Vocal Voices

Two days ago the Guardian did a piece on the off payroll tax changes for the government and how it would impact the labour pool for government departments, and the contractors who work for them.

The Guardian calculated that these contractors would lose up to 30% of their current income.

Crocodile tears says the permanent employee. They're all rich B@stards anyway and they deserve to be trimmed.

So what's the reality?

Where I stand today the permanent person who would fill my role would be paid around £55,000 a year.

My role nets £400 a day. £90,000 for around 225 days per year; great you say. Stuff the gits they deserve it.

Let us break that down a bit.

The contract is the contract, it is a flat fee. ALL taxes and costs _must_ come out of it, there is nothing else paid by the government department.

So, first of all, the contractor has to pay Employers NI over the top of the Employees. It doesn't come out of some mythical fund, it comes out of that £90,000

That is at 13.8%. For ALL the money. None of this personal rubbish about paying 2% once you reach a threshold. Employers pay NI at the full whack on every penny you earn over the base threshold.

So, taking the 8k off for the base free allowance, that's £11,300 on NI. Now we're down to £78,700
Then there is a base workplace pension, OK it's 2% of this year, 5% for next and 8% thereafter. I'm going to use the thereafter figure as this is a permanent change.

That's another £7,200. Now we're down to £71,500

Next Contractors get no holiday at all. They have to pay for it. So, 4 weeks of holidays at this rate comes to £8,000. Now we are down to £63,500

Sick pay also has to come out of the contract. Contractors don't work they don't get paid. End of discussion. Let's be kind and say 5 days sick a year. That's an other £2,000. Now we're down to £61,500.

Currently these contractors have to run a company, company accounts and retain an accountant to do the company returns (well most do, I do my own, but most won't take the stress and who can blame them).

Another grand for that and we're down to £60,500.

On top of that contractors have to pay for their own training and take the time off for that training too. Events, conferences, personal development time. Add £5,000 to that in cost of the events and the time off to go to them and we're at £55,500.

Now, Contractors have no rights, termination is never more than 4 weeks, often only one week. There are no working tribunals, HR Is not involved in any disputes, the contractor has no rights but to take the company to court and pay to sue them if something goes wrong. Contracts do not go up in value, there is no pay rise and no union and no collective bargaining. The best a contractor can hope for is to leave and take the risk of not getting another job and go somewhere else for more money because, otherwise, they'll be on the same pay for the next decade.

Contractors are often not invited to work events, parties, or any other thing which is funded by the company or "department". They are disposable resources who can just be dumped when the budget gets short.

In fact my pay in 1998 was £112.500 per year and £25,000 of expenses on top of that tax free. So contractors have, on average, gone down in pay.

So, it's "fair" you know that contractors should get the "same" tax terms as employees. After all they're rich scum who should be fleeced. £500 a year rich!

Now here is the next chunk of reality. Contractors usually don't live locally to their work. They are flexible and travel. Accommodation for long term contracts have been removed from tax relief by IR35. So it just becomes another cost on the contractor. Here in London that's a minimum of £700 per month if you are sharing a room. As you have to retain your room 365 days a year it is being subsidised on a 225 day wage. Remember this is not the contractors main home but will not be allocated as "costs" under IR35.

Take another £8,400 off and our "rich" contractor is now earning £47,000. The "poor" permie, with holidays, support, sick days, training, events, staff purchase schemes and many others; is on £55,000 a year.

Welcome to reality. Is it any wonder that thousands of contractors are heading for the hills out of public service.

Stupid is as stupid does.

What an eye opener I have always been employed and thankfully with holiday pay etc.
My only experience of these problems was when self employed and ran a small shop recently till I retired, I didn't make my fortune there either I drew a small wage and paid the overheads but that was all.
I feel sorry for contractors and those on zero hours employment, I'm glad I am the age I am and had a fairer playing field than many today.

Manxie xx

Sorry, Suff, but I think you have confused the issue, as is the case with the rules and the Guardian.

I have been both a contractor and an agency worker, and the two are not the same.

As a contractor I had to deal with what you describe, but let's be fair, there were ways around some things and the 'perks' nullified others.

As an agency worker, and this is where the new rules bite, I and my employer (the agency) paid NI. I was entitled to sick pay and holidays... and so it went.

Contractors, if they are wise, will hardly lose anything. Agency workers, those who are not in the know and take the wrong 'contracts' will lose.

No confusion WM. This is for contractors not agency workers. It comes into effect on April 1st and the following happens.

Regardless of Agency or company contracts, the employing body (government department, college etc), has to make an assessment as to whether the "contractor" is to be PAYE or not.

When that assessment has been made, the Agency levies PAYE at source before the contractor see's a penny. Also all other parts of an employed person, workplace pension, employers NI, comes out of the contract.

TFL decided to simply cancel all contracts for all contractors. Suddenly they realised that TFL would grind to a halt if they did that, they employ 700 IT contractors. So they had to employ a company to do the assessments for their contractors. In short it will come down to very fine hair splitting and the HMRC will audit every decision and then make a further "assessment" which can then be retrospectively applied to the contract from April 1st. If TFL or another government body makes one decision and the HMRC decides it's not correct, the contractor will face a bill for the full sum of all the costs I have outlined.

It's a nightmare. Honestly every contractor with the government needs to terminate their contract and only be willing to come back on 50% more money then demand that they are assessed as PAYE. At which point they an shut down their company and just get the agency to do the work.

The short version is this. You could be a member of a 10 person company with a contact that signs away your rights to sickness etc, totally compliant as a non IR35 contractor and you are "assessed" as Off Payroll PAYE, by the government department, the agency or HMRC and you are, quite simply, an employee with less pay and no rights.

Seriously the best result from my perspective is that all impacted contractors walk and never come back. Causing a decade of crisis in the NHS and all other government services. It's the only way they will get the message and ensure the message sticks for all time.

Sadly you can't get enough people to stick to it so that it will work.

Any Government is on a constant search for money. We used to have tax relief on pension funds at one time - no more. Anyone they see who might have a bit of money is fair game to them, to see if they can get some of it. Usually this doesn't apply to the mega mega rich though.

So when they see someone who on the face of it might have some cash a politician will think "We're having some of that", without taking into consideration any mitigating circumstances. Hence the new proposals to take the cost of caring for the elderly out of any money they might leave on their death (so much for free cradle to grave care).

The funniest example is when cheap flights came in with the arrival of people like Ryanair. Some tickets went down from £100 to £15. The result? Chancellor Gordon Brown thought "Right, got £85 in their pocket have they? I'm having that" - and introduced new flight / airport taxes! It was so blatant.

In general politicians and their advisors have no real world experience Suff, so they don't know (and don't want to know) all the actual facts - they just see the money.

It's not the fact that you shoot yourself in the foot that matters. With the government that is a given. It is the speed with which they reload and do it all over again.

Fortunately for the taxpayer, they seem to do this about once every 2 decades or so. After all, the only possible outcome of this move is that the government will have to pay more money for it's contractors and the intermediaries will make money out of it and the contractors will wind up with the same.

I feel a book coming on. Entitled "Why Government of the people is an oxymoron".