Self employment and holiday pay

Axe_meister

One statement a lot of self employed moan about is.
ButI don't get holiday pay/sick pay.
Surely if you have set up your own company your company should set aside some of it's income for holiday/sick pay?

Luminous

It's not quite as easy as that....A lot of time I need to work whenever folks want me to.

Axe_meister

Surely your clients pay into your company from which you draw and income Either as PAYE or dividends.
Just equal it out as if it were a salary with sick/holiday pay.

CabbageCat

Luminous said:

It's not quite as easy as that....A lot of time I need to work whenever folks want me to.

I think that's the same for the employed and self-employed. The only difference is that self-employed people lose money (though axe_meister seems to be suggesting that this should be factored into the company's financial structure - which seems sensible).

prowla

The problem is when people work self-employed at the same take-home rate as would-be employees, but don't realise that holidays are unpaid.

rlw

I'm self employed and I get holiday pay - I am at work right now.....................otherwise, fuck all.

Every holiday costs me a day's income - a two week holiday is a scary prospect.

robinbowes

rlw said:

I'm self employed and I get holiday pay - I am at work right now.....................otherwise, fuck all.

Every holiday costs me a day's income - a two week holiday is a scary prospect.

You can't think like that and stay sane. You have to amortise your holiday out across the year.

For example:

Let's assume you work weekdays, no weekends. There are 260 week days in 2017. Of those, 8 are Public Holidays

Let's assume a further 17 days of "leave" making a total of 25 days. So, you will work 235 days in a year.

If you get paid £300/day that results in a total income of £70,500. However, over the full 260 days, that works out at £271.15/day.

So, £28.85 of each day you work goes to cover one of the 25 days your are not working.

£28.85 * 235 = about £6780 to cover your holidays.

R.

rlw

robinbowes said:

rlw said:

I'm self employed and I get holiday pay - I am at work right now.....................otherwise, fuck all.

Every holiday costs me a day's income - a two week holiday is a scary prospect.

You can't think like that and stay sane. You have to amortise your holiday out across the year.

For example:

Let's assume you work weekdays, no weekends. There are 260 week days in 2017. Of those, 8 are Public Holidays

Let's assume a further 17 days of "leave" making a total of 25 days. So, you will work 235 days in a year.

If you get paid £300/day that results in a total income of £70,500. However, over the full 260 days, that works out at £271.15/day.

So, £28.85 of each day you work goes to cover one of the 25 days your are not working.

£28.85 * 235 = about £6780 to cover your holidays.

R.

Yes.  In theory.

Even do this for a living doesn't make it any better. ie. I am sitting here doing a client's business plan, budget, cashflow and summaries, so I do know where you are coming from.

Danny1969

£300 a day .... wow I don't earn £300 a week !!

prowla

rlw said:

I'm self employed and I get holiday pay - I am at work right now.....................otherwise, fuck all.

Every holiday costs me a day's income - a two week holiday is a scary prospect.

It's worse than that; not only are you losing the income, but you're paying out for the holiday too!

Guitar_Slinger

'scuse my ignorance (I've always been PAYE).

Is the amortise thing based on a self-employed person setting aside the example amount you've used, which comes out of profit...  blah blah blah... to pay less tax?

(I don't know the terminology).

robinbowes

Guitar_Slinger said:

'scuse my ignorance (I've always been PAYE).

Is the amortise thing based on a self-employed person setting aside the example amount you've used, which comes out of profit...  blah blah blah... to pay less tax?

(I don't know the terminology).

I don't think so. It might even be the wrong word entirely. 

I just mean you spread out the cost of your holiday days over all the other days. 

R. 

stickyfiddle

Surely if you're self employed you're the sole owner of a company, for which you also work. 

So so you can pay yourself a salary, or you can take profits out as dividends, or a combination of both. In which case any "holiday" either makes no difference to your salary, but cuts the dividends as the company will not make as much money. Or you pay yourself a daily rate, so the salary decreases. 

Either way way it's the same equation, save for playing with the structure to minimise tax liabilities.

robinbowes

If you're self-employed, there is no company.

As I understand it, you can only do the dividend thing if you set up a Limited Company and make yourself a shareholder.

R.

Jalapeno

Axe_meister said:

One statement a lot of self employed moan about is.
ButI don't get holiday pay/sick pay.
Surely if you have set up your own company your company should set aside some of it's income for holiday/sick pay?

Agreed.

Axe_meister said:

Surely your clients pay into your company from which you draw and income Either as PAYE or dividends.
Just equal it out as if it were a salary with sick/holiday pay.

Don't assume you can draw down dividends only to avoid tax, assuming you pay some salary (and you ought to, to be able to claim loss of income if you're incapacitated),  it's easily forgotten that you have to pay 2 lots of NI (employer's & employee's), as well as 2 lots of pension (again employer's and employee's) - people may be earning £100s a day, but it goes out the door just as fast.

TheBigDipper

robinbowes said:

If you're self-employed, there is no company.

As I understand it, you can only do the dividend thing if you set up a Limited Company and make yourself a shareholder.

R.

That's true. Sole Traders are self-employed and not employees in a company (which they could also own). There  is no company, no shares and no dividend payment to nonexistent shareholders. There is no limited liability, either. Nor is there the same set of rules and regulations to follow. 

richardhomer

All the work I do is on a daily rate - if I don't work, I earn nothing.

In the last two months I've had eye surgery, a lump removed from an ear and a week over Easter where the only person able to look after my school age son was me - so I have not worked anywhere near as much as I'd have liked to.

Ergo - I'm skint and can afford to do sweet FA on a back holiday.

A lot of people are self employed out of necessity, rather than choice.

shrinkwrap

There's no guarantee the work is there from one day to the next.
There's plenty of contractors who do get continual work but by rights they should not be classed self employed.
Most self employed cannot turn work away - do that and the client won't come back to you - the whole thing can be very stressful.

Steffo

In my line of work contract engineers (the one with degrees not technicians) get paid a fair chunk more than engineers on the payroll. Even if you factor in not working 4 weeks a year and having to pay in a pension pot they are still significantly better off. The only real downside is job security, as the contract engineers are on a week notice, and redundancy pay.
Being contract really suits the younger guys, has soon as you have a family it's way too risky.

Danny1969

I had a hernia op this year which meant I couldn't gig for 3 weeks. I knew it was coming up though and basically put some money aside to tide me over. Whever your self employed \ sole trader \ limited company it all amounts to the same thing. The money you get yourself  is turnover minus expenses (inc tax) .... and you have to budget accordingly 

marantz1300

Apparently zero hour contracts are good for British business.

just ask the conservatives, they want to abolish workers rights.

Cameron was talking about paying workers to forfeit their employment contracts and minimum wage being voluntary.

of course this did not apply to MP's.