Switching to subcontracting - day rate?

[thedeepdarkwood]

I am currently employed earning £50k pro rata. I only work 2 days a week. Workload throughout the year is really variable and my employer largely relies on subcontractors to fill the gaps. As we are really busy at the moment he has asked me to do an extra day a week for the next few months and paying me for this through paye. I was however wondering if he could pay me as a subcontactor for these instead? Is is allowed to do a combination of subcontracting and paye?

Also I know the subcontractors he uses that are charged at a lower day rate to the client than myself and do a similar role to me receive £400-£450 per day. This seems high compared to my salary. I do get 30 days holiday and 15% pension but how much would this equate to as a day rate?

I am wondering whether I should just suggest subcontracting all the time to my employer but if so I am not sure what rate I shoud ask for. Any ideas? I am not worried about the variable work as can be flexible.

Have a look into the IR35 rules. If your currently employer is your only 'client' if you go into sub contracting, then it's not as lucrative as you might imagine - if the rules apply, tax and employee NI are removed from the fee and paid directly to HMRC. Then on your side you have all the costs of running a Ltd. company (insurance, accountancy etc.) and none of the protections and benefits you enjoy as an employee. Remember you don't get paid sick days, you don't work, you don't earn. A two week flu can lose you half a month's revenue. I've never heard of doing a mix of employee and sub-contractor for the same company and TBH I can't imagine anyone agreeing to this due to the admin hassle. I think you need to decide whether you want to run a contracting business, or be an employee.

In terms of rate, it's entirely sector dependent. If you are say, comparing developers who get £500 p/d and you are more of a Lead Developer (i.e. some management responsibility) then is it the norm that you'd be paid a higher rate - say £750p/d. Bear in mind that contractors are often replaced by permanent staff because they are cheaper!

Also, 30 days holiday and 15% pension is much more generous than most employers offer already..

Personally I would look at the economic backdrop and see if this is something you’d like to risk now.
there are also legal requirements around leaving a job and returning as a psc (which I assume you’d like to do is to go down the ltd company route)
finally you have ir35 to contend with.

The day rates do sound high on contracting, but if you look at the package as a whole, with the regulations around it you might not be getting as much as you thought plus you’ll have very little labour rights.

Sub-contracting at your employer definitely sounds like an IR35 nightmare to me. You would end up being classed as a 'pseudo-employee' (not hard, given you are an actual employee) and your employer would have to withhold tax and NI. So in other words you'd end up with a load of admin hassle (as would your employer) to end up largely at the same place as you would if you just did the extra day via PAYE.

Ok thanks all, it doesn't sound like the subcontracting route is worth the hassle. I am wondering though about using the subcontactors day rates to negotiate a pay rise. What would be equivalent to a day rate of £400 taking into account my 30 days holiday and 15% pension? I rarely take any sick leave, 1 day in the last 5 years and no other perks.

Stay PAYE negotiate a payrise and ask to go to a 3 day week on a permanent basis

I think by all means negotiate a payrise, but don't try and use the rate paid for the subcontractors to do it. The two things just aren't equivalent; the company is paying a premium for a flexible workforce that they can lay off when not needed, and the subcontractors have a host of hidden costs of their own that mean they're not putting 400 quid in their own pocket at the end of each day. I'd talk about maybe wanting an overtime rate for that extra day - you should also be rewarded for being willing to be flexible.

When I left a £65k a year job I charged £500 per day and two years later this is £700. Obviously depends on your job and industry but doesn't sound far off to me.

Do you not get £480 a shift if you only do 2 a week and get £50k?

£450 a day minimum. I’d always double salary and divide by 220 to get minimum figure it’s worth switching from perm contract for

holiday
sick pay
NI
Contract gaps (many places enforce 3weeks + in Dec)
uncertainty

By the same token @Isyesterdaytomorrowtoday , as the OP isn't contemplating switching from perm to contractor, (450 * 220)/2 works out more or less at her current salary.