Working as a contractor Vs Working as an employee

S

six4our

Guest
Hi, I am a software developer and I have been offered a job by an employer who then asked if I would consider working as a contractor rather than as an employee. I have done some reading up on the pros and cons of each arrangement, but I would also be interested to hear the opinions of people here.

There is an obvious gain to the employer in that they wouldn't have to pay PRSI, holiday/sick pay, etc., but is there a gain for me if I choose the contractor option? I would be working both from home and from the employer's premesis.

As I have recently been out of work I am also concerned about the lack of PRSI payments - as far as I know I would not be entitled to any social welfare if this employment comes to an end and I have nothing else lined up. Is it possible to pay PRSI contributions if I am not a PAYE employee?

Thanks in advance for your input and advice.
 
Hi Six4one,
Just a few q's first.. how was the job advertised by employer or was it word of mouth and emp came to you with offer?
I think from your post you know the answer but to clarify stay an employee if you can as you get nada from being Self Employed/Sub Contractor.
You will lose out on Hol Pay sick pay and redundancy payment if applicable. You have more rights/entitlements being an employee esp for social welfare purposes.
As a subie you will be responsible for all your own taxes, invoicing etc and this brings a whole new aspect of working.
To answer the PRSI q.. yes there are facilities with the welfare to voluntary contribute to your PRSI account but I cant remember the min payable amount or exact details so ring your local office.
I’m intrigued that the employer has asked you to do this, im wondering if it’s purely financial, highly understandable in these economic times, or is it for industrial relation reasons?
Good luck with new job.
 
Hi Allison, and thank you for your reply.
I was on a JobBridge scheme with the prospective employer, and this is coming to an end now. If I agree to the contractor arrangement there are obvious benefits to the employer, which they were open about, but I'm trying to figure out if there would be any benefit to myself.
I believe that contractors usually earn a higher rate (to compensate for the lack of holiday pay, sick pay, etc.) but I am also wondering whether there is an advantage in being able to write off tax for expenses or anything like that?
 
If I were given the option I would certainly go for the employee version, but having been unemployed I tend to grab on to the security aspect. While I appreciate the higher rates are paid for contracts, there's no Benefits to fall back on if the contracts are not renewed. You will be oblidged to do your own taxes etc, pay your own PRSI (class S) from which the only benefit is pension. Apologies if this all sounds very negative but good luck with the new job.
 
What does everyone mean by there is no benefits to fall back on? Surely one is entitled to means tested JSA the same as anyone else?
 
What does everyone mean by there is no benefits to fall back on? Surely one is entitled to means tested JSA the same as anyone else?
Means tested JSA yes - if one has a partner with an income the JSA would be reduced the JSB would not, if a person was sick etc they wouldn't receive illness benefit... public holidays and ordinary holiday pay are not covered.... by all means go for the job if the discipline is there to put aside money out of a theoretically higher income to cover for any of the above eventualities, and the money should on average at least cover you for the holiday days throughout the year - approximately 30 days on which you will not be paid when an ordinary employee will - unless you take no holidays at all! I believe there is a clause that may entitle a contractor to redundancy if they can prove they were comparable to an employee.
 
Contracting has always been popular in software development, and I believe has been increasing again over the last few years, probably with employers wanting to be able to trim expenses at short notice if needs be. It usually pays a premium for the above mentioned reasons. Given the current shortage of IT people, unless you're not actually good at it, I wouldn't worry too much about being out of work.

I suspect your prospective employer might want to employ you as a contractor on the same rate he'd pay you as a permanent employee, which would obviously work out much cheaper for them. If you were on a JobBridge scheme, I also suspect you don't have a lot of experience in software development yet, so you may not be able to pick and choose roles, or dictate the terms of this role. Experience is obviously critical, so it may be worth settling for a lower contract rate - but higher than the permanent rate if possible - to ensure you get experience as quickly as possible. If the role is good and you pick it up well, then subsequent roles should not be difficult to get.
 
1. As a contractor, you must calculate your yearly salary over a reduced number of days. 210 days is a common figure. This is because you don't get paid holidays, weekends, public holidays or sick days. This is why contractors get a premium, as well as because there's little job security. You really have to put money aside for holidays 'n' stuff.

2. As a contractor, you can usually claim the following expense;
a) Computer equipment. Anything up to €1000 can be claimed as an outright expense, anything over will have to be capitalised and claimed back over 3 years.
b) Part of your rent, light, & heating
c) Your internet connection
d) your mobile phone
e) If you will be working from home 3 days per 5-day working week, you may be able to claim mileage when you do have to go into the office. You may need further advice here to make sure you meet the conditions. I can't claim mileage, for instance, as my substantial duties are at the office...

What claiming expenses means is that you won't pay prsi/paye on this money, so reducing you tax bill.

3. Setting up a LTD company cost me €350, plus a fee per month for the accountant, plus business banking fees. My advice on business banking is forget about internet banking (business get charged through the nose) and just use the business Laser/VISA Debit card to check your accounts in the branch.

You can set up direct debits with Revenue to pay your VAT and PRSI/PAYE bills every month, which takes a lot of the hassle out. You are paying your accountant to keep track of all the other paperwork like returns and stuff.

4. As for social welfare, you won't be entitled to things like dental care,etc. etc. But with the state of the health service, is that a bad thing??? You will always be entitled to JA and any other supports. It's not been a big thing for me in the periods that I've been between contracts.


The benefits of being an employee are paid holidays, health, sick leave, training, promotions, social welfare. Also, in the current climate, I've found banks are reluctant to extend any sort of credit to contractors.
 
I appreciate people taking time to reply, thank you. Some very useful information here.
 
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