contractor calculator
Business reluctant to take on permanent staff
Throughout the course of this year the level of unemployment in the UK has fluctuated, affecting both business and employee confidence, and creating a feeling of uncertainty across the jobs markets. However, this uncertainty has been welcomed in a way by those who are part of the UKs expanding temporary workforce. With businesses more wary to take on full time staff, and in many cases reducing their number of permanent employees that they have, temporary and contract staff is starting to become more of an attractive option. Flexible contract workers have recently risen in favour, with more businesses identifying the vital role that they can provide, especially in the short term.
Contracting is a fast growing option for workers who are able to offer specific skills in the short term and as businesses seek to grow post recession they can give an invaluable service. An specialist contractor calculator can offer potential contractors with an accurate idea about how much they could earn working this way.
Whilst contracting has always been an attraction for those with a particular set of skills or knowledge of a specific role, a new survey of jobseekers has found that people believed they would be more employable with a wider range of skills. The survey covered 1000 jobseekers, mainly within IT, and 93% believed that they would be considered a better candidate with a wider set of basic business skills.
The survey also highlighted the fact that with temporary job demand currently growing as it is, there is more competition between people for positions. So this thought regarding improving skills could be productive for workers who are looking at employment, as they could turn themselves into a more attractive employee. With contracting growing at the moment as well, and more people looking over their options when it comes to this type of work, a contractor calculator is a usefulplace to start with, to gain an insight into the advantages of being a contractor.
Rising unemployment causing business concerns
In spite of the latest employment figures from the office of national statistics recording the overall number of people in work within the UK at close to 30 million; a rise of 25,000 people in the last quarter, unemployment has continued to rise. The figures saw the number of people claiming job seekers allowance rise by over 37,000, which left unemployment at just under 2.5 million.
In order to combat this, the government have started various initiatives designed to encourage entrepreneurship, one of them being setting up “enterprise friendly” zones. The government business secretary Vince Cable described these zones as environments in which businesses will be supported and allowed to grow in areas which hold the most potential. The government understand the benefit that new businesses can bring, in terms of supporting both economic growth and job creation. They are also fully in support of self employed workers, contracting for other companies, including the public sector, via their own limited or umbrella companies.
The government are corresponding closely with local councils and businesses to really support new start ups and entrepreneurship. One other point that companies are also raising is that a low level of skills amongst current candidates is hindering recruitment and growth. As part of the governments initiative into entrepreneurship they may opt to look at improving key skills in workers, perhaps by improving training and education at lower levels. Until this sort of scheme is fully in place there is however a shortfall in terms of quality and highly skilled workers. This is where the role of contractors and freelance workers can really provide a lift to businesses.
For them, the benefits of engaging with a skilled worker on a contract basis is that it fills a short term gap, such as a one off project, which prevents the costs of a permanent worker and also leads to a better quality of service. For the contractor, as well as the freedom to work on a range of projects, they can also enjoy a higher level of pay; the increase compared to PAYE can be calculated simply using a contractor calculator.
Freelance workers caught by employment legislation
A recent supreme court ruling has put a clear definition on how to determine the employment status of a worker who is claiming to be self employed. The case came to them after an appeal at an employment tribunal, where a number of ‘self employed’ workers were found to be employees of a company that worked on car valeting.
This case was fairly straight forward for the court to make a judgement on, as it was clear through the employees’ working practice that they were indeed employees of the company, due to most of the important decisions been made by the employer. The workers argument was that their contracts stated they were not mutually obliged to the company, however this turned out to be a sham which the court was easily able to overturn .
Many contractors have to cope with investigations relating to their employment status; despite operating through their own limited companies, some workers are not seen as legitimately self employed and instead as an employee of the company for whom they are contracting for. This is what the IR35 legislation seeks to determine, and has created unnecessary burden for scores of freelance workers over the last 10 years.
One solution to operate as a contractor and remain clear from any IR35 and investigation concerns is to work through an umbrella company instead of a limited company. This ensures that a worker is instead an employee of the umbrella company rather than being self employed. Whilst this makes regulatory compliance much easier, the downside is that less business expenses are allowed to be claimed, therefore meaning a lower income for the worker. Both umbrella and limited company solutions have their merits however, and further information can be found from specialist contractor accountants.
Contractors can also carry out an IR35 review on their contract and also find out how much they could earn if working through a limited or umbrella company by simply using a contractor calculator.
Specialist IT skills in high demand
Figures relating to IT jobs have shown over a 25% rise in jobs created over the last year. The report found that 90,000 IT jobs were created throughout May this year, compared to 70,000 in 2010. This increase has come at a period when businesses are trying to grow following the recession in recent years. Many companies are increasing their spending on technology and IT as these are seen as areas which can provide significant productivity moving forwards. IT was also one of the most reined in part of business expenditure over the recession, so it is no surprise that there is now a surge resulting in more job availability.
