more crackdowns on contractors expected

[Greebo]

Yeah they do seem to be making it harder than necessary by making it that you have to be an employee. I suspect people like you Bear is exactly where they will be aiming for. They don't like the fact that you don't pay employee rates of tax and NI.

Okay not your fault you are perhaps working for this company for 5 years and yes they will have to take you on their books if they want to continue that.

Perhaps companies will have to change their salary bands to cope? Afterall, you have basically admitted you work for them full time at substantially more than they pay their permanent staff, enough for you to fly up to scotland every week and pay for accommodation there.

Perhaps if the permanent position you are filling was advertised with the rate they are paying you then they wouldn't struggle to find suitable applicants?

Of course they could just implement PAYE tax and NI for single director companies but that would cripple a lot of small businesses and make them bankrupt.

 

[dowie]

As a contractor, I don't have a problem with paying more tax, if they want me to pay more NI and income tax fine, but the way they are doing it will have unintended consequences.

The way they are talking, seems to imply anyone that has been contracting for a long time for one client is a permanent employee and so should be on the pay roll is a load of nonsense.

I contract for a defense company and if anyone knows anything about defense projects know that last for ages, I've been contracted to a project for years and am still working on it, all the while my position has been advertised as a permie role and had no takers. On top of this I fly every week from Bucks to Scotland to work for this company, in fact like many contractors that work all over the country.

If I was to be forced onto the pay roll, I wouldn't be able to work there any longer, because their salary bands would not allow the headline cost so I wouldn't be able to afford my travel costs and digs up in Edinburgh. So I would have to find a local job and a company the other end of the country loses a flexible resource with a set of narrow requirements. The only reason I work in Scotland in the first place was because I was made redundant and couldn't find work anywhere near me.

If what is implemented is what is currently rumored, it could destroy the flexible workforce many companies rely on, as they cant recruit from the local areas they are in, Scotland being a prime example.

Before anyone says, why don't I move up to Scotland then, my wife is an HR director of a large US company and works locally so I don't intend to leave her for a job.

well that is an internal problem for the organisation you work for rather than a problem with long term contractors becoming employees - perhaps some employers (whether public sector or otherwise) had better address those issues

if they can afford to employ you as a contractor for several years at a high rate then they ought to be able to pay you as an employee instead - it is the banding that is the issue there not the employee status

 

[Kemik]

The government just can't get enough money can they. All the rich people (and politicians) of course will be exempt and will continue claiming expenses for everything. Despicable realy.

Granted, the MPs took the biscuit with the expenses claims but where have you come up with the idea that there is some kind of super allowable expense when you earn over £x amount?

 

[Greebo]

well that is an internal problem for the organisation you work for rather than a problem with long term contractors becoming employees - perhaps some employers (whether public sector or otherwise) had better address those issues

if they can afford to employ you as a contractor for several years at a high rate then they ought to be able to pay you as an employee instead - it is the banding that is the issue there not the employee status

This. I cant see how you can employe a contractor on £100k a year for 5 years and think its then okay to advertise the same job at £50k per year and wonder why you get no applicants?

Especially when the contractor will be paying about half the rate of taxation compared to the £50k employee.

 

[alx]

No its every sector. In pharmecutical you get paid around £50 to £60k but contracting rates are about £550 a day so if you do work all year as a contractor you can get £143k per annum for doing what they will pay somebody in house to do for £60k max.

Of course there are company car/pensions/employers NI/sickness/redundancy liability etc to add on the £50-£60k in house cost so say another £20-25k in employment costs.

But that still only gets you to £70 - £85k and they are quite happy paying up to £140k for contractors. As being said, if companies were prepared to pay closer to the going rate for permanent staff then there wouldn't be so many one man contracting companies around and this would never have been an issue to deal with.

The reason my gf was never made a permanent employee and spent 3 year contracting fro the same company full time was that the company had a head count freeze during that period and there were not allowed to increase employee numbers so there was lots of contractors used instead as these numbers don;t count

We will just ignore that fact that over these 3 years, the hundreds of full time contractors they used at twice the cost will have cost them double compared to employing them directly.

Thanks this was exactly what I was going on about in response to dowie (just without the figures).

Yeah the head count thing is silly, heard that in few places up here as well - can't have any more staff but go wild on contractors.

 

[Bear]

This. I cant see how you can employe a contractor on £100k a year for 5 years and think its then okay to advertise the same job at £50k per year and wonder why you get no applicants?

Especially when the contractor will be paying about half the rate of taxation compared to the £50k employee.

Because they normally expect people to live relatively close to where they work, not at the other end of the UK in my case. I'm well aware that isn't the case for all contractors though

 

[NVP]

What would happen to all those overseas contractors they bring in from india etc.?

 

[Van Diemen]

It's only natural for people to want to pay the least amount of tax that is legally possible.

All the government are proposing to do is to change the rules a little so that some people will now end up paying more, can't really blame the Gov & I don't have a problem with paying a little more.
The issue here is that the rule changes will have some very adverse consequences for many contractors. Many of us will simply not be able to work in our current positions.

 

[Tuppy_Glossop]

As far as I can see they only want to nail contractors who minimise their exposure to tax & NI. This is usually done by setting up a limited company with one employee (the contractor) who is paid minimum wage by PAYE for a nominal number of hours (with normal tax & NI) then takes the rest out as dividends at a low rate of tax (20%, iirc) and avoids NI completely for the dividend lump.

Gordon Brown's government recommended this set up for contract workers. No wonder they had to borrow so much money.

 

[jimjamuk]

As far as I can see they only want to nail contractors who minimise their exposure to tax & NI. This is usually done by setting up a limited company with one employee (the contractor) who is paid minimum wage by PAYE for a nominal number of hours (with normal tax & NI) then takes the rest out as dividends at a low rate of tax (20%, iirc) and avoids NI completely for the dividend lump.

