IT Contracting in Ireland

I've just started IT contracting. I'm am contracted to a management company who look after my invoicing etc. The problem is they advised me to go down the PAYE employee route instead of maybe setting up a limited company. The difference now is a take home of less than 60% instead of over 80% if I had set up a limited company.
As it is I pay PRSI both the employee (approx 6%) and the employer (10.75%) contributions. And obvoiusly since I dont get holidays, sick leave, pension etc, it's not working too well.
Has anyone got any experience of setting up a limited company or working as self employed while contracted to another company.

The difference now is a take home of less than 60% instead of over 80% if I had set up a limited company.

Click to expand...

Are you sure about this? Are you factoring in accountant's bills and other compliance costs? There's a lot to be said for just getting paid and not having to worry about
- end of year accounts
- filing P35s, P30s
- VAT
- corp tax
- the county sheriff

And obvoiusly since I dont get holidays, sick leave, pension etc, it's not working too well.

Click to expand...

If you're a full time 'A' class employee, you should be getting at least 20 days holidays a year, as well as all the PRSI benefits. This is much better than being an 'S' class director.

At the moment I am contracted to a company, who pay my agency for my services. Then I hire a management company to invoice my agency, and take care of PRSI, TAX etc and transfer the money into my account.

Because I work on 3/6 month rolling contracts. I'm not entitled to any benefits like pension/ holidays and could be let go as soon as my current contract is up. This is normal for contracting.

But my problem is I am currently paying Ers PRSI which is 10.75%. This is what I want to avoid paying.
I would agree with you if it was only the Emplyee contributions I had to pay like PAYE and Ees PRSI.

When I was contracting and using a management contract I effectively was an employee of the management company. So they put all my short contracts under the one period of employment with them. The only advantage AFAIK was to reduce the amount of admin and paperwork each time a new contract started/ended.

I'm not sure what you mean by "benefits like pension/ holidays" or how its related to length of contract? Are they not expenses?

sorry for the confusion... it's simply that i dont have much of a clue as to what i'm entitled to or how contracting works.

I think by your answers and reading other treads it is clearer now... thank u.

The way I see it, my contractor status is 'PAYE employee'. This means my umbrella company do my admin and taxes for a (fixed) fee.

I pay the usual taxes (20% & 41%) and also I pay PRSI both employee and employer contributions. My umbrella company do not pay my Ers (employer) PRSI because they are only acting as my Employer, when in fact they are not my actual employer.

Before I started contracting, I had never considered Ers PRSI, which at 10.75% is a real sting! Thinking about it now... who else was going to pay it!

slash55 said:

...Thinking about it now... who else was going to pay it!

Click to expand...

Ditto Holiday and sick pay.

The managment company I used held back some of my wages to use for these purposes. Once you stopped using them they paid it back as a lump sump.

Management company are only cost effective short term.

Seems to me that you have been badly advised - paying employer PRSI is a large chunk of cash. I'm sure the management company don't come cheap either. As you say the most cost effective way of doing contracting is through a limited company. It has advantages and disadvantages:

One time setup costs of a limited company - about €400 - not sure exactly these days

Paperwork - you have to do regular tax (every three months) and VAT (every two months) returns. These can be done through ros.ie

You have to keep good records of all your purchases/expenses/invoices

You need an accountant to prepare end of year accounts (about €1500 if in Dublin I believe)

Your PRSI would be class S which will cost you less than what you are paying now but has less benefits (for example no dental cover).

Being a director you can avail of an executive pension to move more of the company's income into a pension tax free than if you were a standard employee.

The costs above should come in well under your current setup.

Agree with the last poster..Wouldn't use an umbrella company unless I was planning to contract in the short term. I setup my own company and this has allowed me to extend my services into other areas beyond IT contracting....

On the subject of IT contracting, is there any blogs, forums or other resoureces for IT contracting in Ireland? It would be great if there was somewhere us IT contractors could get together......not saying that this site is not good , but thought something more focused would be also useful.

http://www.itcontractor.com/ is a really good source of info. UK based but lots applies here.

Hi
My partner is an IT recruitment consultant (in Dublin). I've just asked him about this for you, and he has said that his contractors use cxc global, and seem to be happy with their service. They'll apparently set you up up with an off the shelf limited company, (for free). Google them and you'll get more info.
p.s. he says that they charge 4.5% per invoice but will advise you on all your tax affairs and stuff that you can claim (which might be a good bit potentially: I'm self employed, and despite the hassle of annual tax returns, I can claim much more against my annual returns than a P.A.Y.E worker plus for pension, really good tax incentives,as pension off-settable against tax, percentage depending on your age)He's said that it's much more lucrative than working on a p.a.y.e. basis
Nicola

Thanks a million for your replies... much appreciated. I think I'll give cxc (and prima) a ring and see what they can offer with regards setting up a limited company.

Slash. I second that one, I use CXC myself and have not had any problems with them thus far..

I'm self employed, and despite the hassle of annual tax returns, I can claim much more against my annual returns than a P.A.Y.E worker plus for pension, really good tax incentives,as pension off-settable against tax, percentage depending on your age)

Click to expand...

What else can you claim apart from the pension, that a PAYE worker can't? What were the tax incentives?

equipment cost( lap top etc)
attendance at seminars, training
professional fees/memberships
1/6 of home heating light and insurance for home office expenses
subsistence
taxis
travel mileage(kilometerage?)
business expenses incurred
pension
education costs

contractors should retain 80% plus of invoiced hours

downside

bank holidays, Easter, holidays, jury service, all you own expense

work out your expected rate over 2000hours per year and take them holidays!

I too am with CxC and cant fault them.( and had been sole trader for 16 years previous)

Would anyone here know how it works with pension and healthcare schemes ?
Can I claim anything through my Ltd. company, and how does that work ?
Is it just the Med forms that need to be submitted to Revenue at the end of the year ?
And how do I claim for my pension ?

I would appreciate if anyone could give me some info on this.

1. A lot depends on your rate. If you are on good money, it is better to go for the limited company route, as the associated expenses are smaller in relation to your revenue.

How much are you charging an hour?

2. I would not fancy paying out 4.5% of my invoices just to get advice - that is what accountants are for, and much cheaper

3. 2000 hours per annum is overly optimistic , esp if you are on 3 month contracts!!

Most experienced people who are in it for the long haul think in terms of 44 weeks i.e 1760 hours.

You need to allow for :

holidays
bank hols
sick days
doc appts
dentist appts
childcare days
funerals
out of contract days.

Remember you may not be guaranteed 3 months, you could be on 2 weeks notice!

IF you are not sick and take few hols and do overtime, ok you can do 2000 hours, of course, but i'll tell ya, you will be tired! And you would be crazy to do that for more than a few years if you want any kind of life.

So budget realistically.