Are you looking to change from a permanent employee to a contract worker and want to get some advice? We’ve got you covered…
We have put together key information on what it means to be a freelancer / contractor within the construction industry. We discuss ways in which you can set yourself up, how that works in terms of you getting paid and we also offer advice on how to navigate your transition into becoming a contract worker.
We have over 15 years’ of experience working with contractors across the Construction, Civils, Rail, Power and Telecoms sectors,and we have a number of very experienced and knowledgeable people within our business that are experts in helping contractors find their next contract role.
What is a freelancer?
Freelance is a term used for a worker who works for a client, but is not a permanent member of staff. In the construction industry a freelancer is usually called a contractor and works to a day or hourly rate.
According to HM Revenue and Customs (HMRC), a self-employed person is someone who runs their business for themselves and takes responsibility for its success or failure. Freelancers fall under the self-employed umbrella, however, where it differs from being self-employed is that a freelancer typically works with more than one client at a time.
If you are considering becoming a contractor/freelancer, it is important to understand that you will be responsible for paying your own tax and national insurance contributions. The large majority of candidates we work with often have a specialist accounting firm who can help manage this process and ensure that they are adhering to strict Government guidelines. You must also consider that you will not be eligible to the same package as a permanent member of staff… pension, life insurance, bonus etc.
Lastly, you need to make sure you know about the IR35 legislation… you may have heard of this, but it’s not straight forward and needs careful consideration. We have an IR35 expert in our business who is on hand to help candidates we work with navigate this step, which you can find more information about below…
Should I use an umbrella company as a freelancer?
When we work with and find a freelancer/contractor a new contract, we have a number of preferred suppliers when it comes to an umbrella company. Umbrella companies employ workers who are on fixed term contract assignments. They act as intermediaries between yourself – a contractor – and your end client or agency. Your agency pays the umbrella company, who then pay you, the contract worker, through PAYE – as if you were a full-time employee.
There are also a number of other benefits of working with an umbrella company, such as insurance and statutory employment rights. But we suggest you speak to an umbrella company directly who can guide you through how they help. If you are currently working within the construction industry we would be more than happy to share our recommended umbrella companies who we work with regularly.
Limited Company vs. CIS?
CIS is short for Construction Industry Scheme. It's HMRC's way of collecting income tax from people who operate within the construction industry. It is a tax deduction scheme designed to deduct tax at source for work undertaken in the construction industry. The hirer is responsible for deducting a flat rate of tax from their subcontractors and passing this to HMRC. This means you will then need to account for the deduction on your self-assessment.
If you work through your own limited company, CIS deductions can be offset against the company's Corporation Tax liability rather than personal tax. So, with this said, it can often be beneficial to set up a Limited Company, which may sound like a lot of work but working with an Umbrella company can really help.
IR35… what is it and what should I consider?
In a nutshell, IR35 is a piece of UK tax legislation designed to close a loophole in the tax system where workers could use the setup of a limited company structure in order to pay less tax.
As of 6th April 2021, medium and large-sized private sector clients are responsible for deciding the IR35 status of the limited companies they engage with. They must demonstrate ‘Reasonable Care’ when making their determination and share this to all parties in the supply chain.
The ‘Fee Payer’, the entity who is paying the limited company, is responsible for applying the determination and carries the initial tax liability. End Clients will need to communicate the IR35 decisions using a Status Determination Statement (SDS) to the limited company or organisation they contract with, giving the reasons for the final decision.
What does Outside IR35 mean? - If a contractor is deemed outside IR35, they are considered self-employed for tax purposes and are free to pay themselves in the most tax efficient way. This tends to be through a mixture of salary and dividends. Contractors working outside the scope of IR35 are responsible for making sure all their personal and company taxes are calculated correctly and paid on time.
What does Inside IR35 mean? - If a contractor is deemed inside IR35, they are considered an employee for tax reasons. This means they are effectively required to pay tax at the same rate as an employee in the same tax bracket. Tax and employment legislation are currently separate. So, whilst they may be considered an employee for tax purposes, they are not automatically entitled to employment rights ie holiday pay, sick pay, pensions.
If you would like to find out more about how we can help you with IR35, check out our page discussing how we can help contractors navigate IR35.
Why is it beneficial to work with a recruitment agency?
We have invested heavily in our timesheet systems and processes to ensure our contractors are paid on-time, every time. Our expert payroll team are always on hand to help with setting up your online portal when you secure a contract role through us and discuss any issues or answer any questions, so you have complete peace of mind.
We also offer comprehensive candidate care, including an in-house team dedicated to our candidates and contractors, meaning there is always someone there to support you, providing seamless location support.
What if I have found my own contract?
We can offer you and the company you are working for a quick and reliable payroll service. Supported by our advanced financial software, we make the process of payroll administration quick and easy and relieve the burden from you. We even guarantee to pay every single contractor accurately and on time, every time.
Some contract workers are limited and bound by the end hirers own payment terms which can be in excess of 60 days. This can have a negative impact on a contractors’ cash flow. A key benefit of using the Navartis payroll service is that Navartis offer weekly payment terms on a 7 day basis.
Other benefits of our service also include…
IR35 contract status reviews / checks and IR35 risk mitigation
A weekly payroll service and payment within 7 days (versus 60 days + when you invoice a client direct)
Reduced financial exposure should the client’s financial position change and leave the contractor vulnerable to missing payments
Self-billing system to reduce the admin involved in raising and submitting invoices
All expenses are processed weekly in a compliant and efficient manner
We are pre-approved suppliers to many of the industries key clients (saving you time as you don’t have to become a supplier)
Navartis business support team liaise direct with the contractor’s accountants or umbrella companies to provide all relevant statutory financial information including reducing the need to chase and prepare for end of year statements
Contractors can be registered and ready for payment in 24-48 hrs
Contractors receive weekly SMS payments confirmation enabling contractors to stay up to date, on the go
A weekly service call to all contractors to ensure that the service is running smoothly and meeting the needs of all parties
A dedicated (Chartered Institute of Payroll Professionals) qualified Payroll Advisor
Want to find out more about how we can help you? Check out our page that discuss payroll administration.
Want to look for a new contract role?
We have a huge number of great contract opportunities with great employers across the construction, civils, rail, power and telecoms sectors. Search our current construction jobs, civils jobs, rail jobs, power jobs and telecoms jobs.
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