[Closed] Public sector contractors - plans for the new financial year?

I'm a contractor, but in the private sector. It's all a real mess isnt' it.

I'd not touch the public sector for the foreseeable until things settle down and the situation becomes clearer. If I were currently in a public sector gig then I'd seriously consider getting out asap.

Big implications for the NHS.

Many consultants are paid above normal working hours in to their company. If they are now forced to go PAYE I doubt many will continue to do it. Why would you work an extra 10hrs on top of a 50+hr week for then 50% to be taken off you

I do wonder if the fact that the ESS tool isn't going to be available until the end of the month, will mean that it will all be pushed back until November. Maybe wishful thinking.
Currently trying to decide whether to extend a public sector contract due for renewal at the end of March.

Here's a glass half empty take on this.

HMRC will fail to manage this properly - usual lack of resources; Gov will look to extend to private sector.

Chaos.

Predictions (excluding medical staff in NHS)......contractors will look for rate rises in public sector to offset IR35 costs in attempt to leave their financial position substantially unchanged; public sector - NHS in particular - will be increasingly unable to deliver without increases in permanent headcount; increases in headcount not acceptable to exec management.

Longer term - private sector will be targeted with utilities/regulated businesses possibly up first; cost increases for business; performance affected; same considerations as public sector re headcount.

Contractors attempting to move back into perm market; downward pressure on salaries for new appointments; wage freeze for existing employees to bring 'parity' with new hires.

[I]Currently trying to decide whether to extend a public sector contract due for renewal at the end of March. [/I]

Phew, your risk.

If you do you'll be assumed to be in IR35, if you aren't already you've the risk that HMRC will then come to you for all the past income.

Interesting times ahead, that's for sure!

[i]Big implications for the NHS.
Many consultants are paid above normal working hours in to their company. If they are now forced to go PAYE I doubt many will continue to do it. Why would you work an extra 10hrs on top of a 50+hr week for then 50% to be taken off you [/I]

Not just consultants but a large majority of all temp medical staff. They currently work in another trust for their 'extra' if not on their trusts 'nurse-bank'.

I reckon the initial 'hit' will be the Easter weekend, just long enough for them to have had their first invoice paid at net and it dawn on them what it means.

Not just consultants but a large majority of all temp medical staff. They currently work in another trust for their 'extra' if not on their trusts 'nurse-bank'.

Controversial I know but pay tax? 😉
How many contractors pre not disguised employees?
I remember the test that got scrapped, was kind of a tough one.

Judging by the contractors here, the answer is leave for pastures new. It's going to be an interesting year!

Controversial I know but pay [b]more [/b] tax[b] than you are legally obliged to pay[/b]?

Fixed it for you

Big implications for the NHS. Many consultants are paid above normal working hours in to their company. If they are now forced to go PAYE I doubt many will continue to do it. Why would you work an extra 10hrs on top of a 50+hr week for then 50% to be taken off you

What, like pretty much every other higher rate tax payer (albeit it's 62% marginal tax at £100K)?

Maybe the hospital consultants (already one of the most highly paid professions) should see it as a fair contribution towards the running costs of a service that just about everyone agrees needs more money spent on it.

julians - Member

Controversial I know but pay more tax than you are legally obliged to pay?

Fixed it for you

[i]So how close to the IR35 rules do you fly? How many of those are actually just disguised employees? [/I]

Mike

You've also to understand that its the clients pushing contracting too, they don't want these employees so are happy to pay them as contractors - pretty much like the Govt has been with its +30000 contractors.

And if it could ever sort out its HR, it'd probably find there was less demand for NHS ones too.

http://www.independent.co.uk/news/uk/home-news/health-warning-over-army-of-nhs-temps-8101469.html

[I]It's mostly consultants who work through their own ltd company though. Most nurses on the bank would be paid through payroll so will already be paying PAYE as it's essentially a part-time job, so this will make no difference to them. [/I]

Ignore those on local nurse bank, and you'll find it's probably in the region of 10000 across the NHS on every single day (if not shift) and +£4bn pa spend.

How many of those are actually just disguised employees? Long term contracts??

It isn't the contractors fault that the NHS etc. won't take on permanent headcount.

