Firms hiring only married freelancers & contractors might be onto a good thing – the chance to make massive savings from hiring costs. ContractorCalculator’s analysis of the costs to firms of hiring contractors versus employees reveals that a married contractor trading via a personal service company can cost between 50,000 GBP and 60,000 GBP less than an employee, for the same take home pay.
“How many of the contractors you’ve just interviewed for your latest assignment were wearing wedding rings? If you choose the more mature married contractor, you might just be onto a good thing – massive payroll savings,” highlights ContractorCalculator CEO Dave Chaplin.
Contractor clients and employers could be missing a trick if they fail to dig a little deeper into how their workers get paid. By discriminating against unmarried limited company contractors, umbrella contractors and employees, and only hiring married limited company contractors, firms can slash their employment costs.
That’s the logical conclusion of ContractorCalculator’s analysis of the cost of contractors and employees to end-user clients and employers. “When you do the sums, it can cost a client or employer as much as 60,000 GBP extra to employ someone who gets the same take-home pay as a married contractor,” says Chaplin.
So, how does this anomaly come about? “Married limited company contractors can of course legitimately split their income with a spouse who works in the business and remains unaffected by the settlements legislation,” explains Chaplin. “This has a huge impact on take-home pay once a contractor starts earning 5,000 GBP or more per month.”
At net incomes of 3,000 GBP per month, limited company contractors outside the IR35 ‘disguised employment’ legislation – whether or not they are married – are cheaper by between 13,000 GBP and 15,000 GBP per year than contractors inside IR35, umbrella contractors or those on fixed-term employment contracts. That’s quite a saving by itself.
Chaplin continues: “When you look at contractors who require earnings after tax of 5,000 GBP per month, choosing a married limited company contractor to fill a role becomes a no-brainer. They are about 7,000 GBP per year cheaper to hire than unmarried contractors, and nearly 30,000 GBP per annum cheaper than a contractor hired on a fixed-term employment contract.”
But it’s when you start to look at high level and senior contractors, such as programme and change IT contractors and senior interims, that the real savings can be made. Married limited company contractors requiring net pay of 7,000 GBP per month only cost the client 106,664 GBP for a one-year contract.
To hire the same contractor and pay them 7,000 GBP net each month costs 165,787 GBP if they’re inside IR35; 158,937 GBP if they’re using an umbrella; and 157,497 GBP if they’re employed on a fixed-term contract. That costs the client between 50,000 GBP and 60,000 GBP more each year than using a married, limited company contractor outside IR35. Even an unmarried limited company contractor costs 126,408 GBP, roughly 25% more.
“As an aside,” notes Chaplin, “these figures show that the Exchequer Secretary to the Treasury Danny Alexander’s off-payroll rules, designed to ensure government workers pay employment taxes, are likely to backfire. Forcing a senior interim onto a government department’s payroll will end up costing the taxpayer far more than the Exchequer can hope to gain from additional taxes.”
Chaplin concludes: “So, the next time you are hiring, take a discreet look at your interviewee’s left hand. The glint of a wedding band might just mean you can try negotiating a better deal.”
Kaynak : 