Contractors: IR35 & general discussion

[deadtom]

Hi folks,

I work in the automotive sector doing homologation engineering type stuff and am considering making the switch from permanent to contractor for the flexibility benefits (i.e. not having to go into the office).

The offer is £33.50/hour inside IR35, which I thought sounded like a reasonably generous offer as my current permanent role is somewhere around £20/hour equivalent, but I guess none of you would even get out of bed (as they say) for less than £50? and this talk of £100/hour is pretty wild.

I am going to preempt the advice from this thread will be to not do it for such meagre hourly rate?

[Blown2CV]

for an inside role you typically will not have any greater 'flexibility benefits' than a perm.

[deadtom]

Blown2CV said:

for an inside role you typically will not have any greater 'flexibility benefits' than a perm.

I'd be doing the same work for the same organisation and I've already had some informal discussions with them about it, and it's been confirmed that I would not be subject to the requirement to go to the office 3 days per week 'just because'

[Deep Thought]

deadtom said:

Hi folks,

I work in the automotive sector doing homologation engineering type stuff and am considering making the switch from permanent to contractor for the flexibility benefits (i.e. not having to go into the office).

The offer is £33.50/hour inside IR35, which I thought sounded like a reasonably generous offer as my current permanent role is somewhere around £20/hour equivalent, but I guess none of you would even get out of bed (as they say) for less than £50? and this talk of £100/hour is pretty wild.

I am going to preempt the advice from this thread will be to not do it for such meagre hourly rate?

Your £33.50 an hour may not translate to an awful lot more than your £20 an hour, as Employers NI, Apprenticeship levy and a set aside for annual leave will be take from this, THEN you will pay your normal PAYE tax after that.

[Deep Thought]

deadtom said:

Blown2CV said:

for an inside role you typically will not have any greater 'flexibility benefits' than a perm.

I'd be doing the same work for the same organisation and I've already had some informal discussions with them about it, and it's been confirmed that I would not be subject to the requirement to go to the office 3 days per week 'just because'

That could be a big +++ depending on travel costs, commute duration etc.

[deadtom]

Deep Thought said:

Your £33.50 an hour may not translate to an awful lot more than your £20 an hour, as Employers NI, Apprenticeship levy and a set aside for annual leave will be take from this, THEN you will pay your normal PAYE tax after that.

Indeed, plus I believe it is a requirement to have public liability insurance, and I am not sure how much that costs. Rough calculations suggest that it would work out about the same for net pay.

My primary motivation in considering the switch to contractor is to allow me to live where I want rather than trying to get more money for the same work (though of course that would be nice too), but I wonder whether I am undervaluing job security and a set income.
Sometimes I think it would be totally worth it, life's too short to never take a risk on something that is important to you etc, but then I hear from other contractors (this thread and elsewhere) who would be unimpressed at double the rate I've been offered, and it feels stupid to give up security for what is apparently actually very little in return.

Edited by deadtom on Friday 16th February 16:02

[Guvernator]

You've got to remember that a lot of the contractors on this thread are talking about the IT sector where rates have always been pretty high and mostly not comparable to a lot of other sectors. A reasonably experienced IT contractor can earn £4-500 a day and anything a bit more specialised or higher up the ladder, potentially a lot more.

You have to compare apples with apples, is £33.50 an hour considered a good rate for work in your sector? If so, then fill your boots.

[deadtom]

Guvernator said:

You've got to remember that a lot of the contractors on this thread are talking about the IT sector where rates have always been pretty high and mostly not comparable to a lot of other sectors. A reasonably experienced IT contractor can earn £4-500 a day and anything a bit more specialised or higher up the ladder, potentially a lot more.

You have to compare apples with apples, is £33.50 an hour considered a good rate for work in your sector? If so, then fill your boots.

this is true, and of course PH being what it is will have a higher average income than normal people too. Possibly I am earlier in my career than most in this thread too? I've been in the industry 5 years, so still relatively junior. No line management responsibilities etc

I'm not really sure whether it would be a good rate for the sector, as noted above I think it works out to be approximately the same net income to my current permanent role, but I would be exchanging safety, security, reliability etc for the ability to live where I'd like to.
That being said my permanent role is civil service, and as such is relatively poorly paid; a similar role to mine in the private sector pays 25 - 30% more than I get, but that comes with its own drawbacks of course.

Edited by deadtom on Friday 16th February 17:15

[Gazzab]

deadtom said:

Hi folks,

I work in the automotive sector doing homologation engineering type stuff and am considering making the switch from permanent to contractor for the flexibility benefits (i.e. not having to go into the office).

The offer is £33.50/hour inside IR35, which I thought sounded like a reasonably generous offer as my current permanent role is somewhere around £20/hour equivalent, but I guess none of you would even get out of bed (as they say) for less than £50? and this talk of £100/hour is pretty wild.

I am going to preempt the advice from this thread will be to not do it for such meagre hourly rate?