This rise in IT jobs has also been noted by recruiters, as well as specialist contractor accountants, who have seen a rise in people becoming umbrella company contractors. Although there are many permanent IT jobs, a lot of projects are on a contract basis and so a lot of IT workers are freelance.
There are many advantages to working freelance, first and foremost the ability to choose contracts and work on a range of different projects. Many IT workers in particular like to take advantage of the freelance work style as their specialist skills are often in demand, especially considering the skills shortages in certain areas. This means that many workers receive multiple job offers and large wages for taking up new roles.
With this comes the second main attraction to working as a contractor, which is the high level of pay that contractors enjoy. Employers and businesses will pay a larger amount to someone who works on a one off project, than someone who is employed on a long term permanent contract, so multiple contracts can provide a much higher annual salary. Potential contractors and those who are looking towards becoming self employed can make a quick calculation using a contractor tax calculator to see how much more they might make using a tax efficient solution.
New employment legislation close to implementation
With the latest piece of UK employment legislation, the Agency Worker Regulations, due to be implemented within the next 2 months, workers who feel that they may be affected might be starting to be concerned about what the regulations will mean to them. This makes the next couple of weeks vital in terms of preparation if the AWR are to be brought in smoothly. There are important responsibilities for recruiters, employers and accountants who all work with freelancers and contractors during the employment process. So whilst the regulations initial impact will help workers at one end of the scale, it is important to also protect the higher end contractors from being negatively affected by them.
After it being suggested that limited company contractors, those who are legitimately self employed, will be out of the scope of the regulations, those who operate under an umbrella company are also thought to be safe as long as there is a ‘pay between assignments’ payment option set up .
The regulations have been designed to support those at the lower end of the temporary work force scale. This includes the likes of nurses, low level IT or support staff and other locum workers. The benefits of the regulations to this category of workers is extremely valuable as it offers them more security and better rights, whilst retaining the attractions that flexible working brings to them.
There are however, obviously the higher end workers who also fit into the wide category of ‘agency workers’ and for whom the implications of the regulations are not massively beneficial. These workers are often top end IT workers or engineers, professions which require highly skilled and experienced workers to carry out detailed tasks and projects. Due to the nature of their roles and the way they operate through limited or umbrella companies, these contractors tend to get caught by a range of employment legislations like IR35, as well as the AWR.
Government seeing growth in freelance workers
One of the top contractor groups, the Professional Contractors Group (PCG), believe that a growing number of people are now opting to work as freelancers. The group regularly quote that there are around 1.4 million freelance workers in the UK, but this number is increasing, with many more people looking to move towards the flexible work style. There are a range of reasons for this, the first being the current economic situation, which has meant that employers are offering fewer permanent jobs and deciding to opt for shorter contracted jobs to reduce long term costs. This has been replicated by the government who have cut many public sector jobs and are now transferring a lot of work to the private sector.
The government are taking an increasing notice of contractors and freelance workers, and an all party parliamentary group for freelancers was recently established to give the government a greater insight into the real benefit of the flexible workforce. The MP chairing the group, Brian Binley, was extremely positive in his praise of this workforce, saying; “Freelancers do a tremendous job for the UK economy, creating a flexible workforce, which can provide specialist expertise at short notice.”
It is these particular traits; specialist expertise and the ability and freedom to work on multiple contracts without hesitation that has pushed the freelance work style to the top of the UK jobs market. Many experts in recruitment and other relevant sectors are witnessing the trend of workers who are opting to join the growing freelance revolution; so the flexible and multi location workers, who are not tied to an office, will be an key fixture in the future.
Those interested in more information about being a contractor can find out how contracting could benefit them by completing a contractor calculator; a type of tax calculator used to work out the tax savings that contractors can make by working through a limited or umbrella company as opposed to simply pay as you earn.
Public sector jobs cuts in spending review
With the government aiming to reduce costs within the public sector, many IT contracts and projects are being transferred over to the more efficient private sector. At the same time the government are reviewing the way they deal with their IT operations across the sector. One report revealed that the expenditure on IT is ridiculously inflated, with some systems costing between 7 and 10 times the actual market value. This is just one case of poor efficiency within the public sector.
It is clear why so many recruiters and government officials have highlighted the role of contractors and freelancers, many of whom have taken up some of the public sector workload. The level of service is of a high standard as most of these workers are extremely skilled and knowledgeable in their area of expertise. There is also a huge long term cost saving with hiring contractors working through umbrella companies as opposed to permanent staff.
