Limited Co or staff salary?

armstrongracer

The company I'm working for has suddenly gone into liquidation and I need to get back earning pronto. I've been offered a contract role through an agency and have two options regarding salary. Not sure which one to take, the options are:

Set myself up as a Ltd Company, contract rate offered = €42/hour
Go paye as temporary staff, paid directly by the agency = €67,500 pa.

I contracted for 5 years during the boom but at a much higher hourly rate and it was a no brainer, I went Ltd Company route. The advantages here are less clear cut. I let the previous Ltd company lapse so would have to start over again. However, I could go down the Managed Co route with someone like CxC. The issue I have with Ltd Co is that as a director you can't sign on which was an issue when I was between contracts before. However, I have 5 years of paye stamps now so not sure if that makes a difference. The hourly rate offered leaves no surplus unlike before so would need to be able to sign on if the contract finished. Which way should I go?

blindsider

Revenue are looking at 'contractors' less favourably. They are pushing for 'contracts of service' i.e. employee status.

TBH I would go see an accountant who specialises in this area.

armstrongracer

I'm fully aware of that but last time I contracted I was fully tax compliant and didn't take the Pi** regarding expenses or pay myself a small salary and take a large dividend, which is what revenue are coming after. That sort of behaviour is what killed contracting in the UK and brought in ir35.

The question still stands though, am I better off financially to go paye or Ltd Co?

Mrs OBumble

I'm not sure of the finances (reemmber you lose the PAYE tax credit if you're fully self-employed .. won't be an issue for you this year, would in subsequent years).

But as a rough rule of thumb, I've heard that all up your contracting hourly rate shoudl be double you PAYE one for it to be worthwhile.

A salary of 67k is roughly an hourly rate of 33. So I wouldn't say that 42 is high enough to make contracting worth it, unless it's very short term and you don't have to cover for leave, training etc.

Ray Palmer

If you go the route of managed company you are still classed as self employed. It isn't being a director that is the issue it is the fact you pay S1 stamps as a self employed person.
If you are a temporary employee make sure you are paying the correct stamps. They may be just putting you through in the same manner as a managed umbrella company as happened to a friend of mine.
If you are contracting you should never rely on the dole and put it all down to the buffer you must have in your finances for periods not working.

armstrongracer

I'm 100% sure that if I go the temporary employment route I would be classed as an employee of the agency, so paying full PRSI and getting holiday @ sickness benefits.

Around 2008 when the bubble burst I saw contract rates dropping and all the advantages for contracting were gone, which is why I went back to paye work. My particular skill set is in demand within the medical device and pharma industries and over the last 5 years have had numerous calls from agencies about going back contracting. To tide you over gaps between contracts you would need to have €10-15k available as backup, for anyone with a family rates now are generally too low to be able to accrue any surplus, especially if travelling and accommodation have to be included.

Ray Palmer

armstrongracer wrote: »

I'm 100% sure that if I go the temporary employment route I would be classed as an employee of the agency, so paying full PRSI and getting holiday @ sickness benefits.

Around 2008 when the bubble burst I saw contract rates dropping and all the advantages for contracting were gone, which is why I went back to paye work. My particular skill set is in demand within the medical device and pharma industries and over the last 5 years have had numerous calls from agencies about going back contracting. To tide you over gaps between contracts you would need to have €10-15k available as backup, for anyone with a family rates now are generally too low to be able to accrue any surplus, especially if travelling and accommodation have to be included.

I guess it is different in IT. You can walk from one job to the next and the contract rates are normally double PAYE salaries.