IR35 l StartUp Exemptions
Did you know you could be taking huge advantage of an experienced workforce without all the costs?
I have previously written about the benefits of contractors within a startup environment:https://thejam.io/2020/06/30/contract-vs-perm-post-coronavirus-edition/ – The cost & risk myths associated with it.
This blog is to extend on that topic further. We would be lying if we said there wasn’t a disgruntled contract workforce who are scratching their heads as to where to find “outside” IR35 contracts. Some of the benefits overlap; easier to onboard, highly skilled individual and all hiring based on evidence.
Why do the contractors want you? Well, there are 3 main reasons and if you sit within 2 of them, then for the contractor you sit outside. Reasons below:
- You have an annual turnover not exceeding £10.2m
- You have a balance sheet total not more than £5.1m
- Your company headcount is below 50 for that financial year
This isn’t a point your finger moment to highlight that you aren’t making money, but realistically most startups operate in the negative for a wee while before becoming profitable.
Perhaps the easier way to explain this is to give you examples of what’s available if you dont look at contractors:
Example: – Looking for a Software Engineer with a budget of £70,000 – £80,000
- Small & Competitive talent field with many companies looking for the same thing
- 3-5 years experience max
- Real cost of hiring someone at £80,000 is £95,000 with NI, pension, onboarding cost and training
Contractor Alternative:
- Pay £500pd and get someone with 8+ years experience
- In 6 months their output is highly triple that of a permanent staff, costing you £50,000
- Can hire a permanent member of staff alongside them at a more junior level to be trained up
- Every contractor is looking for an opportunity to sit outside IR35 to maximise earnings
This is very much a numbers game. Yes, having a contractor for 2-3 years will inevitably end up costly, but that isn’t the road you need to go down. You are a high growth startup who are under pressure to push things to production. Get rid of the training, on-boarding lag and get someone on board who can get shit done quickly.
This is a pattern we have seen all too often this year. Some roles within Product Management and Engineering have been open for 6 months+. What are the costs associated with that? I imagine a bit more than spending a bit of budget on a contractor to come in and complete work efficiently.
Get on with your plans knowing that you are leaving the product/code in good and experienced hands.
Remember, if:
- You have an annual turnover not exceeding £10.2m
- You have a balance sheet total not more than £5.1m
- Your company headcount is below 50 for that financial year
You could take serious advantage of a talented candidate pool.