That doesn’t sound great. I doubt you will take home much more and will sacrifice the benefits which will likely be worth more. I’d stick.

[Terry Winks]

deadtom said:

Guvernator said:

You've got to remember that a lot of the contractors on this thread are talking about the IT sector where rates have always been pretty high and mostly not comparable to a lot of other sectors. A reasonably experienced IT contractor can earn £4-500 a day and anything a bit more specialised or higher up the ladder, potentially a lot more.

You have to compare apples with apples, is £33.50 an hour considered a good rate for work in your sector? If so, then fill your boots.

this is true, and of course PH being what it is will have a higher average income than normal people too. Possibly I am earlier in my career than most in this thread too? I've been in the industry 5 years, so still relatively junior. No line management responsibilities etc

I'm not really sure whether it would be a good rate for the sector, as noted above I think it works out to be approximately the same net income to my current permanent role, but I would be exchanging safety, security, reliability etc for the ability to live where I'd like to.
That being said my permanent role is civil service, and as such is relatively poorly paid; a similar role to mine in the private sector pays 25 - 30% more than I get, but that comes with its own drawbacks of course.

Edited by deadtom on Friday 16th February 17:15

Guv is right here and it's not easy to compare. For instance Mr Hypothetical was looking a senior IT leadership position and has 25 years under his belt. Ultimately I think for it to work once the whole package is considered it had to be nearly double to make the jump. Sure if its purely cold hard cash you want and don't care about the other things right now (there are definitely periods in life to do this) then its worth it.

At the numbers you're talking about there seems very little upside, maybe with more experience those rates might get higher? It's always worth keeping an eye on it. Also, do it when you're young and don't really have many responsibilities, its easier to sort should you end up out of work with no notice than if you have a whole world of family baggage with you.

[Gad-Westy]

deadtom said:

Guvernator said:

You've got to remember that a lot of the contractors on this thread are talking about the IT sector where rates have always been pretty high and mostly not comparable to a lot of other sectors. A reasonably experienced IT contractor can earn £4-500 a day and anything a bit more specialised or higher up the ladder, potentially a lot more.

You have to compare apples with apples, is £33.50 an hour considered a good rate for work in your sector? If so, then fill your boots.

this is true, and of course PH being what it is will have a higher average income than normal people too. Possibly I am earlier in my career than most in this thread too? I've been in the industry 5 years, so still relatively junior. No line management responsibilities etc

I'm not really sure whether it would be a good rate for the sector, as noted above I think it works out to be approximately the same net income to my current permanent role, but I would be exchanging safety, security, reliability etc for the ability to live where I'd like to.
That being said my permanent role is civil service, and as such is relatively poorly paid; a similar role to mine in the private sector pays 25 - 30% more than I get, but that comes with its own drawbacks of course.

Edited by deadtom on Friday 16th February 17:15

On the face of it, it doesn't sound a great deal to me. I'm in automotive but on the mechanical design side for Tier 1/2 supply. I'm not sure how rates for my type of work compare but that would be a very low rate for mechanical design. I do see rates like that being advertised but I also know recruiters really struggle to find good candidates and struggle even more to keep them there for more than a few weeks. I love contracting and the independence it brings so I'd never want to put you off the general concept but I'm not sure an inside IR35 role would necessarily give you a great deal of independence and I'm also not sure I'd personally be prepared to put up with all of the downsides for little or no uplift. I guess there are also other things to consider like your current holiday entitlement, pension scheme etc. If you are still keen for all the upsides, you could maybe push for a little more but as a minimum maybe an agreement that the rate be reviewed after x number of months.

[Gad-Westy]

deadtom said:

Blown2CV said:

for an inside role you typically will not have any greater 'flexibility benefits' than a perm.

I'd be doing the same work for the same organisation and I've already had some informal discussions with them about it, and it's been confirmed that I would not be subject to the requirement to go to the office 3 days per week 'just because'

Maybe you can't answer this but why would your organisation be happy for you to the same job remotely as a contractor but not as an employee for what sounds like about the same overall cost to them? I can't really see how this arrangement benefits them other than the fact that it means you can be kicked out for free at short notice if need be.

[deadtom]

Gad-Westy said:

Maybe you can't answer this but why would your organisation be happy for you to the same job remotely as a contractor but not as an employee for what sounds like about the same overall cost to them? I can't really see how this arrangement benefits them other than the fact that it means you can be kicked out for free at short notice if need be.

a good point, and the answer is that they're not particularly keen on it. But they have said they would rather keep me as a contractor than lose me altogether.

[deadtom]

thanks for your replies everyone, everything mentioned is what I have been mulling over already so it's a good sanity check to see that there doesn't seem to be some big thing that I have overlooked

[wombleh]

If someone has been permanently employed like that and then changes to be a temp employee, doesn’t that cause all sorts of legal complications for the “employer” in terms of what rights that person has?

[Gazzab]

wombleh said:

If someone has been permanently employed like that and then changes to be a temp employee, doesn’t that cause all sorts of legal complications for the “employer” in terms of what rights that person has?

