Running a "real" company

[workshy fop]

Chaps,

Some advice please. Three of us currently run a Ltd. Co. which is a preferred supplier for a larger co.
We'll soon be in a position to take on more people, maybe 10+ , some will be proper contractors so they can just invoice us directly and deal with the tax implications themselves. Some, however, are through umbrellas and just want payrolled (despite getting less money :rolleyes: )
We would take over that function, and pay them directly as employees, cutting out their current umbrella and agency costs.
I'm trying to think of the implications of doing so and to calculate the cost of an employee.
e.g. we would hit the limit for providing a stakeholder pension. NI and employee NI is easy as that is built in. Various employment rights etc.
How does it work with the well known umbrella companies, do they pay sick pay, holidays etc.?
Is there any rule of thumb as to how much an employee costs e.g. 50% more than salary?
I realise it's a big question, and I will seek advice from a govt Enterprise type agency, but wondered if there was any advice you could give.

Thanks

Fop

[Eric Mc]

I'm a bit shy of giving advice now as someone might take umbrage of what I say.

(See the Currency Traders thread).

Having said that, how do you know that it will be OK to hire people on a "Self Employed" contract basis?

>> Edited by Eric Mc on Thursday 14th July 18:48

[shadowninja]

i heard more than 5 employees means you need an official H&S policy... (and i dont just mean one that reads "dont be bloody stupid" )

[groomi]

If you're intending taking contractors (umbrella/limited or freelance) on for a position which could/should be filled by an employee, then you are likely to fall foul of IR35 which will cost you all more money. (I think this is what Eric is alluding to).

Get advice from your accountant - don't just hire people willy-nilly.

[srebbe64]

IR35 legislation is designed to ensure that the Revenue get their slice of yours and your staffs' hard earned money. Don't even bother trying to get round it. Purely from memory, staff can be called suppliers providing: they have several customers (not just you), the invoice amount varies month to month and they don't come to your office all the time.

I note you say you've been awarded 'preferred supplier' status. I guess this could mean you've got one big customer. If so, this is the biggest risk, quite possibly.

[Eric Mc]

IR35 was one of the possible scanarios I was thinking of. However, IR35 would normally relate to individuals who operate through a limited company or possibly a partnership. Anyone working for you as an "individual" would either be a normal employee or be possibly self employed. However, employers and indiviudals are not always in a position to chose whether "self employment" status is appropriate.

[davidd]

Talk to an accountant and an HR/law specialist.
there is lots round H&S, pensions and other dull but important things (where 'be an adult and use your brian should suffice') which might need to be put in place but sometimes there are ways to do them without actually doing anything if you get my drift.

D

[dcw@pr]

Eric Mc said:

I'm a bit shy of giving advice now as someone might take umbrage of what I say. (See the Currency Traders thread).

ignore him, that was a pointless over reaction

[workshy fop]

Thanks for advice so far. I don't see how IR35 would apply to us as it's a proper business, we are chasing other contracts etc. The only risk with it is that if we employ 50+ contractors (could now be this many) and 2 or 3 of them get audited, then so will we 2 or 3 times, which you can do without.
We are looking at cutting out the agency, and the umbrella co. and also taking a cut from the supplier, effectively creating our own umbrella co. , but on further investigation, it's like re-inventing the wheel, there are plenty of companies with it all set up already at £25 a week so why have the hassle. The contractors can choose if they want to put their hands up to IR35 and go fully PAYE with an umbrella co. , their choice and better for us from an audit point of view. We have found one umbrella co. willing to do a discounted deal (could be up to 60 contractors now) and a £200 intro fee to us for each one

Thanks again.

Fop.

[Eric Mc]

Regarding the sub-contractors you hire, IR35 is not a concern for you. If those sub-contractors are working through their own limited companies, then THEY may have to consider whether IR35 is appropriate FOR THEM. You do not have to worry about their status.

If you "employ" an individual in a personal cpacity on a self-employed basis, then YOUR COMPANY might have to consider that that individual should really be taken on as a normal employee. In this situation, the onus is on YOU to ascertain their correct tax status regarding their relationship with you.

[gbw911]

I can recommend you have a look at www.dti.gov.uk/er/index.htm

This is particularly good for knowing what SHOULD be done. Don't be put off by the mass of information, it is mostly pretty straightforward. However there is a lot of it - welcome to the world of 'red tape'

cheers
Geoff