Contract employed or PAYE?

J

johnjoe100

Guest
Hi, I’ve just finished college and have begun working for a small software company (12 people). I was told that most people working for the company get paid like consultants /contractors even though they are actually permanent at the office. I have been given the option to either get paid normally i.e. a PAYE waged employee or else get paid by a cheque and do my own taxes etc. Another issue is that I studied business myself and am working here for experience, so I will not be earning near the same amount as the other software engineers i.e. Less than €30,000. This also means that the cost of an accountant could seriously eat up my wages. As I mentioned, I studied business so I believe, because my case is so straight forward that I could pay my own taxes. But I have a few questions

1. Should I just forget about contract and get paid normally?
2. If I go contract what will earning less than €30,000 mean?
3. If I go contract should I ask for more money so I end up with the same take home pay as if they were paying me themselves?
4. If I am reasonably competent and intelligent with accounts could I do my own accounts easily?
5. Tax: Do I need to register for VAT?, What taxes am I liable for?, would filing my own taxes be straightforward enough (1 person, no expenses, less than €30,000, no children/wife etc?,

Any advice or comments would be really appreciated!

Thanks
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I can't see any advantage to going contracting, especially if you end up with the same money.
 
Yes, no advantage whatsoever from your viewpoint of being treated as a contractor. If the Revenue examine your case, they will probably insist on you being treated as an employee. Best to avoid being dragged into that particular can of worms.
 
Thanks for the replies. I know it would be extra hassle but I wouldn't mind the experience of filing my own taxes as it will benefit me in another few years. I haven't talked to my manager about what i'll do yet, I'm just rtying to find out what is normal in this line of work. My main question is should I ask for more money, If i go contract it means more hassle for me and less work for them, so is it normal for a contractor to earn more than they would if they were an employee of the company?
 
There is a basic credibility issue with someone in your position claiming that you are self-employed. Revenue may suspect that it is a scam to evade employers PRSI. At this stage of your career you need this sort of issue like a hole in the head.
 
If you elect to go the contractor route you will not be eligible for paye tax credit.This is worth more than €1800 a year.
 
As far as the Revenue are concerned, this is an issue for your employer and not for you (whether you are PAYE or contractor).

If they decide you are a contractor you can't force them to treat you as an employee, but thay will be open to problems with the Revenue in due course if audited.

As a contractor you will have no employment rights, and you should therefore consider this carefully.

When individuals work as contractors (for various companies, and are not employees), they usually get paid extra to compensate for not having full employee rights.

However, if you are really an employee, it is the company that are acting incorrectly.

However, again, if you set up a company, you can contract your services to the company, as this will be above board for the company, as a company can not have a company as an employee.

Many companies insist on their "contractors" setting up companies for this very reason.

Just remember that you will be doing nothing wrong by being a contractor for the company, but just be aware of the other implications.
 
You should advise your boss to get good tax and legal advice on this issue.

They face very serious problems from the Revenue when they are audited.

Let's say they pay you €2,500 per month. The Revenue could deem this to be net pay and oblige them to gross this up.

They would face interest and penalties as well.

The joint working group on employment status which comprises The Revenue, The Department of Social Welfare, NERA and others have published the [broken link removed].

You are clearly an employee and should be subjected to PAYE.



Brendan
 
johnjoe100 said:
find out what is normal in this line of work.
Click to expand...

Some comments on this from someone in the software industry, leaving aside the legalities of this option:

It is always advisable to go permanent initially. If after a few years you have built up a marketable skillset then you can consider contracting. From a recruitment perspective I would be reluctant to hire (or even interview) someone who went into contracting straight out of college - wouldn't look good.

The employer is only offering this to minimise costs, not for your benefit. The fact they even offer it to someone just out of college should be setting off alarm bells.

Will you get sick pay, pension contributions, annual leave etc?
 
Thanks for all the responses and interesting points. I'd say I'll just go the PAYE way for the moment and see if future circumstances make contract employment any more attractive.

Thanks
 
Don't forget if you are a contractor you will have no PRSI cover in the event of illness or unemployment.
The PRSI you pay as a contractor only provides pension cover for the future
 
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