations for example which isn't appropriate for my situation.

When I use the take home pay calculator at Lisas company website, Contractor Umbrella, my projected take home pay is 69% of my gross & this includes the Umbrellas margin. Calculator here - Umbrella Company PAYE Calculator | Contractor Umbrella

[TheFaQQer]

You're thinking about this like an employee rather than an employer. The costs to an employer of hiring an employee are typically about double the salary (depending on benefits etc.). It's also easy to lose sight of the reduced number of days that you're likely to be working each year as a contractor. Anything above 200 days is good. So, as others mentioned, at least 200%.

You're typically looking at somewhere between 40% and 100% uplift, according to various discussions and scenarios that I've just looked at.

There's a reasonable looking calculator here - it may be a few years out of date so the percentages are different, but it's a good starter for working out how much a permanent employee costs a business.

[joe2014]

employers NI is 20% on earnings above 192 p/w.

Thanks

This is wrong I think, it is the personal rate.

[joe2014]

You're thinking about this like an employee rather than an employer. The costs to an employer of hiring an employee are typically about double the salary (depending on benefits etc.). It's also easy to lose sight of the reduced number of days that you're likely to be working each year as a contractor. Anything above 200 days is good. So, as others mentioned, at least 200%.

Of course, I think we are looking at it from different view points. In my case I'm taking a position in which I will for all intents and purposes be a full time employee, but paid as a contractor instead of through the payroll. So, working 37.5 hours a week 5 days a weeks etc., in this case I think that a premium of 30-40% is acceptable - 28 holidays in a full time position must be worth about 10% and employers NI is 20% on earnings above 192 p/w.

So am I leaving anything else out?

Employers NI & Employee NI & Holidays & income tax - I guess what I need to know is if there is anything else I should deduct in my calculations so that I can approximate my take home pay?

Thanks

[TheFaQQer]

It would be more comparable to a 60k p/a position I think

I don't.

[jamesbrown]

Hi Lisa,

thanks for your post - considerably higher, would 30-40% higher be enough or would I need 50%?
Thanks

You're thinking about this like an employee rather than an employer. The costs to an employer of hiring an employee are typically about double the salary (depending on benefits etc.). It's also easy to lose sight of the reduced number of days that you're likely to be working each year as a contractor. Anything above 200 days is good. So, as others mentioned, at least 200%.

[joe2014]

It would be more comparable to a 60k p/a position I think

[joe2014]

Sounds about right to me. I'd never thought about what I was paid per hour as a permie, though, but those figures look pretty reasonable.

I think contractors rates need to be considerably higher to some extent because they might not work 40 hours p/w all year.

If on the other hand you worked all year at this rate you would gross 122,500 (2,500 * 47 weeks) - from this minus your various taxes and you are going to take home considerably more than what someone earning 45k as a permie would take home. The rates are not comparable, the only way you could say someone on 500 p/d is equitable to a 45k permanent position is if they only worked an average of half the year.

[TheFaQQer]

Works for me, someone on £20/hr (about £40k pa?) normally would expect to pull £450/500 a day contracting, wouldn't you agree?

Sounds about right to me. I'd never thought about what I was paid per hour as a permie, though, but those figures look pretty reasonable.

[joe2014]

Works for me, someone on £20/hr (about £40k pa?) normally would expect to pull £450/500 a day contracting, wouldn't you agree?

I don't know I need to up skill considerably before I can think of earning that type of money! I understand much better what you mean now though as not having employment security, pension scheme etc. would all have to be considered along with holiday pay and NI - but, for my self I am going from a temp agency job into a contracting role so I don't have employment security or a pension at present.

From what I can gather holiday pay at 28 days p/a is worth about 10% of your salary and I will have to portion about 13% for employers NI - so I need to be earning 25%-30% over what I would be happy earning temping for an agency, I think the discrepancy here is that you are looking at it from the angle of taking a contract over a permanent, secure job where as I am looking at it going from a temp. PAYE job to a temp. contracting job.

[stek]

So someone on £30 p/h contracting would work for £10 p/h as a regular employee? I think you might be over reaching a little

Works for me, someone on £20/hr (about £40k pa?) normally would expect to pull £450/500 a day contracting, wouldn't you agree?

[joe2014]

I'd say more like 200-300% to cover bench time, pension, skilling up, etc...

So someone on £30 p/h contracting would work for £10 p/h as a regular employee? I think you might be over reaching a little

[stek]

Hi Lisa,

thanks for your post - considerably higher, would 30-40% higher be enough or would I need 50%?
Thanks

I'd say more like 200-300% to cover bench time, pension, skilling up, etc...

[joe2014]

Your rate as a contractor should be considerably higher than the rate that you would be offered as a permanent employee as the liability for employment costs moves from the employer to the intermediary. Employment costs include Employer's National Insurance Contributions, statutory payments e.g. sick pay, maternity pay etc and holiday pay and they have to be borne by every UK employer including umbrella companies.

Hi Lisa,

thanks for your post - considerably higher, would 30-40% higher be enough or would I need 50%?
Thanks

[joe2014]

Not sat and worked it out myself, but my instinct would be any rate sub £25/30 an hour would be a clear candidate for perm only.

When you take all the benefits and protections of perm into account the day or hourly rate has quite a lot to cover.

Surely the actual figures aren't as important - I mean if I was to earn 140% of my usual wage wouldn't I be earning about the same?