Gordon Brown's government recommended this set up for contract workers. No wonder they had to borrow so much money.

You'll find these days that agencies will only take you on via a LTD or an umbrella company. If you ever used an umbrella company and saw the fees for effectively handling your money you would go LTD.

Lots of quotes of contractor just paying tax and NIcs on a minimum wage setup but we also pay employers nics and corporation tax (currently 20%). Once you factor in the risk of not working, holiday, sick, pension, insurance and the expenses of travelling half way across the country to work and suddenly it doesn't sound as rosey as that baseline quote that contractors earn more than permies. Personally I meet many permies quick to complain but hide behind the safety blanket of turning up to work and doing begger all

One place I contracted for had 120 odd in the dept for a while, then once a Win7 upgrade completed across the company, the next week about 30 people were left. Then a couple of months later a new project came along and that team grew to about 100 again.

Many companies are going to be in trouble if the flexible work force dissapears

 

[jimjamuk]

well that is an internal problem for the organisation you work for rather than a problem with long term contractors becoming employees - perhaps some employers (whether public sector or otherwise) had better address those issues

if they can afford to employ you as a contractor for several years at a high rate then they ought to be able to pay you as an employee instead - it is the banding that is the issue there not the employee status

Also you will find that contractors are normally paid out of project funds as a cost to deliver that project - that equals CAPEX

Permies are normally a part of the ongoing costs of running a company and are paid out of OPEX

CAPEX are almost one off costs that are accepted and signed off to get something delivered so you cant just say offer the same role as a permie as that costs is ongoing when a projects finishes and you can imagine the outcry if companies just fired and hired people on a whim

 

[Tuppy_Glossop]

How many contractors use agencies, though ? I never have and nobody I know has. I cba with the faff of minimising my tax & NI. I am simply self-employed and pay the required tax & NI. I agree that permies tend to think contractors live on another planet, but we don't really.

 

[jimjamuk]

Depends on the sector you are in - if you can get work via linkedin or by word of mouth then great but when you look at Network Security its basically Jobserve and agencies 80-90% of the time and agencies will only speak to you if you are LTD or umbrella

 

[PooKer]

How many contractors use agencies, though ? I never have and nobody I know has. I cba with the faff of minimising my tax & NI. I am simply self-employed and pay the required tax & NI. I agree that permies tend to think contractors live on another planet, but we don't really.

I've always had an agency (I'm on my 3rd contract). I'm in the IT sector.

People are all "close the loop holes" but these are not really loop holes for my level. I'm on £140 a day. I don't get paid holiday nor sick leave. No one wanted a skilled member of staff, everyone wants 1st line. Some contracts last 7-8 months. Some last 3 months you take what you can get at the time if anything at all. I also cannot get on the property ladder due to being self employed.

A lot of people jumped to having a limited company on the grounds they they cannot get a full time position to match the skill level. I myself fit into 2nd/3rd line but all the jobs around here are 1st line.

I even started with an umbrella who took a stupid cut of the income that I was worst off then being a full timer without the perks. I then made the change to a limited company. I do contracts along with working directly with home users.

I expect my current contract to run till Christmas, but I'm renewed 2 weeks at a time. And I could be told to leave with 24 hours notice. While I'll agree some contractors are on stupid money. The majority of us are just keeping our heads above water like full timers with less security.

But I can still hold my head up high and say even when paid in cash it goes in the books. But if contracting doesn't work out a good way to make money. Maybe I'll just become an MP....

 

[Tuppy_Glossop]

Interesting, from the company's point of view what is the risk of a self-employed contractor compared to agency/umbrella ? Surely they just want the best person for the job ?

 

[Greebo]

Because they normally expect people to live relatively close to where they work, not at the other end of the UK in my case. I'm well aware that isn't the case for all contractors though

Pay scales can easily be broken by offering you the waGE AND THROUGH PAYE AND PAYING FOR YOUR ACCODMOATION/TRAVEL EXPENSES????

 

[alx]

As far as I can see they only want to nail contractors who minimise their exposure to tax & NI. This is usually done by setting up a limited company with one employee (the contractor) who is paid minimum wage by PAYE for a nominal number of hours (with normal tax & NI) then takes the rest out as dividends at a low rate of tax (20%, iirc) and avoids NI completely for the dividend lump.

Gordon Brown's government recommended this set up for contract workers. No wonder they had to borrow so much money.

Don't forget they pay 20% corportation tax on the profits the dividends are taken out of. Also the dividend tax got revised in the last budget so there are 3 rates now (7.5%, 32.5% and 38.1%), but for lower amounts the overall tax % isn't that high.

 

[Skeeter]

This has been brewing for years. Personally I think it's a bit misguided. If they managed to stop all tax efficiency in single person companies, would it recover as much tax as reclaiming the tax from one Starbucks company?

 

[alx]

Pay scales can easily be broken by offering you the waGE AND THROUGH PAYE AND PAYING FOR YOUR ACCODMOATION/TRAVEL EXPENSES????

Too much effort for companies to have to rip up their pay scales and re-baseline

 

[PooKer]

Interesting, from the company's point of view what is the risk of a self-employed contractor compared to agency/umbrella ? Surely they just want the best person for the job ?

The umbrella will have insurance, agency will have a reputation to uphold and get a commission for anyone that joins the umbrella they recommend, and self employed direct can be a saving but they need to be sure they've got the correct insurance. Also setting them up on the payment system is sometimes an issue. All comes down to the business. I mean the NHS trust near me is dependent on set agencies due to the fact it costs a stupid amount to setup new suppliers as it'd be a change to some software that is outsourced.