Due to this rise in employers offering contract jobs and looking for freelance workers, we are beginning to see a growing trend of permanent workers to contractors. On top of the increased job availability there are also a range of benefits available to people who work under one of the various self employed models. Being self employed means that you are free to work on whatever contract you choose, allowing freedom for the role and holidays you receive. Providing an expert service or skill also means that a higher wage is often demanded.
Working through a limited or umbrella company, workers are also able to receive an amount close to the tax free allowance as their salary, meaning they pay just a small amount of tax on their income. The main problem comes with the IR35 legislation which acts to establish where a worker may not be genuinely self employed, but instead an employee of the company.
FSB support self employed workers
More of the top IT jobs are now being taken by women, according to figures from a leading online recruiter. The report saw an rise of more than 160% of women working in the IT sector. This also included an incredible 1000% increase in female IT workers accross Northern England; this has been evidence of women successfully entering this sector and competing with men for the top IT jobs.
Female contractors were also supported by the Federation of Small Businesses (FSB), who have urged more women to consider becoming self employed. They also want the government to do more to support small businesses and remove various barriers to entry for people setting up their own business. For those who are interested in learning about the benefits of becoming self employed, a great starting point is to use a contractor calculator to see what financial savings could be made by working through either a limited or umbrella company.
The growing use of temporary workers has been noticed by the government, particularly the department for Business, Innovation and Skills, which represents the business interests of UK workers. They, in hand with many recruitment companies, have been eager to draw attention to the vital role that flexible staffing arrangements can fill. The benefits can be felt throughout the working circle, from employers and employees to the government.
A flexible working model ensures that positions are filled, often with highly skilled workers, and employers are not burdened with full time salaries to pay (and the other requirements that come with full time staff). For the worker, a contracting role means they are free to work the role and hours that they choose to; and whilst there is a level of risk attached to the role, they usually receive a higher salary by working through a limited or umbrella company. This means they are able to pay a lower level of tax, which can be worked out by entering daily or hourly rates and expenses into a tax calculator.
Contractor Savings through Umbrella Company
HM Revenue and Customs have been fighting to clamp down on tax avoidance over the last 12 months , and have recently looked at Umbrella Companies who have been paying their contract workers the national minimum wage (NMW) by topping up their pay with their subsistence and travel costs . This had led to HMRC bringing in tighter national minimum wage rules in order to attempt to crack down on people who are not in line with with tax legislation .
HMRC have confirmed that these types of schemes go against parliamentary law, and so they are attempting to establish those businesses who are involved in this tax avoidance and are planning to take suitable action against them. The Recruitment and Employment Confederation (REC) are one group have also urged the Government to provide more clarity and consistency to the expenses schemes and improve how they are interpreted by HMRC. They expect that this will help people understand and better co-operate with them.
Contractors who want to operate through an umbrella company can find out how much money they could save in comparison to pay as you earn (PAYE) by using a self employed tax calculator. On top of comparing the amount this could save them in comparison to PAYE it will also llustrate to them how umbrella company savings compare to a limited company. Using a tax calculator like this is a perfect way for contractors, especially those on large daily rates, to really get an idea about what option would work for them.
Independent expert advice can also help a contractor to evaluate the best solution for them. With legislation such as IR35 a problem for many contractors, they must ensure that they are employed in the correct way. Working with a company such as Independent Contractor Services, contractors can receive a big increase in their net income per month whilst also discovering a solution that fits them best.
IR35 Forums work should aid contractors
Following a review of small business taxation and IR35 legislation by the Office of Tax Simplification, the government opted to establish the IR35 Forum; a body created to review the plans to improve IR35 and scrutinise HMRCs ongoing work to apply it. The forum comprises of a selection of industry experts, as well as members from recruitment and contractor groups. They are aiming to find a workable IR35 solution, which will settle contractors worries after 11 years of the current regulations .
The forum will consider a range of areas, including the segmentation of those who are caught by IR35, the role of HMRC and their sucess in improving the legislation, and finally they will look at a number of ideas for a future solution, such as some kind of business test to work out a workers status.
One of the IR35 Forum members , Chris Bryce of the PCG, has high aims for the forum . He said that they are aiming to make a real improvement to the uncertainty surrounding IR35 and issues such as the “unacceptable length” of most IR35 investigations. He continued by saying that the forum are taking the challenge of improving IR35 very seriously and are determined to deliver clarity, transparency and consistency to the contractor community. He finished by declaring that the group are “determined to clean up HMRC’s administration of IR35 once and for all.”
As IR35 does however still exist in its current form , it is important for contractors to be aware of the legislation and whether they may be caught by it . Those who are unsure about what the legislation mean to them are advised to contact a contractor accountants who can speak them over the rules, and give them independent expert advice. As well ascomparing the options for working through a limited or umbrella company, they can also use a contractor calculator in order to discover how much they could earn compared to PAYE.
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