Some questions for IT Contractors please

[Jokester]

As far as I’m aware the IR35 changes in the private sector are nominally better for the contractor in the sense that the client will now be liable for unpaid tax if someone is found to be a disguised employee rather than the employee themselves.

Obviously there is a potential that clients will now say they won’t deal with contractors and merely hire and fire staff on a short term basis as projects come to an end but I don’t believe the more reputable companies would go this route as IR35 has been repeatedly tested in court and if you are doing the sort of work that everyone appears to be talking about in this thread then HMRC don’t have a leg to stand on.

 

[Nazbit]

I accept the early termination thing. It is after all why you're receiving a higher rate than a permanent employee.

I think that generally you'd be able to see it coming in terms of renewal / lapsing / early termination wouldn't you? I know that in my 10 years as an employee it's always been fairly obvious to me which contractors were going and staying and I assume it was to them too.

But yes it could come out of the blue.

1st to 2nd is often hard and IS affected by the time of year.

When are the peaks and troughs during the year?

As well as your skillset location is another important consideration. How far are you willing to travel? For me it's 1.5hrs each way per day. Some are happy to work away but I did enough of that in various perm roles to be over it!

I would be happy with up to 1.5 hours each way. That puts me in range of Manchester, Liverpool, Chester, Wrexham etc.

For Oracle Database the highest paying contracts appear to be in the big banks and financial institutions in Canary Wharf and the "City".

Locally I'm seeing £300-400 whereas they are paying £500-600 and upwards. However attempting to do the maths is looks like the extra would be burnt entirely on accommodation and Monday / Friday travel even as tax deductible expenses. Don't have children but don't think it would suite me anyway to be honest.

Worth noting that the IR35 landscape is changing.

From my research it seems like the big risk is with companies and agencies being responsible and liable for determining IR35 status some will just blanket everyone inside for safety.

You'd have to hope that this will lock them out of the best talent and they'll eventually come round. It will probably take a while for the industry to come up with a decent solution for managing the new IR35 changes but I suspect agencies and companies will soon find clever wording and tests to show that they're not inside IR35.

If it's true that 50% of vacancies end up within IR35 how will they fill them? Who wants to work on a contract basis with the pay of a permenant role? How can they hope to attract talent?

It's definitely uncertain but I can't imagine an IT industry that doesn't run projects by loading up with contractors for the build and then winding down to leave the BAU to in house.

Obviously my viewpoint is coming from a permenant employee so I could be wrong but I've worked with contractors for 10 years. I'm interested to hear what you all feel the industry would look like and what you personally would do if a large portion or majority of roles were trapped by IR35. I just don't think its feasible and the agencies, the contract wording etc will just evolve to stay ahead of it.

 

[Jokester]

Couple of decent articles around IR35 here:-
http://blog.kingsbridge.co.uk/private-sector-ir35-reform-what-will-it-mean-for-contractors/

http://blog.kingsbridge.co.uk/being-lorraine-kelly-ir35-status-explained/

 

[dowie]

As said above if there's no work there's nothing to bill, rendering your notice period null in effect. Sure you can continue to drive to their offices everyday but you won't be paid!

It's part and parcel of the risk/reward aspect of contracting.

That doesn't make any sense, sure if you've signed a contract that allows for that, one sided termination of rat contract without notice then of course. But if you've signed a contract that provides for notice then that doesn't make any sense... why are you not getting paid X days in that case? I mean if they decide one day that the project is canned then fair enough, that doesn't prevent them form paying you off if covered in the contract.

 

[dowie]

As far as I’m aware the IR35 changes in the private sector are nominally better for the contractor in the sense that the client will now be liable for unpaid tax if someone is found to be a disguised employee rather than the employee themselves.

Sounds like a few angles that could help with, like I know a fair few people in banks essentially act like one of the employees, have a company e-mail address, get the same one day working form home as the employees, get to go to the company Christmas party etc... and of course work similar hours to the full time employees - like say 8:30 - 6:30 even though they're only billing say 7.5 or 8 hour days.

I guess in future they perhaps ought to bill all additional hours etc.. and just cite IR35 as the reason why they're doing everything by the book, I suspect they'd soon be told to just work 9-5 and ignore any typical hours of the full time employees etc...

On the other hand one of my friends is quite essential to the bank he contracts at (he was a former employee they think they really need to hold onto) he's managed to wangle getting double daily rate if he comes in on a weekend or bank holiday and strangely enough he manages to engineer things so that he's frequently working bank holidays or has to come in and check something on a Saturday etc....

 

[Jokester]

That doesn't make any sense, sure if you've signed a contract that allows for that, one sided termination of rat contract without notice then of course. But if you've signed a contract that provides for notice then that doesn't make any sense... why are you not getting paid X days in that case? I mean if they decide one day that the project is canned then fair enough, that doesn't prevent them form paying you off if covered in the contract.

There’s very few cases where notice for the contractor would come into play (if he’s legitimate and not a disguised employee), really the only likely instance is the client knows the job is coming to an end and is giving you courtesy of telling you the date in advance.

If there’s no work, you can’t invoice.

If you are sacked, you will (probably) be marched off the premises by security immediately.

The notice in a typical contract won’t stipulate you will get paid for that period regardless of whether you are working or not. Indeed if it did it would look like you were an employee!

 

[wonder_lander]

That doesn't make any sense, sure if you've signed a contract that allows for that, one sided termination of rat contract without notice then of course. But if you've signed a contract that provides for notice then that doesn't make any sense... why are you not getting paid X days in that case? I mean if they decide one day that the project is canned then fair enough, that doesn't prevent them form paying you off if covered in the contract.

