How to calculate employee salary for contractor

[AnnaF]

Hello Everyone
Just wondering if there is a standard calculation for determining the salary of a contractor changing to an employee.

This case is currently paying £200 per day. The contractor works for other people than just my client but would like to come on board fulltime with my client.

The employer would give 5 weeks holiday plus 4% pension and BUPA cover.

So do I say:
260 days @ £200
minus cost of 5 weeks holiday
minus cost of pension
minus cost of BUPA
minus cost of ER NIC

Or is there another way to do it?

Thank you in advance for any help or suggestions.
best regards
Anna

 

[KernowQueen]

whatever the going rate is for that job in the area?

i don't see how his past rate as a contractor comes into it, seems like comparing apples with pears - but i could be wrong!

will be interesting to see other replies...

 

[bettersales]

Gross pay for salaried employees is calculated by dividing the annual salary by the number of pay periods in a year. For example, if an employee has an annual salary of $35,000 and employees are paid every other week (that is, 26 pay periods in a year), his or her gross pay will be $1346.15 per pay.

 

[payrolloxford]

The preferred HMRC calculation for day/year is 261 - 365 minus 52 weekends. Your client could certainly offer a salary based on the deductions you mention, which would leave him financially in roughly the same position as he is at present, but as the previous poster says, there is no guarantee that the contractor would be happy with that figure.
Linda

 

[GGGSurrey]

The contractor works for other people than just my client but would like to come on board fulltime with my client.

To me this seems to be the crux of the matter - the contractor would like to be an employee. Therefore the calculations should be done so that the employer is no worse off.

If it were the employer who would like the contractor to be an employee, then the starting point would be to ensure that the contractor is no worse off.

 

[AnnaF]

Thank you - some good food for thought there.
AnnaF

 

[Tom McClelland]

Don't forget to allow a factor for sick pay, and for employment rights, which imply the employer taking on a considerable risk.

And holiday is a legal minimum of 28 days based on a 5 day week, not 25, essentially it amounts to a 12.1% uplift of an employee's daily rate.

So the formula for equivalent employer cost is something like:

annual employer cost = annual employee pay + 13%NI + 12.1% holidays + 4%Pension + 3%sickness + 20% employee rights.

(the 20% figure for employee rights is notional and plucked out of the air)

Solving for pay with a given desired cost this comes to c. pay = 2/3 cost. So someone who was previously on c. £200/day would be paid c.£133/day as an employee if the employers costs are to remain constant.

 

[GGGSurrey]

annual employer cost = annual employee pay + 13%NI + 12.1% holidays + 4%Pension + 3%sickness + 20% employee rights.

I think most if not all of those percentages should be compouded too not just added together........

 

[Tom McClelland]

I think most if not all of those percentages should be compouded too not just added together........

Agreed (for some of them), but because the decimal fractions are fairly close to 1 compounding them isn't massively different from adding them together, to a first approximation.

Anyway, I've tended to work with the rule of thumb that a fully loaded employee costs about 50% more than their headline pay rate, before you take into account office and admin overheads, and as long as the company isn't offering a significant company pension scheme and other significant benefits like gym/canteen.