We’ve previously written in detail on the respective benefits of fixed-term contractors and permanent staff. But here at Juggle, we always try to make employer’s lives as easy as possible. So without further ado, here is our quickest breakdown yet of the differences between permanent (PAYE) and self-employed contract workers…
|Permanent (PAYE)||Self-employed contract|
|Description||Employed directly via a company||A consulting “work” arrangement as opposed to “employment”|
|Tax (business)||13.8% National Insurance||Not applicable|
|Tax (professional)||0% – 45% dependent on earnings (plus 2-12% National Insurance)||
Same tax brackets but with self-assessment
|Other obligations||Pension, benefits and legal obligations including maternity and paternity leave||Not applicable|
|Equity||Normal in venture-backed startups||Not applicable|
Types of self-employed contract
New government regulation is making contract engagements more complex (hooray!). But don’t despair — below is a table outlining the three main options: full time vs part-time vs project.
|Work pattern||5 days per week||1-4 days per week||Until the project is delivered|
|Best when||Multiple tasks or projects to work on at one time. Time- intensive work. Several roles needed at once needed to get things started||Limited budget but need a higher experience level. Someone senior at two days costs the same as someone less experienced for five days||There is a clear deliverable that has an endpoint, such as a website launch, event, team hire etc.|
|Doesn’t make sense when||Limited budget and you need the experience or don’t have the resource to train or manage someone. Workload is light||You need a quick delivery on something or have a deadline with an intensive workload||There isn’t an exact delivery point. The work is ongoing|
|Consid-erations||Your budget, experience level required, amount of time and work required||Can the work be done in part-time hours?||Is a definitive end goal in sight?|
The commercials for contractors tend to be reasonably straightforward. You’ll usually pay a percentage of their day rate to the recruiter in the range of 10-20% (it can go up to 30% in some sectors and with senior positions).
The general rule of thumb is that if it’s a position which is relatively common, the lower the cost. Niche positions which require deeper networks and more active sourcing in-house, using platforms and agencies, will naturally be more pricey.
Recently some odd contracts have stipulated that the client pays until the contract end date, even if a candidate does not work out. Keep an eye out for these to avoid a frustrating situation where you are paying for staff that aren’t delivering.
How does pricing work for permanent staff?
Pricing of permanent hires tends to come in two forms — fee and subscription. This is how they match up:
|Description||Pay per hire||Upfront cost (monthly or annual) but not per hire|
|Best when||Hiring volumes are less than 10||Hiring high volumes particularly in specialised areas (Snap HR & Hired.com for tech, for example)|
|Doesn’t make sense when||Hiring volumes exceed 10 per year in a specialised area.||Hiring volumes are unpredictable and/or the volume is spread out amongst multiple areas (less than 10 hires per function)|
Regardless of whether your staff are permanent or self-employed, implementing a flexible working policy can help build loyalty and improve productivity.