I’m a draughtsman currently employed by a new company earning £16 per hour with 25 days holiday + bank holidays.
They are asking me to go self employed so they don’t have the hassle of paye, pensions etc etc
Having been in full employment for last 25 years since leaving school, I have no knowledge of such things.
Is there an easy formula to work out how much I should ask for per hour to maintain what I have now, to cover the holidays , bank holidays etc
What are the benefits of being self employed?
Thanks

Look into it – being “self employed” for one company is a bit dodgy, HMRC usually see through that one. You also lose a lot of the protections an employee has.

google ir35 and tell them to do the same

Google IR35 Disguised employment.

You’d also need to cover the periods that they don’t give you any work, there’s no saying that they will continue to want you working 37.5 hours per week. Which is fine so long as they know that you’ll be accepting work from other sources and may sometimes be unavailable and that you are confident of getting work from elsewhere.

Going a Self a Employed

Are you Italian 😉

No chance that will be classed as Self Employed by HMRC.

I’ve been self employed for almost 28 years, I find that take your hourly rate and multiply by 2,000 to get yearly rate then half it to get your cash out of your business (once holidays, fallow periods, sickness, NI + tax, insurance and general faffs which you cover the cost of rather than your employer). So you would need to charge £32/hr to get £16 in your pocket.

Ha, not Italian no, missed that one..
37.5 hours per week,, that would be a nice break 😉

I’m £16 per hour before tax etc at the moment so it’s roughly £12 in my pocket.
So going by Chickenmans guide I think I’ll start the bidding at £24 per hour.
When we use subbies we pay £35-£40 per hour so I’m guessing they shouldn’t bulk to much.
At present I’m busy for 55-60 hrs per week so should be ok for now

guess you also missed the whole ‘tax’ bit. oh well. anyway, i’d work on 3x your rate if you’re contracting, which funnily enough seems to add up to what you state they’re already paying contractors. not sure why you’d want to undercut them for apparently no benefit to you.

Why would you start at £24? Start at £35, the same price as the subcontractors and then at least you’ve got some room to negotiate if you have to.

Charge what the others are getting or at least ask them to make you an offer. Self Employed as a disguised employee is not the best position to be in as you could be liable for a decent chunk of tax. Also check out NI implications for any pay structure you take on and factor in any pension provisions.

also remember that because they aren’t doing PAYE, pension, tax etc.
….then someone else will be doing it…..
i.e. YOU

(ex IT contractor)

You a wanna go a self employed a?

PS don’t want to put you off – I did very well for myself IT contracting at good rates – but no way would I go self employed with all the extra hassle / lack of security at anything like permanent rates.

Don’t under sell yourself.

I’ll look into the ir35 thing in the morning.
I would be using their drawing package. If I buy it myself then I’m looking at a £15k outlay and 2k a year support.
Although that would give me the ability to work for other companies too.
Plenty to think about though, thanks for the responses

I know of one chap who did that, then one day there was an audit, fines for all ..and had to repay everything.

be careful on that one.

Definitely have a backup plan in place in case they do decide to stop putting work your way. They will be under no obligation to send you work. From a taxation point of view you’d be on very dodgy ground working for only one client but more importantly you need to look after yourself and the best way to do that is to spread your reliance around a bit.

IR35 is a bugger – total grey area.
One indicator of IR35 is if you use your own tools (software!) wot U bought yourself, then this is an ‘indicator’ you are not caught by IR35.
15k though! jebus! and I thought visual studio for sofware dev was expensive….

Take solace that you are very unlikely ever to be investigated /caught for IR35 even if your working practices are a bit, erm, cosy.

didn’t mean to be too flippant…
are the contractors they employ paying that 15k +2k/year?
ir35 isn’t ‘that’ grey an area. there are pretty straightforward guidelines on the hmrc website.

1. The “is it really self employed” bit is their problem not yours.

2. Double the hourly rate is the self employed equivalent over employed.

3. Sounds like they’re trying to sack you on the cheap.

1. no
2. no
3. no

apart from that you’re bang on.
the difference between an employee and a contractor? the contractor knows he may be out of work next month. 😉

ir35 isn’t ‘that’ grey an area. there are pretty straightforward guidelines on the hmrc website.

The only people who think it’s a grey area are the disguised employees.

Companies try to do this to avoid long term contracts. They can get rid of you without notice or warning. Self employment has many perks but not in this case.

ir35 isn’t ‘that’ grey an area. there are pretty straightforward guidelines on the hmrc website.

If you look at those rules on the HMRC website, you can do a quiz which asks you how you performed. It only expresses someone’s culpability for IR35 as a ‘risk’ rating. I.e. it is a risk based assessment and thee are no black and white rules in or out.

Do some reading on the IR35 cases which have actually gone to court.

http://www.hmrc.gov.uk/ir35/guidance.pdf
Fairly straight forward, most of those I knew – including myself who were and some who still are doing work as IR35 would be straight into high risk by passing none of the tests. Thats actually a lot better than it used to be. Thinks like advertising and previously being employed by the company are a good test.

They should have paid the £15k for the program initially . A lot don’t pay the yearly maintainance charge which just means you don’t get the support and the latest updates.
One company I worked for previously were using a bent version and ended up with. £5k fine and had to buy the software on top of that to avoid court, so could be expensive if I don’t play properly

The cynic in my says it sounds likely they are trying to get you to hand your notice in! If your considering it, make sure you negotiate a deal which your happy with. I would ask for a fixed sum to leave, negotiate a higher hourly rate than being currently offered and ensure that you are not exclusively subcontracted to the one company.

In your position I’d state £32/hr. Then put it up after a year. Also I’d be selling myself to potential new clients from today.

Would you loose any entitlement to redundancy payment buy doing this? They effectively get you to resign which forfeits all those benefits, you come back as a contractor then the next day they say they have no work for you. Big saving to the company?

Is it just you or other employees?

As if it’s just you, then they’ve still the ‘hassle’ of PAYE etc – so it must be that they think it’ll be cheaper.

Also check the pension status, especially if you are on a final-salary scheme as it may be you need far more than you think to cover this ‘benefit’.

Hope you get my point

that would give me the ability to work for other companies too.

I’d say being able to work for other people is almost a pre-requisite of going self employed.

How can you claim to be self employed if you’re only able to work for one employer?

Sorry to be one of the ones saying it, but offers of freelance aside, what’s actually happening here is they’re trying to make your post redundant, without paying redundancy. They are trying to sidestep their responsibilities as an employer.

At a guess they either don’t like you, or they’re struggling to stay afloat. Either way you’re in trouble. Tread carefully, and good luck.

IR35 – another way to look at it (as expressed by an accountant I asked) – was mutuality of obligation.

Basically as above, if they are obliged to give you work, provide materials, workplace and so on.
Equally, if you are obliged to turn up at set hours, make yourself available for work.

I usually work for just one client – but tools are bought, I can bunk of for days if need be, work from home, I’m not obliged to take work nor is he obliged to hand me work..

It’s not self employment as others have pointed out due to you only having one client. As others have hinted at what is their motive as they must know that it is disguised employment too. Are they going through tough times and looking to make redundancies in which case you will have a waived any entitlement or just to reduce down your hours?