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Fancy the bank? 1/2

I recently met a candidate who had just started an interim General Manager role with an acute FT, on the trust’s bank. In my 5.5 years as an interim healthcare recruiter, this is the first example I have found, but I wonder whether it will become more commonplace? I asked the candidate how the arrangement came about. He replied to say he was in touch with the trust directly and his interest and willingness to look at going on the bank was probably a sweetener for the client. And although he didn’t say so, I suspect he realised that the absence of an agency was probably helpful. An agency in the middle might well have discouraged candidate and client to explore a bank arrangement; it looks like employment not the provision of services, it involves different contract templates, and which agency really wants the headache of calculating PAYE and NI?!

The candidate set out to match the net day rate received in his previous role, which involved some complicated analysis once you start to consider the different tax regimes and benefits of PAYE vs personal service company.

First of all the candidate was on an hourly rate, which he set at 9% higher than the rate he secured for his previous role. The new hourly rate, multiplied by 37.5 hours gave him a weekly gross income approximately 9% higher than the income generated by his previous role, but that 9% compensated for the fact he could not claim expenses before tax, and for the fact that he was now paying National Insurance. The big hit of course was that his earnings are subject to income tax, whereas interims operating through personal service companies can limit their tax liability by keeping their salary low whilst taking most of their income through dividends which have lower taxation brackets.

His holiday pay was incorporated into his rate so represented a benefit, and better still, with his relatively high income he was happy contributing 14% towards the NHS pension, which of course was matched by the client.

Where did this leave him? Analysis to follow on Friday, but the differential is probably smaller than you would imagine, and looming legislation change on changes to dividends and the status of expenses being tax deductible means it may soon be narrowing further.