You've also to understand that its the clients pushing contracting too, they don't want these employees so are happy to pay them as contractors - pretty much like the Govt has been with its +30000 contractors.

This will be chaos for the public sector. I saw a sort-of similar situation play out two years ago at a large public-funded establishment:

Management decide they're spending too much on contractors
Management notice that employees are much cheaper
Management get rid of loads of contractors (literally hundreds of them)
Management try to recruit permies (at Civil Service rates, well below actual market rates)
Management fail to recruit permies (it was also an unpopular location, doing specialist work, there's only a finite number of suitable people)
All the work the contractors were doing, is not getting done
Management relax rules and start taking contractors in "limited" cases
Most of the work the contractors were doing, is still not getting done
Management start recruiting the old contractors back again.
Management find that everyone wants a pay rise to go back to their old jobs, to compensate for being ****ed about, and protect against a repeat performance.
Various multi-million pound projects are two years behind schedule because they've been stalled due to lack of manpower. No money has been saved.
Taxpayer bails it all out.

So the same kind of thing will happen now. The public sector is so bound up in red tape, pay scales, headcounts and unionisation, and that is *exactly* why it has so many consultants. Because "the system" cannot pay market rates for specialist skills. The best people with the best skills will walk. They won't be replaced. Government will trumpet the huge reduction they've made in spending on consultants. Then 3, or 6, or 12 months down the line things will blow up when services aren't being delivered and projects aren't getting finished.

Really, this should have been trialled on the private sector first. It's going to cost the taxpayer a fortune.

+1 Sundayjumper

Same scenario will occur where my OH contracts. Management are currently in ostrich-mode.

All the contractors are on a weeks notice, so are waiting until the end of March before resigning.

The only winners will be the professional services companies.

[i]Really, this should have been trialled on the private sector first. It's going to cost the taxpayer a fortune. [/I]

Hopefully this is sarcasm.

@ Sundayjumper

So the only hurdle here is "(at Civil Service rates, well below actual market rates)"

So this is great news for us permanent NHS Staff..Bring it on 🙂

It isn't the contractors fault that the NHS etc. won't take on permanent headcount

Oftentimes they will, it's just that they can only offer talented people less money than the existing, possibly rubbish, staff are on due to rigidity with bandings & increments. I'd happily be an NHS employee otherwise.

My current colleagues (the other contractors) are getting in a bit of a tiz about all this, but I'm not bothered as I'm (very obviously!) well inside IR35 and have been for 10ish years, so have been paying more tax than I could have got away with.

Admittedly I was a bit pissed when I lost pretty much all expenses this fin. year, but I'm still paid pretty well, and don't have a massive sense of entitlement because I know 3 more Excel functions than the perm. staff 😆

The only winners will be [s]the professional services companies[/s] Capita

Sunday jumper, are you up in the north west? That sounds exactly like my work!

Sundayjumper - Member

Really, this should have been trialled on the private sector first. It's going to cost the taxpayer a fortune

'Trialed' Come on, if you're a contractor working full time for a single 'customer' on a long term contract you must have been waiting for the other shoe to drop for years. IR35 was passed in '99 and reviewed in '10 - plenty of time for everyone to get ready.

Will thousands of contractors getting paid, what? twice what 'Permies' get paid really just walk from roles in disgust at paying the same rate of tax as them? Nah. Yeah go and get nothing sitting on your arse watching neighbours in protest rather than earning, doesn't sound like the mindset of any of the contractors I know.

julians - Member

Controversial I know but pay more tax than you are legally obliged to pay?

Fixed it for you

The People who decide what you're legally obliged to pay don't agree with you.

"[i]'Trialed' Come on, if you're a contractor working full time for a single 'customer' on a long term contract you must have been waiting for the other shoe to drop for years.[/i]"

You've missed the critical detail in the new rules. The onus of declaring in/out of IR35 is moving from the contractor to the employer. Many employers are likely to play it safe and say "in", which obliges them to deduct tax from your invoices almost exactly like a PAYE employee. They don't need to give you any of the benefits of being an employee though. If they declare "out" and HMRC disagrees somewhere down the line they will be liable. For HMRC it will be far easier to do this at employer level, than individually with the tens/hundreds/thousands of individual contractors engaged by the employer. Hence the example of TfL applying a blanket ban on PSCs to save themselves the grief.

