New job, for a US company…
Discussion
I’m in early negotiations with a future employer, based in California. They want to employ me, based in the UK, reporting into California. However, they do not have a UK company, so are planning on working with a third party company/ agency to hire me, who will take care of my salary, pension and benefits - allowing me to become an employee.
From a financial point of view, is there a better option I can propose that would be better for me, such as setting myself up as a company, and invoicing them?
I’m sure it’s not as simple as my suggestion, hence seeking advice on here. As you can imagine, I’m keen to save tax, and increase pension contributions.
From a financial point of view, is there a better option I can propose that would be better for me, such as setting myself up as a company, and invoicing them?
I’m sure it’s not as simple as my suggestion, hence seeking advice on here. As you can imagine, I’m keen to save tax, and increase pension contributions.
To save on taxes and potentially increase pension contributions, setting up your own company and invoicing the employer could be beneficial, provided you do not fall within IR35.
IR35 is a set of tax rules in the UK designed to assess whether a contractor is genuinely self-employed or essentially an employee for tax purposes. If your contract falls inside IR35, HMRC (Her Majesty's Revenue and Customs) considers you an employee, and you will be subject to PAYE and National Insurance contributions as if you were an employee.
Several key factors determine whether your work falls inside or outside IR35:
1. Control
Inside IR35: If the client dictates what work needs to be done, how it should be done, when it should be done, and where it should be done, it suggests employment.
Outside IR35: If you have significant control over how, when, and where you work, it indicates self-employment.
2. Substitution
Inside IR35: If you are required to carry out the work personally and cannot send a substitute, it suggests employment.
Outside IR35: If you can send a substitute to do the work in your place, it indicates self-employment.
3. Mutuality of Obligation (MOO)
Inside IR35: If the client is obliged to offer work and you are obliged to accept it, this indicates employment.
Outside IR35: If there is no obligation for the client to offer work beyond the terms of the contract and no obligation for you to accept additional work, this suggests self-employment.
4. Financial Risk
Inside IR35: If you bear little or no financial risk, similar to an employee, this indicates employment.
Outside IR35: If you bear financial risk, such as needing to correct defective work at your own expense, it suggests self-employment.
5. Provision of Equipment
Inside IR35: If the client provides all the equipment and tools necessary for the job, this indicates employment.
Outside IR35: If you provide your own equipment and tools, it suggests self-employment.
6. Part and Parcel of the Organisation
Inside IR35: If you are integrated into the client's organisation (e.g., attending staff meetings, having a company email address), it suggests employment.
Outside IR35: If you remain independent and operate your business separately from the client, it indicates self-employment.
IR35 is a set of tax rules in the UK designed to assess whether a contractor is genuinely self-employed or essentially an employee for tax purposes. If your contract falls inside IR35, HMRC (Her Majesty's Revenue and Customs) considers you an employee, and you will be subject to PAYE and National Insurance contributions as if you were an employee.
Several key factors determine whether your work falls inside or outside IR35:
1. Control
Inside IR35: If the client dictates what work needs to be done, how it should be done, when it should be done, and where it should be done, it suggests employment.
Outside IR35: If you have significant control over how, when, and where you work, it indicates self-employment.
2. Substitution
Inside IR35: If you are required to carry out the work personally and cannot send a substitute, it suggests employment.
Outside IR35: If you can send a substitute to do the work in your place, it indicates self-employment.
3. Mutuality of Obligation (MOO)
Inside IR35: If the client is obliged to offer work and you are obliged to accept it, this indicates employment.
Outside IR35: If there is no obligation for the client to offer work beyond the terms of the contract and no obligation for you to accept additional work, this suggests self-employment.
4. Financial Risk
Inside IR35: If you bear little or no financial risk, similar to an employee, this indicates employment.
Outside IR35: If you bear financial risk, such as needing to correct defective work at your own expense, it suggests self-employment.
5. Provision of Equipment
Inside IR35: If the client provides all the equipment and tools necessary for the job, this indicates employment.
Outside IR35: If you provide your own equipment and tools, it suggests self-employment.
6. Part and Parcel of the Organisation
Inside IR35: If you are integrated into the client's organisation (e.g., attending staff meetings, having a company email address), it suggests employment.
Outside IR35: If you remain independent and operate your business separately from the client, it indicates self-employment.
i've a good pal who runs a Compnay providing these type of services in the Uk and across many overseas countries for a variety of 'end users' both big and small - who are in the same situ as your prospective employer OP....ie/ no local entity.
depending on the size of the employer ( ie/ the US Corp ), often they look to work in this way as oppose dto with a freelancer/1 man show, because of a few factors:
1/ easier for invoicing
2/ may already have arrangements in place either for Uk or elsewhere, which means that billing again is easier, but also that benefits and the exact nature of the contract for you is 'as is' for other employees.
3/ as per above, can be easier for them to be doing bulk FX deals with less recipients
Just a word of advice, which you may be aware of anyway!
US companies are shy about vacations, often including public hols as part of any allowance - i know some have changed their stance on this, but having recruited for a number over the years i'd look to bolt down and have a clear understanding of things we take for granted here:
sick pay, holiday entitlement - and most of all notice periods.
depending on the size of the employer ( ie/ the US Corp ), often they look to work in this way as oppose dto with a freelancer/1 man show, because of a few factors:
1/ easier for invoicing
2/ may already have arrangements in place either for Uk or elsewhere, which means that billing again is easier, but also that benefits and the exact nature of the contract for you is 'as is' for other employees.
3/ as per above, can be easier for them to be doing bulk FX deals with less recipients
Just a word of advice, which you may be aware of anyway!
US companies are shy about vacations, often including public hols as part of any allowance - i know some have changed their stance on this, but having recruited for a number over the years i'd look to bolt down and have a clear understanding of things we take for granted here:
sick pay, holiday entitlement - and most of all notice periods.
As someone who has done this and now works for the UK entity of the US company (albeit one with all of 6 employees!) I agree with all of the above but understanding their future plans for the UK is important in my view.
My company are very considerate and extremely generous by US standards but by UK standards the benefits are rubbish so when I started I agreed that I could take unpaid leave if I wanted more holiday in a year. The pension contribution is rubbish, there's no salary sacrifice etc. but they're very generous on private medical as they think that's cheap!
Feel free to DM me if you have any questions
My company are very considerate and extremely generous by US standards but by UK standards the benefits are rubbish so when I started I agreed that I could take unpaid leave if I wanted more holiday in a year. The pension contribution is rubbish, there's no salary sacrifice etc. but they're very generous on private medical as they think that's cheap!
Feel free to DM me if you have any questions
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