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Does anyone have a formula to compare employment to self-employment rates?

Does anyone have a formula to compare...

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Does anyone have a formula for the following:-

Currently working on contracts at an hourly rate, receiving no holiday pay or benefits from any clients.  Working through a Limited Company and billing about £30k.

Want to arrive at a comparable rate for being employed in a full time position.

Has anyone done this number crunching before who would be willing to supply me with the formula they used and/or factors to take into account?

Many thanks.

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By CWalsh22
26th Oct 2014 19:23

Employed v Self Employed
There isn't a formula as such but here's a few figures that will help you to work out the answer to your conundrum.

Firstly, of your £30k income through your limited company you would have to set aside 12.07% to cover the holiday pay entitlement if you were an employee. You can work out your underlying pay rate if you would want to compare yourself to an employed earner.

If you were to achieve a £30k salary, holiday pay would be paid when you took leave and you would probably be entitled to a 1% employer pension contribution per year, plus Statutory Sick Pay as a minimum. Whether you would gain any other employment benefits, or even job security, would depend on the employer.

As an employee PAYE would become due on £30k. The first £10,000 pa sees no deduction for tax, the remainder being subject to a deduction of 20% for income tax.

National Insurance is deductible at 12% on income over £7956 a year.

As an employee, unless you are going to be travelling to temporary workplaces, you would not be entitled to claim tax relief on travel expenses, but almost every other work related expenses (not business related expenses) can attract tax and NI relief. You would need to reclaim these reliefs direct from HMRC at the end of the tax year, so you would probably still need to file a self assessment return.

If you are an agency worker, the hourly rate for a worker being paid under PAYE is usually 20% to 25% less than the rate paid to a self employed worker or limited company owner, this being the anticipated cost of holiday pay and Employer's NI which is a payroll cost of employing employed workers.

Hope this helps you in your future decision.

I post information specifically for freelancers and agency workers on my Linkedin account, message me if you would like to connect.

Carolyn Walsh

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By geroge
26th Oct 2014 22:29

work out your post tax income in each case - PAYE calculators online should make this easy, as you already know your Ltd net drawings.

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By DKB Tiger
28th Oct 2014 15:17

Internet salary cals should be able to show you employed gross and net and also as a self employed person, one thing to bear in mind being self employed you have to pay the baisc NIC on a monthly DD (£2.50 per week) and then Class 4 will the calculated when you submit your tax return.

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By petersaxton
28th Oct 2014 15:21

It's not 2011-2012 anymore!

It's £2.75 per week for class 2 NICs now.

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keep calm and have a cuppa
By tbk
28th Oct 2014 16:21

not a comparison but

this site has a good calculator for the employed option

 

http://www.thesalarycalculator.co.uk/

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Replying to Davis_21:
keep calm and have a cuppa
By tbk
28th Oct 2014 16:28

although it turns out

they have a self-employed/ limited co calculator here

 

http://www.employedandselfemployed.co.uk/

 

I can't vouch for the accuracy personally and they can only ever be as good as the estimates you put in but they seem pretty comprehensive

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By DKB Tiger
29th Oct 2014 18:21

£2.75 NOW I my increasing my

£2.75 NOW I my increasing my Charges !!!!!!

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By Sherman Holter
30th Oct 2014 13:35

Thanks

Many thanks for all the comments.

Actually the Class 2 NI is a red herring because the comparison I'm looking for is for employed vs self-employed via a Limited Company so no Class 2.

Thanks to all.

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Replying to JDBENJAMIN:
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By sosleepy
30th Oct 2014 14:51

So..

Sherman Holter wrote:

Many thanks for all the comments.

Actually the Class 2 NI is a red herring because the comparison I'm looking for is for employed vs self-employed via a Limited Company so no Class 2.

Thanks to all.

So you don't mean self employed then?

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By Sherman Holter
30th Oct 2014 14:58

Semantics!

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Replying to Wilson Philips:
By petersaxton
30th Oct 2014 15:04

Exactly

Sherman Holter wrote:

Semantics!

Does it really matter what words mean?

Can't everybody just grunt at each other?

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Replying to The Dullard:
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By andy.partridge
30th Oct 2014 15:21

No need to grunt anymore

petersaxton wrote:

Sherman Holter wrote:

Semantics!

Does it really matter what words mean?

Can't everybody just grunt at each other?


Just point with thumb at tablet
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