IT Contracting

Yeah just using those figures for example, one agency quoted a contract that I could do for 280 per day which really isnt worth it compared to what I would be leaving behind and taking into account all the extras you mention and the risks off having periods of no work.
 
You asked a few questions in the previous posts. I am in the same boat.

I have a company: Say for agruments sake I get 50K per year.

Each month I pay myself a salary of 1/12 of 25K (my salary is half my expected earnings)

On that I pay PAYE and PRSI of 25k as per an employee - As a director I am class S PRSI and I dont have to pay employers PRSI for me. I also dont get the Employee credit (~2000ish) because I am a director.

I pay myself some expenses too - Phone bills and the like - I submit my expenses on an excel spreadsheet mothly as if I was a regular employee to the company (ie I just create a record of my monthly expenses) and pay myself these expenses monthly. Tax free (and only legit ones!).

So say my expenses amount to 5k a year.

By the end of the year - I have withdrawn in sqlary and expenses 30 of the 50K. I also pay the Accountant his 2k and other company expenses - Office setup etc - Say this is 5k in total

Thus out of the 50 - 30 goes to me, 5 to the company expenses. And at close of the year - I pay any outstanding debts/taxes and work out what cash is left - in this case 15K. I then pay myelf a supplemtary salary for 15k for the 12th month - Call it a bonus if you like - and on this i pay PAYE and PRSI as normal. So in effect - I have earned 40K salary, 5k Expenses. Company cost 5k. Company Net profit = 0, Corporation Tax = 0

As per going direct or through an agency - the rate tends to be the rate - ie is a skill earns 100 per day - you will get 100 per day - The agency charges the customer a percentage on top of this. Vat is also on top of this.

Large companies can allow for rolling contract - I will be in mine for 4 years at the least. But withour an agency - you are dependednt on the customer paying the invoices. I aways get paid - but sometimes the invoice is lost, or slow to be processed. Agencies tend to pay the "salary" on the same day each month. So they are the one waiting on the cheque - not you.

Hope this waffling post helps!
 
Great explanation! Wish I'd had it before I started my own research a few months ago!
 
Lauren said:
Great explanation! Wish I'd had it before I started my own research a few months ago!
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So do I. The key think I see is to visualise the seperation between you as a person and your company. The Company is a legal entity in its own right - all monies earned are the companies, so how does a standard company pay you as an employee. Through Salary, Bonuess and expenses. Salary and Bonuses are taxable, (Real) Expenses aint!

Dont forget things like the fact you can give your employees a tax free bonus in vouchers or non monetary value of 250 per year. And you are an Employee! So buy yourself a Xmas voucher if not done so already this tax year!! You deserve it I am sure!

Other than that - ITs all been trial and error - and reading this site regularly!
 
Thanks Sol28, thats the kind of insight I was looking for.
 
Sol28 said:
Dont forget things like the fact you can give your employees a tax free bonus in vouchers or non monetary value of 250 per year.
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Is that 250 figure correct? I got this from a FAQ on revenue's site:

35. How many incidental/small vouchers can an employer give to an employee in the year?
Just one, up to the value of €100. The small benefits relief applies to a one off benefit. If an employer is providing small benefits on an ongoing basis, e.g. €25 voucher on a quarterly basis, the first voucher under €100 may be ignored but PAYE/PRSI must be applied to all subsequent vouchers given to the employee in that year.
 
Brouhahaha said:
Is that 250 figure correct? I got this from a FAQ on revenue's site:

35. How many incidental/small vouchers can an employer give to an employee in the year?
Just one, up to the value of €100. The small benefits relief applies to a one off benefit. If an employer is providing small benefits on an ongoing basis, e.g. €25 voucher on a quarterly basis, the first voucher under €100 may be ignored but PAYE/PRSI must be applied to all subsequent vouchers given to the employee in that year.
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It is now - Changed in Last years budget - 100 pre 2005, 250 from 2005 ->
 
So Sol28, in an example of 50 earnings through your company you are saying you would get 40k (subject to income tax and PRSI) and another 5k expenses - would this be subject to income tax or is that 5k net?
 
