As you might have read in this thread, I received a proposal for a short-term consultancy in London. Today I had a chat with the head hunter from the recruiting agency and he explained to me that there are two routes I can go. I can be self employed (and he mentioned something about “incorporating myself”), with the disadvantage of having to deal with the paperwork for the taxes, or I can contact an umbrella company (nothing to deal with zombies, apparently ), and this company is going to hire me and pass me my payment - for a price.
To be honest with you I’m not keen on either option and I wonder if there is any other contract type that could be useful. I’m not an expert on UK contract law, but I find it difficult to believe that there’s no contract type to employ a specialist for a short spell, like the one I used many times in Italy. Of course I’m aware that different countries have different legal systems and different traditional approaches, but it feels, I dunno, strange.
As I mentioned before, in Italy there were two relevant contractual forms: External Consultancy, used when there’s a single consultancy that won’t be repeated, and Continued and Coordinated Consultancy, when it can extend an unpredictable amount of time or when there could be repeated consultancies in a relatively short time. These contract types were between me and the final employer, and the recruiting agency would take a separate commission.
So, is there any other way of managing and negotiating consultancy work that I should be aware of?
I don’t know how much UK contracting you’ve done before, so I’ll go with the beginners guide (sorry if its a bit basic). If you aren’t aware of IR35 and Section660 look into them - they are likely to affect you if you go any route but freelance or PAYE. If you are doing this long term some clients may insist on professonal indemnity insurance (its a good idea anyway).
You can go freelance as a self employed individual, which some companies dislike, but that means doing your own taxes. A lot of client companies don’t like this and will prefer you go through an umbrella or a Ltd.
If you “incorporate yourself” it means setting a Ltd company with yourself as a director. Again you have to deal with tax, NI etc, but you can VAT register to reclaim VAT and pay things as business expenses (like travel) which can help make money go a bit further. Most contractors and consultants I know use Ltds.
If you go through an umbrella company, there are several ways these work - some will incorporate a company for you and do the work, others will make you part of a larger limited. Some will allow you to reclaim expenses some, surprisingly, won’t. A lot of agencies have agreements with one or two umbrellas that they will send business in that direction and receive various benefits in return. Look into the cut the umbrella takes before agreeing anything - it can be rather high.
Also some agencies will do PAYE where effectively you are temping through them. Its the simplest option, but not all agencies offer it.
Hmm, all extremely interesting - and enlightening. Enlightening enough that I decided not to accept the consultancy. I do not appreciate the way the recruiter was pretending with me that my only options were either being self employed (with incorporation as an option) or going for an umbrella company. Of course both of those approaches have benefits for me together with their disadvantages, but they mainly have benefits for them (recruiter and employer), and I feel I was not given a fair amount of information.
), and this company is going to hire me and pass me my payment - for a price.