Hi,
Currently working for a company who would like me to work for them directly via ABN and invoice them for the work I do. Currently getting $44 per hour flat rate anytime inclusive of super minus tax.
My question is how much should I be getting from them to cover all costs involved in going on to ABN?
Sounds like your boss wants you to get an ABN because he wants to avoid paying your superannuation, holiday pay, sick pay and long service entitlements.
It's often known as Sham Contracting and is unlawful.
Do you have a decent union to approach?
If you have no other option ask for at least another $22 an hour, 50% more, and see what he says.
Without going into arguments as to whether or not you "should" be doing this, you'll need to consider set up costs (which can range from effectively zero to "simply" get an ABN as a sole trader up to ~$300 to register a Pty Ltd company if you do it yourself … more if an accountant or other professional does it all for you).
If you go down the Pty Ltd route (which I would) you're looking at ~$300 a year in ASIC fees to maintain the company. In any event you'll likely want an accountant to do your annual tax returns … will be in the range of $1,500 - $2,500 a year for company filings (may be less for a sole trader) pending how complex your overall arrangement is and whether you can keep on top of the quarterly filings.
Why would you register a Pty Ltd for an arrangement like this?
I assume you consider yourself a casual employee. It's not as simple as charging extra $X per hr for you to engage with your employer via an ABN. Currently, your relationship is employer-employee, there are certain entitlements and benefits that your employer must provide to you. In certain instances, casual employees might even have more entitlements than full time salary-taking employees, see WorkPac Pty Ltd v Rossato [2020] FCAFC 84.
When you are engaged with the company through an ABN, it's a business to business relationship. You lose a fair bit of benefits and entitlements, but in a sense, you get more freedom, i.e. you can negotiate your own working terms, or you can even engage other companies depending on your contract terms. Also when there's a dispute, you can't really take it fairwork.
Once you start on the ABN route, there're other things to think about: insurances, ato filing, business structure. Also, you would be considered self employed, and that's a different ball game comes time getting loans.
Self employment has great perks if you play your cards right.
what are some benefits of being self employed compared to being an employee?
You can work your own hours and employ workers.
Just a few:
- optimise your tax liability.
- small business incentives and supports from government
- work outsourcing
- receive multiple incomes from multiple clients at the same times.
BUT for all those and more to happen, you'll need to a lot of leg work. Getting an ABN is just the very first step. If you are interested, there're a few forums out there to get some ideas.
OK to make it more clear. Company employs me via agency and wants to take me on direct via ABN. I am only contacted to work whatever hours they have to offer and once they say no more work for me from them it's over with that company.
So they basically want to take you on as a direct contractor worker via your own company and not have to deal with an agent and paying them more.
It's your choice if that works for you or not. Find out costs and hassles of setting up your own 'consultancy' company and calculate your costs.
do you feel like running your own business? Because in that's exactly what you do with an ABN. If you don't like the idea, do you have the option to say no?
Depending on the job, you may also need to factor in getting a public liability insurance.
and if you are happy to entertain the idea, time to look for a decent accountant. The accountant would be able to let you know the full scope of what running a business entails and costs.
Should go for it, dont think that work could get any worse
You can then also do some creative accounting
Depending on your role, it may still turn your relationship into sham contracting. Having that employment agency as a 3rd party is different. Without that, most likely you are techincally an employee.
Has the company indicated they would pay you more than what you currently take home from the employment agency?
So basically they want to employ you directly without paying the agency that put you forward/matched you with their company their cut. Well I can imagine doing this would sour your relationship with that job agency, if you want to work with this job agency into the future; have them put you forward for other positions/roles I wouldn’t do this - it’s pretty much burning bridges.
Also, what incentive would you have to do this? Setting up your own business, means organising insurance, managing your own taxation, etc.
Could use a payroll company that takes 2 percent of your wage and this gives you insurances and a hassle free setup. Could not see advantage of making a company as its PSI anyway.
I would ask for little extra to cover it and a little more again to share the profits.
Also surely their agree,ent with the agency and yours exclude you from cutting them out.
It is called subcontracting and lawful.
My ex tripled her hourly rate when she started contracting and still felt she was under-charging.
She was on 6 monthly contracts with no guarantee of renewal. I believe she's been on 2 days/week since last November and there aren't too many other contracts out there
Having a business insisting you work as a contractor with a abn (when you you just want employment like anyone else) is cruel and benign.
Are you getting $44 per hour from your agency, or is that what the company is paying to the agency? If it's a case that that is the amount the agency is paying you, then it's likely they're charging the company a lot more per hour for your time.
If you own your own company, you'll be able to receive the full payment amount and indeed power to negotiate with the company with all the finances coming to you. Eg. if the agency is paying you $44 an hour, and you wanted an additional $5 per hour, the agency will likely ask for more from the company (eg $10) and only give you your requested $5.
So yes, some hassles at the start and then on-going managing of finance-administration but in one case, an agency was charging near 100% extra to what the person/contractor was getting paid. That is, I paid nearly $75 per hour and the contractor only got $40 per hour.
From what company is telling me, they are paying $85 an hour and I get $45.
If the company is paying $85 already that's the minimum I'd accept if I had no option but to take the job under their new terms.
They want me to go direct so they don't have to pay the commission of the agency and will allow them to give me more work as projects I work can't afford me other wise.
Strictly looking at the hourly pay only, maybe go back to the company with say $65 per hour under your own banner. That's a nearly a 50% pay increase for you and quite a saving for the company (eg. $20 per hours x 40 hour week = $800 saving, assuming they have you working that many hours per week).
You'll need to decide whether it's worth all the administrative hassles.
allow them to give me more work
And also less work or even just tell you that your services are not required any more without any redundancy payout.
Two sides to every coin.
I would not gain any redundancy from agencies either.
@WesthamAreMassive: Actually, depends on the specifics of your circumstance, you might be eligible for redundancies and paid leaves.
I would say between $60 and $80 depending on various things and whether you want the extra hassle.
Possibly towards the lower end if your not currently entitled to holiday or sick leave, or given you imply you want to work more for them and like them.
Possibly towards the upper end if your not financially savvy and are going to have to pay an accountant to do the extra paperwork, super payments, extra abn work and fees at tax time.
Hopefully they don't know you only get $45. If they do you must explain there's a lot of extra costs to you. They may be hoping you do $65 as that's splitting the commission in half, but you must start discussions above that number! Maybe say $75 and only go down if they guarantee you a minimum amount of time or work.
If you are working full time with this company, I would refuse to go ABN unless you have other businesses to venture.
They can't force you however they may retrench you