"[i]Will thousands of contractors getting paid, what? twice what 'Permies' get paid really just walk from roles in disgust at paying the same rate of tax as them? Nah.[/i]"

Some definitely will. I know people who will very happily take six months off while the dust settles.

"[i]Sunday jumper, are you up in the north west? That sounds exactly like my work![/i]"

No, but I can take a decent guess at where you work ! I was at a large site in Hampshire. Which you can probably guess...

I don't see any implications for NHS - just the outside leaches. all NHS staff are PAYE including medical consultants and all locum / bank work is also PAYE

TJ - yes your consultant will be PAYE for their contracted hours, but there are a number of consultants that do additional hours that ask for that payment to be made to their company.

There are quite a few agency consultants and middle grades that do it too

I thought that loophole had been shut last year - and its very very few folk.

Could just pay higher rate tax on their extra hours, just like us PAYE saps. (NHS, FT employee here) just a scam isn't it really? Just starbucking in an individual scale.

Just starbucking in an individual scale

I can see the point that temp staff may not work at same rate all year so paye is probably not workable, but once you're off paye it would seem you can just basically avoid tax left right and centre which the majority of us don't. Plus there seem to be quite a few contractors effectively taking a full time position.

So what's the practical* reason for contractors legally avoiding tax that paye aren't allowed to? genuine Q

*I'll avoid using emotive words like "moral"

Interesting times, personally I think we will see a move towards more perm roles and an increase in salaries for new recruits (unlikely to be passed on to those already a PS employee)

As for the "moral" question, it is an interesting one. I have no problem with contractors earning significantly more due to lack of perm benefits and the additional risk (though several 'contractors' at my place have been working for the same employer for nearly a decade with the odd week or two break in contract). The bit that does bug me is the lack of a significant contribution towards tax. Yes I know well within the rules, and yes I know I also could have taken advantage. Most contractors are sensible but we all know several pis staking ones. VW Camper as a mobile office? Rib as a company vehicle? Boasting of 93% takehome?

I'm also wondering if the Pimlico plumber case might be used by a contractor at some point to claim a decade + worth of perm benefits. Imagine If some of these £1k per day contractors were also able to claim they should have been entitled to a perm equivalent pension....

Yea, all us contractors are just coining it in and no tax at all..,

And the reason employers use us is that unlike their perms we come in and get the job done, can be dismissed with a weeks notice, no hols, no sickness, no training, no pension and no NI. So saving about 50% of salary in the public sector.

b r - well some do, some don't. Just like some PS staff are diligent and hardworking and get the job done.
There's always a case to use contractors but as usual the system is skewed to address the % that do legitimately play the system.

Me, an ex contractor who used a Ltd Co to limit my tax exposure to what I was legally obliged to pay.

[quote=b r ]
All the contractors are on a weeks notice, so are waiting until the end of March before resigning.

Leaving it a tad late. When will your final invoice be paid it you did that ? If it's after 6th April then it will be subject to the off-payroll changes. Is your agency making provision to pay all invoices by 5th April ?

[I]Is your agency making provision to pay all invoices by 5th April ? [/I]

I'm not in a PS contract, but my OH is - and yes, pretty much all the agencies have worked out (some needed a 'push') they'll need to bring their payments forward otherwise folk would be leaving at the end of February.

And TJ, have you any idea just how many shifts are filled by temps in the NHS - as said it isn't "a few", it's thousands, per day.

No communication about it at all where I work. I'm employed via an umbrella so should be ok but would like it confirmed.

Have you asked?

Yes, nobody even seems to know it's happening 😮

BR - yes - and the temps are all on payroll paying PAYE tax apart from a very few consultants in London whose employers allowed them to sert up this scam. How do I know - I have been a temp and I have been a manager in the NHS

TJ

10000 every day IME, worked out from supplying software to the recruitment industry vs my clients market share.

Also Govt think they've approx 30000 PSC contractors working in the public sector.

TJ, br, in the spirit of STW, you're both wrong! 😉

Nurses are mostly with the hospital bank (so within PAYE) or with a legitimate agency (so not a PSC). It's the consultants, IT contractors, project managers etc all employed through their own limited companies that this will affect.