Because that's how the majority of these contracts are handled. As I say if you're direct working for the client things "may" be differently but if there's an agency involved then in my experience you "could" in effect be out with no notice payable and that's an accepted risk.

 

[dowie]

So what is the purpose of having a notice period in the contract with regards to the clients obligations towards the contractor?

From what you guys are saying it apparently serves no purpose at all?

 

[wonder_lander]

So what is the purpose of having a notice period in the contract with regards to the clients obligations towards the contractor?

From what you guys are saying it apparently serves no purpose at all?

The client doesn't have any obligations towards the contractor in this instance. The contract is between the contractors ltd co and the agency. So client co has a contract with the agency to supply a <insert skillset> chargeable at <insert bill rates> to do <schedule of work> by <timeframe>.

Agency sources suitable contractor that client co interviews, if they wish to proceed then agency issues contractors ltd co (or their umbrella company) with a contract for services as above but changig <bill rates> for <pay rates>

 

[Jokester]

So what is the purpose of having a notice period in the contract with regards to the clients obligations towards the contractor?

From what you guys are saying it apparently serves no purpose at all?

Pretty much. It largely boils down to clients having a 1 week notice on terminating the contract nothing more. If during that week they still have work for you great if not, you’re free to work for another client.

 

[dowie]

So what is the purpose of it? Like why is it there, I don’t understand what it is even there for given that from what you guys have said you might as well not have it there in the first place.

 

[InvaderGIR]

If there is billable work, unless you're clearly utterly incompetent, they can't just get rid of you / cease the contract with your Ltd/Umbrella. The above stuff is all based on when there is no work for you to be able to bill and none in the pipeline essentially so there is no point you being there. As a contractor you/your ltd or umbrella can only bill the client if you have work to do.

If you have no work when you're a permanent employee you still get paid for the time you're sat there twiddling your thumbs at the end of the week/month, as a contractor you don't get money for that so no point in keeping you there.

I stand to be corrected of course, this is just how I'm understanding things.

 

[dowie]

Ah fair enough, so the project you’re working on still exists but they want to reduce staff they can’t just get rid of you, the work is there and so they have to give you 7 days notice. But say the project itself is completely cancelled, then you can be out of the door right away and no notice needed as they have no work.

 

[wonder_lander]

Ah fair enough, so the project you’re working on still exists but they want to reduce staff they can’t just get rid of you, the work is there and so they have to give you 7 days notice. But say the project itself is completely cancelled, then you can be out of the door right away and no notice needed as they have no work.

If there are 2 developers, 1 perm and 1 contract but there's only project demand now for 1, they are far more likely to tell the contractor not to come in.

 

[Jokester]

If there are 2 developers, 1 perm and 1 contract but there's only project demand now for 1, they are far more likely to tell the contractor not to come in.

Yup = no work

 

[dowie]

If there are 2 developers, 1 perm and 1 contract but there's only project demand now for 1, they are far more likely to tell the contractor not to come in.

Yeah I get that, like contractors are supposed to be disposable/tenporary. It’s just how the notice period was supposed to apply I was questioning... like if there is a notice period in that situation they presumably can’t just can you immediately simply because they’re reducing staff else what purpose does it serve? On the other hand if they’ve literally got no more work - project finished or cancelled then notice irrelevant.

 

[InvaderGIR]

Staff reductions usually mean there isn't enough for the number of there so it equates, essentially, to there being no work (for the contractor). There might still be work left but it can be picked up by others to complete the project on time.

 

[dowie]

That doesn’t seem like a sudden thing like say a project being cancelled. I mean when else would the notice period be used to cancel a contract ahead of schedule if not simply because there isn’t a need for so many staff/contractors as they’re starting to have less to do?

I’ve worked on plenty of projects, you don’t suddenly finish out of the blue but you could certainly be in a situation where you no longer need some resources and so just get them to finish up some tasks and then (in the case of perm employees) back to their usual jobs, maintenance list etc... etc...


I mean I guess it could be used for an incompetent contractor but I’d presume there would be other clauses to get rid of people instantly for incompetence.

 

[DAIR]

Thanks for all of the contributions so far.

How do you all get on with holiday / time off within a contract? I guess in theory on a 3-6 month contract you'd probably only want to take the odd day as necessary. But on a 9-12 month contract is it reasonable to take a week or two out?

I guess in theory if you're outside of IR35 then you have the ability to decide not to work on a given day if you can accept not being any to bill anything.

But in reality could there be pushback and threats to terminate the contract?

Where I've worked in the past contractors have just delivered the news "I won't be in tomorrow and I'm away for a week next month" and faced no resistance but I don't know if that's representative.



Is this a London rate? In the North West (Liverpool, Manchester, Crewe, Chester etc) I'm seeing most contracts in the £300-400 range and even the odd public sector offering of £250.





This is something that slightly confuses me.

My assumption is that when you wanted to pay a dividend you'd ask the accountant to tell you what you could afford to take, keeping enough in the company to cover tax payments. You'd also know if you had any significant expenses coming up so you'd leave money in for those as well.

As far as I can see the rest of the funds could be taken at any time?

The only advantage I can see to leaving it in the company would be if you planned to take a good few months off later in the year or next year and you could use that period to drip feed it out in a more tax efficient way. If you intend on going to contract to contract or ideally with only a couple of weeks off in-between each one then isn't it better to keep taking dividends?

Unless there are other factors I'm not aware of, not taking funds so as not to pay tax seems like cutting off the nose to spite the face?



I'll try to get recommendations on a good accountant, one with IR35 experience. I assume I'll just use their software tool of choice to submit paperwork and have them take care of it.

Get in touch with an accountant called Gorilla Accounting.

I've been using them since I started out. And they've been amazing.

 

[ChrisD.]

I use Crunch and loads of my mates do. They’re brilliant.