SteelBlue05 said:
So Sol28, in an example of 50 earnings through your company you are saying you would get 40k (subject to income tax and PRSI) and another 5k expenses - would this be subject to income tax or is that 5k net?
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Well the 5 k is cost associated with the business - My personal mobile phone bill which is used for business - I apportion out the business costs. etc etc

So yes the 5k is Net, Like Mileage expenses is Net.

So 40 K subject to tax and PRSI - Say Net 20K (50% approx rate) + 5k Net

Let me state - I am not an accountant and would advise one - just for some of the crap associated with a company - but this is what i have found of having the company for 2 years.
 
Sol, Id nominate that post as a sticky on IT contracting. Great post. Makes a few vague notions on the whole thing clear for myself too.
 
car said:
Sol, Id nominate that post as a sticky on IT contracting. Great post. Makes a few vague notions on the whole thing clear for myself too.
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Glad I could help - I remember trying to work all this out 2 years ago when i formed the company - The sole trader route was a lot handier - but now that I am used to the company - I think its more profitable as I can charge expenses i didnt before - and in some ways its safer as you are paying PAYE as you go along - So you dont have a whopping huge tax bill.

One thing - Companies do have to pay preliminary corporation tax - but "unfortunatly" my company hasnt had a net profit yet - due to the salary paid to the director(s). Hence preliminary tax on €0 is €0. So you dont really need to worry - unless you are leaving mony in the company for future growth. Which really isne necessary for something like IT contracting.
 
One last tip for this evening.

For Salary software - Go to Payback.ie - they have a demo version there which is excellent - Irish based - will do all your forms for you. Your accountant should do all that for you too - But I like to keep track of it myself as well. Its free for companies of 4 employees or less. Obviously the money is made as companies expand and take on more employees and you are so used to the software that you upgrade.

I find it excellent.
 
What daily rate would you expect for a SQL Developer with 5 years experience (thats SQL Server as opposed to Oracle which is usually a bit higher)?

I've been quoted between 240-280 which I thought was low, I'd expect 330-ish according to salary surveys I have seen on recruitireland.com etc.
 
Steelblue

Take salary surveys with a pinch of salt. They are usually conducted by recruitment companies who will have a vested interest in "encouraging" people to submit their CVs due to the rates they perceive are available.

If you have been quoted the above rates from a number of sources then that to me would imply that is what the going rate is.

C
 
A few more questions:

1: Would my limited company be contracted to work for the recruitment agency or directly to the client?

2: What is the story with VAT, I assume my limited company needs to pay it? But then do I have to add VAT onto the daily rate for the contract?
 
Very few (generally small) clients will deal directly with your company. Most will want to deal with an agency. Many big companies have "preferred suppliers" which will include one or more agencies and simply never hire contractors directly. Also, apparently there is a fear that directly hiring a contractor directly (for contracts longer than 3 months) in theory could allow the contractor to be considered an employee. This has (as far as I know) never happened but it would mean the contractor could claim employee rights or revenue could chase the hiring company if the contractor fiddled their taxes.

VAT is very simple. You add it on to the total on each invoice and then pass the charged VAT back to revenue every two months. Daily rates are always quoted exclusive of VAT.
 
darag said:
VAT is very simple. You add it on to the total on each invoice and then pass the charged VAT back to revenue every two months. Daily rates are always quoted exclusive of VAT.
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Thanks, I didnt know that this is how it is done, so it is generally expected that I add the VAT on top of the quoted daily rate at the end of the month?
 
SteelBlue05 said:
Thanks, I didnt know that this is how it is done, so it is generally expected that I add the VAT on top of the quoted daily rate at the end of the month?
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All rates quoted by agencies and companies are ex Vat

So if you see a rate for 100 per day. You will charge them 121 - of which you will repay 21 to the VAT people ever 2 months (less any VAT the business has paid on supplies etc). 100 will go into the company accounts
 
Thanks Sol28 and Darag for that.

So the norm would be that my limited company would be contracted to the agency rather than the client?

Also as it is a contract and the client wished to stop the contract after say 2 months of a 6 month contract would I still get paid for 6 months work?
 
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