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IR35 l StartUp Exemptions

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: – 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.

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