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Freelance advice please(5 Posts)
I've only ever worked as a permanent employee, so don't really have an idea of what freelance entails and would like some advice please.
I've applied for a 24 hour (3 days a week) role with a company but it is on a freelance basis and mainly working from home with some fairly local travel to meet other members of the team once a week or so. They have said that even though it is a freelance role that the hours and days that i work would need to be set so they know when I am working. This works for me as I'd need to arrange childcare anyway.
I'm just not sure about the security of freelancing in this way, having only been a permanent employee. Also, what steps would I need to take and how much work does that involve? I guess I would need to set myself up as a sole trader. How would holidays and time off work? I've also never worked from home long term before.
I currently work 4 days a week in an office and always wanted to work 3 days (there is too much for me to do here to reduce my hours), but I'm just not sure what this would actually mean for me. Any thoughts or advice would be great!
Ok, am sure others will be along shortly...
Setting yourself up as self-employed is easy. You simply register with HMRC and you're off.
Your first year's tax return is likely to be more complex as it will have employed and self-employed income on it. I would strongly recommend getting an accountant for Year 1, they can advise on things like capital (setting up) costs - do you need to buy stuff like a computer for this job? - and a reasonable percentage of things like electricity/broadband/heating/mobile phone costs that you would be able to claim as expenses for working at home.
They will also be able to advise you on IRC35, and other tax issues where basically if you a client determines your hours of work, and you can't sub-contract the work or change your hours, whehter you should be a PAYE employee instead. I would definitely get advice on this if you are only thinking of having one 'client'. Other people on here are good at this stuff!
You don't get paid for holidays or time off, so you need to make sure your day rate is high enough to cover, at the very least, 5 weeks of unpaid leave (or whatever your equivalent paid terms would be).
It should also be high enough to cover the fact you are covering your own sick leave, pension, maternity pay, office space, heating & lighting, computer, phone line, software, professional training and development, insurance, stationary, and anything else.
Hope some of that helps!
Your hourly rate needs to be considerably more than if you were employed to cover your holidays, sickness, and additonal costs such as insurance, bank charges, accountancy, telephone/internet, equipment, postage, stationery, etc. Usually being freelance means the client just pays for your time and you have to finance all the other costs yourself.
I'd say a 25% uplift on an equivalent employed hourly rate is the bare minimum to cover your additional costs and protect yourself for sickness cover etc. A more average uplift would be 50% but I've seen it upto 100%, i.e. double an employee equivalent rate.
Also don't forget you have no employment protection. Freelancers are usually the first to go when times are hard or if they simply don't like you - you've no protection. They can "fire" you when they want, unless you have some kind of notice period or minimum period written into your contract.
It sounds to me like it is a job and they are avoiding giving you all the 'perks' that come with a job- holiday/sick pay. You won't get any of that, it is worth asking how you can deal with time off - ie do they require notice, can you just tell them you cannot work? That is how some freelancers are able to operate.
As mentioned IR35 is worth looking up - it is used to challenge companies that are avoiding paying employers NI amongst other things by pretending a role is freelance when it isn't. www.ipse.co.uk/policy/ir35
In practical terms you need to register as self-employed and start keeping all evidence of business related spending as it can come off your profit and reduce your tax bill. www.gov.uk/working-for-yourself/what-you-need-to-do
As others have said you need to look at the rate they are offering you. You will be responsible for your own tax & NI and pension contributions. The rate should be higher than your current role.
It would be interesting to know why the company has chosen to offer this role freelance? It could suggest that they are uncertain about it? And are trying to avoid the normal probabation period etc.
Being a freelancer is fairly straightforward (although I opt to pay an accountant to do my accounts/tax return) but if you are just being a freelancer for this company's convienence I'd think carefully about it. If they are a 'normal' company and have chosen to offer this one role as freelance I'd want to know why.
Sorry this is a bit on the negative side, I can understand how it ticks so many of your boxes for a role....just be careful...
IR35 won't be an issue if you are a sole trader though, only if you set yourself up as a ltd company.