Not if it’s an inside deal.

[wombleh]

Well, thinking for example companies can’t just swap staff onto temp contracts in order to then make them redundant without consequences.

If they start as a temp then bit different as they never had those rights to start with. Employment rights rather than IR35/PAYE related issues that is.

Edited by wombleh on Friday 16th February 21:58

[Pit Pony]

deadtom said:

Hi folks,

I work in the automotive sector doing homologation engineering type stuff and am considering making the switch from permanent to contractor for the flexibility benefits (i.e. not having to go into the office).

The offer is £33.50/hour inside IR35, which I thought sounded like a reasonably generous offer as my current permanent role is somewhere around £20/hour equivalent, but I guess none of you would even get out of bed (as they say) for less than £50? and this talk of £100/hour is pretty wild.

I am going to preempt the advice from this thread will be to not do it for such meagre hourly rate?

I'm not sure why a permie, can't have a flexible work location and a contractor can. That makes no sense to me. Is this the same company ? Maybe a discussion with your current bosses, about your desire to work from home is where you need to start?

Permanent. You have pension. You have sick pay. You have employment rights. You get paid when you have a hospital appointment. If they wish to get rid of you, there's a whole lot of hoops they need to jump. There's no dead time between contracts, there's no risk that the next contract location isn't a pain to get to.
Obviously if I didn't have a job £33 would tempt me, if there was nothing else on offer. As another contractor once said. If you are out of work, you don't wait around fir a better offer.
Does your £20 an hour include their pension contributions, to match yours, does it include thier Employer National insurance. If it doesn't, then maybe its closer to £25? If you sensibly added some sickness insurance to your outgoings, and whatever the umbrellor charges, would the £33 drop to £29?


The question I'm wondering is where in the country you are based? Because when this contract finishes, where is the next contract ?


I'm Now working in Automotive. My area is Design for Six Sigma, and I'm coaching Design Engineers, but background is in Manufacturing Improvement.
Permie job. Work from home one day a week. All the st that goes with Permie. Performance appraisals, yearly objectove settings. I'm keeping out of the 40% tax bracket by maximising my pension contributions.

When I was contacting, Automotive rates were st compared to other industries. Aerospace, Nuclear, Wind Turbine Electonics, Medical products, all paid 25 to 40% more.

Rates in the Northwest were always lower, so I usually ended up in the East Midlands or West Midlands. I once phoned up about a role at Halewood, because the rate was advertised as only a couple of quid an hour less than the contract I was on, and that would mean I could easily comute daily instead of being away from home, all week. No. Those were the rates for Gaydon. When they told me the rates for Halewood I made my exit.

I digress.

Would I resign from a permie job, probably not. Unless they were really pissing me off.
If I was already sitting at home, with no work, would I turn down £33? No.

[Gazzab]

wombleh said:

Well, thinking for example companies can’t just swap staff onto temp contracts in order to then make them redundant without consequences.

If they start as a temp then bit different as they never had those rights to start with. Employment rights rather than IR35/PAYE related issues that is.

Edited by wombleh on Friday 16th February 21:58

They can offer you a new contract and you can accept it. Not sure that would break any employment laws. It’s just a poor offer.

[Frankthered]

deadtom said:

Deep Thought said:

Your £33.50 an hour may not translate to an awful lot more than your £20 an hour, as Employers NI, Apprenticeship levy and a set aside for annual leave will be take from this, THEN you will pay your normal PAYE tax after that.

Indeed, plus I believe it is a requirement to have public liability insurance, and I am not sure how much that costs. Rough calculations suggest that it would work out about the same for net pay.

My primary motivation in considering the switch to contractor is to allow me to live where I want rather than trying to get more money for the same work (though of course that would be nice too), but I wonder whether I am undervaluing job security and a set income.
Sometimes I think it would be totally worth it, life's too short to never take a risk on something that is important to you etc, but then I hear from other contractors (this thread and elsewhere) who would be unimpressed at double the rate I've been offered, and it feels stupid to give up security for what is apparently actually very little in return.

Edited by deadtom on Friday 16th February 16:02

Are you sure this is inside IR35?

A couple of point you've made don't quite gel. I am inside IR35 in my current role and the client has a mixture of inside & outside contractors. (For info, when I started, client would only allow inside for new starters, but has now relented!)

As an inside contractor, I am obliged to follow the same working patterns as the permies - in office 2-3 days per week, wfh for the rest. This also applies to core hours. The client's interpretation is that they cannot dictate these things to the outside contractors, so they are free to work in whatever location and whatever times they see fit. It would appear that the latter arrangement is what you are being offered, but it's not inconceivable (although IMHO quite unlikely) that a client might do this anyway.

Also, you should not need any liability insurance if you are inside - that definitely falls into the category of Somebody Else's Problem unless you are outside.

Worth checking because some of the answers above might be a little different if you are actually outside ...