What is a Day Rate Contractor?
“A person or firm that undertakes a contract to provide materials or labour to perform a service or do a job”
A contractor is a person or company that performs work on a contract basis, who operate via their own limited companies and are not employees for a larger firm or business.
Is Daily Rate Contracting used in IT, Business Change and Data?
In Ireland, there is a significant market for day rate contractors. There is a contract market for a range of skills including software developers, project managers, business analyst, security and data architects and data analysts. Typically, organisations use contractors for a project which will end, specialist skills or not being able to increase the permanent employee headcount of their organisation.
What is the difference between a Contractor and an Employee?
A company may pay an independent contractor and an employee for the same or similar work, but there are important legal differences between the two.
For the employee, the company withholds income tax, PRSI, and USC from wages paid. The employee is entitled to paid holidays, sick leave and any benefits the company may offer.
Independent contractors are not employees of the Client Company. They are responsible for their own taxes. They are not entitled to any of the company’s benefits, holidays or sick leave. Contractors only get paid for the days they work.
How do I become a Contractor?
In order to work as a contractor in Ireland, you will need to set up a limited company or use an accounting solution.
There are three types of Limited Companies contractors can have. Umbrella Limited Companies which can be either PAYE or Director companies, which are run by an accounting company. The other option is to create a Limited Company which is run by the contractor.
An umbrella company process payroll for Contractors whilst offsetting business expenses against their tax to increase their take-home pay. Also, it ensures Contractors remain tax compliance for the duration of the contract.
The accounting company will own and manage these companies and depending on your own personal circumstances and preferences, you will be placed into either a PAYE Umbrella or Director Umbrella company. There are several companies that can guide you through the process of being setting yourself up for day rate contracting, such as Icon Accounting and Contracting Plus. There are many more but these companies make the process easy.
A Limited Company is a company that is set up and owned by the Contractor and the contractor will manage their own taxes and invoicing. This involves liaising with the Company Registration Office and generally an accounting practice like Solan and Associates.
Some Benefits of Being a Day Rate Contractor:
Financial – Because contracts aren’t permanent, contractors are expected to be able to deliver results more quickly. Due to this, employers are generally prepared to pay a higher daily rate than would be paid to permanent employees.
- Tax Efficient: Contract work can be more tax-efficient than salaried employment. It is worth speaking with a specialist tax consultant or contracting service about your circumstances.
- Flexibility: Contractors are able to change jobs on a regular basis and to experience different environments.
- Company Politics: Contractors are usually not involved.
- Independence: A contractor is his or her own boss, and being self-employed can give great satisfaction.
- Self-Training: Contractors can choose their own form of training and hence can keep abreast of leading technology.
- Holidays: Not being fixed to set annual holidays. This means extended holidays may be taken in between contracts.
How much can I expect for Day Rate Contracting?
Day rates can change depending on the demand for your IT, Data or Business Change skill. In Ireland, the 2021 rates can be found on our Salary Survey 2021.
If you would like to discuss contracting, then please feel free to reach out to us at email@example.com