I was a contact engineer for ten years I contracted for the same company for seven years.
I did what you said above.
My experience is was a typical MO for IT and Engineering contractors. Businesses cannot to afford to take them on permanently - They would demand a salary up to twice the permies they work alongside - Obviously unworkable for a business. - I think that HMRC have been trying to close this gap for years as they are definitely loosing out on tax revenues.
I think this is a critical point. It’s become accepted that part of the state’s job is to put money into businesses which would otherwise be non-viable (because they can’t afford to pay the true costs of doing whatever it is they do). It occurs in much larger numbers (I believe) at the bottom end of the pay scale where tax credits allow employers to staff their businesses very cheaply because the state effectively tops up the salaries, keeping the staff above the breadline. I confess I do understand the argument for this as a policy - there are some real benefits from being in work and from having some jobs done even if, strictly speaking, they’re not economically viable.
VB Keynes
True.
But, you have to pay your own pension (-20% (your and your employers contribution)), you have no job security at all, you don’t get paid sickness or holidays (lose 25 days pay a year), you are fixed term, you have to pay legal and accounting fees (about £1K per annum for a Ltd company), you get treated like crap by most organisations, you have no say in the area you work in, you have to deal with agencies who like to keep your money for 3 - 6 months, you need to fill in VAT submissions every 3 months and pay them even if you have not been paid. The tax advantages are being seriously erroded, so the rates will rise to compensate. And, as has been said, most Gov’t organisations could not afford the skills they buy this way, as the people don’t fit into the regimented pay scales.
Spoken as an ex-contractor via a limited company.
We, as contractors, are brought in to do a job that, allegedly, no one else can do from the permie pool of staff. The type of job I do (project planning) is not a dark art, but many people see it as one hence why they employ contractors.
I was once a permie and did the same job as I do now. I was treated like shit and not respected for what I did. Contractors, on the other hand, were deemed to be minor gods with the knowledge of the universe at their fingertips. When I was ripped a new arse at a project meeting (I was shat upon by my project manager [the cunt] who refused to accept that whatever it was was his responsibility) I decided enough was enough and left the feckers to clear up their own shit. I was in work as a contractor within two weeks of leaving and was immediately respected for what I did.
Yes the money is better, but there is no sick-pay, no holiday entitlement, no company pension. Yes we may pay less personal tax but we do pay Corp tax, and any other tax that may be necessary. We do not avoid tax. How much more will go into the Govt coffers by way of this new ruling I have no idea, but I bet it’s a hell of a lot less than they would have got from the likes of Starfucks, Amazon, etc.
It’s easy to pick on the small people; the big bastards have bigger lawyers and better accountants than I could ever afford.
my wife went from permie to contractor and back again. Yes she agrees she was initially treated like a god solving the problems no one else could in time scales no one else could. But after 5 years she said that had all gone, and despite the same attributes the contractors were in the end treated like shit…disposable like a used tissue. She got lucky, her last company offered her a permanent role that was hard to refuse… yes there was a pay cut, but when you took into account all the hassle of contracting, the cut was bearable. I don’t know what the situation is like now as this was 10+ years ago.
All I do know is that these days she hires and fires contractors at the bat of an eyelid.
At our place, I have been through a process of consolidating contractor budgets into permanent posts, and the quality of the deliverables has increased. In an HEI we call contractors Visiting Lecturers, and i’d rather not have to use them…
My industry relies on contractors. Without them the industry will carry on, but will not deliver on its projects. I foresee a year of shite, followed by a term of contemplation along the lines of ‘why are we unable to deliver the necessary projects’. It is HMRC who are driving this problem, not the employers. Hopefully, HMRC will take a battering for this, but I doubt it.
One of my roles before I got sick was to replace as many of our Visiting and Temporary Lecturers as possible as we feel they are very poor value for money.
We pumped the funds we saved into fully funded PhD scholarships. As an institution we get better students, better classroom outcomes on average as we control training and standards, and an increased flow of decent research. Along with an income and a full fee waiver, the students get proper vocational training as part of their PhD programme and our NSS scores have risen markedly so the undergraduates are happier.
The temporary lecturers and tutors lost out, but they were given 18 months notice of the change so had some time to adjust. As almost all of them were moonlighting from another HEI where they are in full-time roles we didn’t feel we were being overly vicious in cutting them.
