[bmwak]

Hey all.

Looking for a bit of advice. Long story short, I am currently in a full time role but have been offered a fixed term contract and happy with the package e.t.c, 'til the company said to me that due to head count restrictions, they cannot hire me directly and that the recruitment agency would hire me and they would pay my salary (although I would work for the said company).

Is this 'normal' behaviour in these types of contracts and is there anything I need to be concerned about? They have advised that it doesn't affect anything.

[JLR1969]

Currently that is what I am doing as I was not sure if I wanted to be an interim long term and could not be bothered to set up a limited company. It's OK if it's short term but longer term it's not very tax efficient.

The company you work for are basically having their cake and eating it.

You need to consider what benefits the FTC gives you and how long the contract is for, is it a day rate or salary, pension etc.

I would say that that if you have been at this company a long time you could be missing out on redundancy payments etc if you move to a FTC, not an expert but there are good reasons for the company putting you on one.

Normally notice periods are less potentially with FTC

Do you currently work for the company or is it a new job

[bmwak]

Originally Posted by JLR1969

Currently that is what I am doing as I was not sure if I wanted to be an interim long term and could not be bothered to set up a limited company. It's OK if it's short term but longer term it's not very tax efficient.

The company you work for are basically having their cake and eating it.

You need to consider what benefits the FTC gives you and how long the contract is for, is it a day rate or salary, pension etc.

I would say that that if you have been at this company a long time you could be missing out on redundancy payments etc if you move to a FTC, not an expert but there are good reasons for the company putting you on one.

Normally notice periods are less potentially with FTC

Do you currently work for the company or is it a new job

Thanks for the reply. So in essence the agency just acts as a umbrella company right?

The contract will be 7 months. It is a salary and I am told it is not pro-rata.

I am told that there is every opportunity near to contract where i'll turn permanent. But they can't hire me permanent for now.

One thing that concerns me is national insurance and tax. Im assuming it still would work as permanent employment, whereby you have a tax free annual amount, and you just get taxed on what is above it, based on your tax code?

I've only worked at my current employer for 3 years, so not a huge pension pot if you like.

It is a new employer / new job.

[JLR1969]

So you would be paid through the agency, they would deduct tax and NI and you would have the same tax allowance as anyone else.

Legally when you have worked 12 weeks they have to accrue holiday allowance for you so ask about this now.

You may enjoy moving from company to company if after 7 months the full time job does not appear.

Have they given a reason why they cannot employ you from day 1

If your package does not match that of a perm employee then I would be asking for a better salary.

[bmwak]

Thanks for your help, much appreciated.

Thats great on the tax and NI front. Although I assume they'd probably deduct it to the pro-rata of your salary and deduct it to your band (whether its 20% or 40%), is that how it works for you?

I will ask on the holiday front (been told it is 25 days though) not sure if they would therefore accrue for it already.

Yes I have never tried temping or contracting, so If i enjoy the experience I definitely would give it a shot long term.

[Ajs_435d]

I agree with the above, what I will say contracting is great if you can get constant good pay and not be out of work for a while, obviously you don't get sick pay/holidays and an employer can get rid of you within a week.

I had my halcyon days last year where I had a good long very very well payed contract, this year I've had to take short term contracts not as well paid contracts and been out of the work in the middle. I work in IT/control systems so not exactly a bad sector just had bad luck.

There are certain hourly rates than you can base as an equivalent for a staff perm role. Get an accountant I never go through umbrella, if you earn over a certain amount its worth claiming vat too but in recent years it isn't worth it as much as it used to be.

Good luck with your new contract all the best.

[Watsey]

At this stage ask a lot of questions; make sure you get all the facts, in writing.

I'm cynical when it comes to FTCs, and will never consider them. IMO they are being increasingly by organisations to reap the rewards of 'hiring' people but without paying full market rate or benefits. I see a lot of pro-rata FTCs being advertised - in short the client is making it clear that it is not willing to pay a premium in return for the benefits that come from working with a flexible workforce. Not acceptable IMO.

For a first-time experience of contracting, working through a recruiter will probably be fine. If you decide to stick with independence for the longer-term I'd recommend :

Setting up a Limited Company.
Business banking.
VAT registration.
Getting a good and fairly-priced accountant; one that can quickly get you fully informed of how to operate a successful business, and the allowances that your business can make use of.
Choosing an intuitive online accounting platform such as QuickBooks.

The government has removed the upside of the VAT Flat Rate Scheme, so select the standard VAT scheme instead so you can recover all of your input VAT.

Price your rate on the basis of your total annual income requirements and the cost of all annual benefits that you used to receive as a permanent employee (holiday; pension contributions; car/allowance; private healthcare; etc) and the divide by the number of days that you expect to be contracted each year.

Do your research to fully understand the acceptable rate range for your specialism, experience and target sector(s) - knowing your worth will help you to negotiate from a professional standpoint.

Good luck with it, but don't sleepwalk into an arrangement that disadvantages you just because it's convenient for the client.

[Jeff123]

I would not necessarily use an accounting package at this point. They are quite complex at first and there are better things to spend your time on. Really, its a few (or maybe even 1) invoice per month, plus some expenses, so basic record keeping would be fine.

[Tengocity]

I took somebody on this year on a FTC, but it was a specific situation.... we liked him, but he failed the assessment centre. I wanted to take a punt on him and negotiated openly with HR and him that we have a FTC for 7 months to the year end and if he performs well then we will convert it to a permanent one.
It's all worked out well and he will go perm shortly.
Doing that felt honest and transparent, whereas I know of managers that would employ or perm and then fail people's probation period if they didn't like them enough, which i don't think is at all appropriate.

We also do it for Mat covers.

As above I'd be looking for complete transparency.

[225]

I can understand why people take ftcs but to me its the worst of all options. You get permie wages, still need to look for a job in a few months time and cannot claim travel etc .

Most firms I see doing this are doing so because they need an interim but can't or won't pay for a contractor.

[isleaiw1]

Originally Posted by 225

I can understand why people take ftcs but to me its the worst of all options. You get permie wages, still need to look for a job in a few months time and cannot claim travel etc .

Most firms I see doing this are doing so because they need an interim but can't or won't pay for a contractor.

well i day rated at a company for a while, and then went on the payroll when I realised what the pension contributions and potential bonuses were at my level - neither of which they were prepared to build into a day rate properly...

Yes my take home went down when I went on FTC, but my overall package went up thanks to a couple of good bonus years and a bit of astute negotiating (they converted my prior expenses into an end of contract termination bonus which was paid every 6 months...)

[225]

Originally Posted by isleaiw1

well i day rated at a company for a while, and then went on the payroll when I realised what the pension contributions and potential bonuses were at my level - neither of which they were prepared to build into a day rate properly...

Yes my take home went down when I went on FTC, but my overall package went up thanks to a couple of good bonus years and a bit of astute negotiating (they converted my prior expenses into an end of contract termination bonus which was paid every 6 months...)

Fair play if you can get that then it does make sense.

[isleaiw1]

Originally Posted by 225

Fair play if you can get that then it does make sense.

One of the issues is that some companies have an issue converting the full pay package into a realistic day rate for the number of working days in the year you can expect - as it sounds high! I learned to be flexible and see which negotiation route was the most open door....