I don’t really understand why any industry allows itself to rely on contractors. Contractors make sense when you have fluctuating staff requirements, project work say, or if you need some unusual skills for a short time. However, many companies seem to have a large number of contractors all the time. I can’t see the sense of this.
As you say, it is required because of fluctuating staff requirements.
I have trained-up a few planners over the years and I have my own (seemingly successful) way of doing that. Where I currently work, they decided a few years ago to start training their own planners so that they would have a pool of in-house planners. Well, they did train them. But as they wouldn’t pay them decent money the good ones left for a better life while the dross remained. I did try to point this out to company at the beginning but they wouldn’t listen. Hence why they need to bring in contractors.
Throughout my working life I work with a mixture of contract and permenant staff.
Contract staff are far more reliable at actually turning up to work or they don’t get paid.
They don’t get a 25 days paid holiday entitlement.
No pension contributions are required.
They don’t whine to HR when something trivial happens.
If they are crap at thier job thier contract gets terminated whereas permenant staff that are crap at thier job tend to get promoted IME.
I can only imagine it’s political rather than tax policy. Don’t think any party would get elected on a ticket of removing the ability of one Man band companies to effectively take pay as dividends to avoid income tax.
In the NHS there appears to be a concerted effort to drive out interims and contractors, particularly at senior levels. This is almost certainly driven by the swathes of managers that NHSE employs in its archaic top down bureaucracy that are going to be foisted on local commissioners and providers to ‘support’ them with sustainability and longer term strategic change - and to do that they’re going to have to make room both by sacking the incumbents and getting rid of private interims etc.
The problem is that this layer of people who do tick
box ‘assurance’ are wholly incapable of either operational leadership or implementing strategies, and so people like me and my company will likely still be in high demand.
Currently the rules around off payroll staff are being tightened and all manner of obstacles being put in place to make it difficult for my clients to employ me, but where there’s a need and a will there’s always a way.
What they have failed to do is to drive out the lazy long term employment of admin and nursing staff which I’ve proved can be sorted by attention to detail and serving notice on agencies and scooping up their staff into substantive roles. The staff themselves aren’t the ones profiting greatly it’s the agency companies who are creaming off huge profits for supplying staff who are actually part of the established headcount.
I don’t make enormous profit out of offering services like this and do offer real practical help to the NHS at 50% of the rate that consultancies I’ve worked for used to charge me out at. Typically I’d be used for short sharp pieces of work that are quite specialist, but increasingly I’m being offered longer term and interim style posts to help sort out wicked problems and gaps in senior capacity and capability.
One of the risks of becoming a contractor is that tax rules are subject to change and changes of the rules is not surprising because in the past the piss was taken by amongst others ( I think) the contract IT professionals who in addition to earning lots of cash they paid minimal taxes. Even accounting for lack of pension, no pay for sickness/holidays and less job security it’s still very financially viable.
I cannot see any good reason why a contractor should pay less tax than a permie.
The Oil and Gas Industry is Contract driven. I have been a Freelance Pipping Designer/Engineer since 1961 starting with Schedule D taxation until 1976 when we had to become a Limited Company because of “The Lump”. Writers,actors etc were exempt and continued on Sch. D. When we started contracting the Permo’s didn’t like us but we still did the “Front End” designs and most of the drinking! The Goverment has tried many schemes to tie us down taxwise but our Agents and Accountants always came up with the answers plus the Petro Chem Industry and Engineering Design Companies have massive clout. Without contractors the EDC’s could not survive and would have moved to countries who would meet thier needs. I have worked mainly in Europe in my career and in the US Aussie, Korea and South America, some jobs tax paid or waved. Now I am an Actor I have to revert to Sch. D again. Parting is such sweet sorrow.
Is this the most boring thread on the internet btw? 
You don’t have to read it old boy 
It is as it is.
You have the choice to go contracting or not, knowing all the facts in advance.
It my be boring but I think Dave has something in the pipeline.
Nope the Porker one is.
Exactly. I don’t think that anyone is saying that they shouldn’t have a higher pay rate, to account for the lack of benefits and job security, but there is no reason for a tax benefit.
I guess that the immediate impact of tax normalisation is that rates would rise, and tax takings would rise. If the government paid more to the departments that had to pay more for staff, it should even out for them. But obviously there’s no way the Tories would do that!