Because pensions

Prentii says:
October 23 2020 at 10:22 am
If it is caught by IR35 (and almost all of those roles should be and should have been even prior to public sector contract changes) then there isn’t much tax advantage that I can see to the contractor. The whole £1000-£2000 per day will get netted down after allowing for ER NI, EE NI and PAYE. What it does do is keep this contractor off any employment benefits, including pension.

Many contractors see these conditions as the worst of all worlds – mind you there are plenty who could cope with that indignity for up to 2 big ones a day.

Or can you see how the contractor can game the system?

Reply
Richard Murphy says:
October 23 2020 at 10:34 am
But why not employ them then?

Why play a game that is wholly unnecessary and too closely related to tax abuse?

Because pensions, holiday pay, maternity leave and all the rest for a contract that is going to last 5 months…..

Or, as we might put it, if you’re going to make employing someone expensive then you might well want a trapdoor in the system when you want to only employ someone for a few months…..

15 thoughts on “Because pensions”

  1. The one time I did a three-month job (extra hands needed, get the product out of the door), I ended up with a pension with thruppencehapenny* in it instead of being able to pay into my existing pension. Since then, everything I’ve done has been through an umberella with a consistent and single set of tax and pension accounts.

    *I get sent a statement every year telling me that in 20 years’ time I can draw out £3.60 a year. Yep, seven pee a week.

  2. ‘Why play a game that is wholly unnecessary’

    The employer will decide that.

    ‘and too closely related to tax abuse?’

    Tax evasion. Tax avoidance. Now, we have ‘tax abuse.’

    “That’s too closely related to tax abuse,” said no tax accountant ever.

  3. It’s almost as if the Potato has no understanding, not even a rudimentary one, of business.

    Which, for a qualified accountant (ex senior partner no less) and a self-proclaimed ex-director of several companies, would be a quite astonishing situation.

    Or, it’s early onset dementia.

  4. No, because bureaucracy. As jgh demonstrated. What is the cost of administering a pension of £3.60 per annum?When jgh gets to Normal Pension Age the pension fund or insurance company can buy him out for £300 and heave a sigh of relief but until then they have to spend more than £3.60 pa (in employee’s time plus postage) to annually remind him of that pension.
    There’s a bureaucracy cost to all the other things you mention as well – the employer even has to check for the possible entitlement to paternity leave these days!

  5. Sure it’s unnecessary, you can always outsource the 5 month contract offshore.
    Oh, you wanted UK work for UK workers….so why make it so hard then?

  6. jgh said:
    “The one time I did a three-month job (extra hands needed, get the product out of the door), I ended up with a pension with thruppencehapenny* in it”

    Yup, I’ve got one of those too. As well as the annual statement, every few years I also get a huge bundle of documents saying that the administrator is changing (presumably because no-one wants to keep doing this nonsense), which seems to require a trip to the High Court (by them, not me, although if I were in London on the day I might be tempted to go along).

    Worse, mine was a double regulatory problem – I was only taken on to cover a part-timer’s maternity leave. Nice little earner, but one of those jobs you’re glad is only for a few months.

    You can now transfer them, to merge it with your personal pension, but in my case it isn’t worth doing because my long-ex employer is still paying all the scheme administration charges.

  7. “But why not employ them then?”

    Because you only want someone for 5 months, that someone has rare skills, you want them now and you know you are going to have pay a lot of cash for them. None of those things are consistent with the mandatory requirements for an open recruitment process for any job in the public sector. Literally can’t be done.

  8. He might also consider asking why these people choose not to seek out long-term employment.

    For some people the freedom to arrange their affairs as they see fit is a big plus. An employer has expectations about when you’ll show up to work, when you go home, how long your lunchbreak is, are you taking too many trips to the restroom, what do we do while you’re out on FMLA leave, ‘productivity metrics’, and on and on and on.

    A contractor has a set of pre-defined deliverables and all he has to worry about is meeting deadlines and quality metrics. And when he’s done he can go on vacation for as long as he wants or scrabble for the next contract. He doesn’t have to worry that he’ll lose his health insurance coverage if he changes jobs. He doesn’t have to worry about the company raiding the pension fund. He doesn’t have a boss trying to find make-work to keep him in the office until 5pm. He doesn’t have to care about showing up at 8:15 and having a cup of coffee and a smoke before starting work.

    In many ways being a contractor has so many upsides that it frustrates me that its so hard to get into and stay in that status. There’s so much legal pressure to push you into employee status ‘for your protection’ when there’s no upside to it – not even a steady paycheck as your employer will furlough you at the drop of a hat if there’s no work. Nothing hurts a wage-slave more than being told to go home early because they finished everything.

  9. What Agammamon says in spades.

    Lots of us do not want to become employees of our (varied) clients. And it would simply never work anyway in a lot of cases, in terms of the demands, flexibility, variety of clients, and all that is needed on both sides of any particular contract. Murphy truly is beyond clueless on this sort of stuff.

  10. My contracts always make it clear that – whatever the reality of any personal working relationships as they evolve – my company is delivering something to the client company, and that’s it. And we mean it. No individuals ever feature except that in practice I act as the key representative for my company (no different to any professional company with a key client director or partner).

    If I didn’t employ anyone and/or had house elves in my office doing the grunt, no client of mine would give a shit. They are only interested in the outcome/quality of delivery. Ie, it really is a B2B relationship. How can that possibly be some sort of “pretend” employment (even if in fact there is no one else, not even any slaving house elves)?

  11. @ Agammamon
    My second job (my first was during the last summer holiday while at school) was for eight months between leaving school and going up to university. That plus a follow-up during the long vac after my first and second years earned an additional state pension of 1s 3d per week (17.5 cents in 1966 money). Half a dime a day!
    Somebody had to monitor that for 40-odd years (well, if it had been a private-sector pension they would have done – as it was a state pension they ignored it until I asked for a quote and they got that wrong the first time but these days the employer has to keep records for at least forty years).
    It’s not why people choose not to seek long-term employment – very often they don’t have a choice.

  12. John77

    They do have a choice – change to a career field where a single employer has enough work to make it worth employing you full time.

    Other careers are not like that. Want to be an lawyer? Most of the options are private practice because we don’t need a lawyer for 40 hours a week. So you’re a contractor working for multiple clients.

    Don’t like that? Go into marketing or something.

  13. They also seem to be making one of the most widespread silly-ass assumptions that Leftists and people who’ve never run a business are fond of – the profit margins are so large that there’s no need to find ways to reduce costs. In the real world if you find a way to shave 5% off the cost of employing someone, or reduce the administrative hassle, or eliminate the risk of getting stuck paying them for not working it doesn’t just mean your obscene profit margins go higher, it can mean the difference between staying in business or failing.

    When surveyed, the average bloke always vastly overestimates profit margins for businesses. Funny how people who seem to think that running a business is a cash printing machine never bother to start one themselves.

    Not to mention that your competitors will be doing it, so if you don’t you’re at a competitive disadvantage.

    Other than that…

  14. Ahem


    Newmania
    February 14, 2019 at 11:15 am
    What about if , off the back of your meeja exposure, you trouser vast payments for your crappy book .
    Guido 2015 estimated that Jones made..”a cool half-a-million quid in the last 12 months…”
    Owen Jones reputedly listened to George Formby records at night so as to keep his working class accent whilst at Oxford .
    I like him.”

    I claim my £5

  15. @ Agammamon
    You did not read my post. The job was for eight months before I went to university. Long-term employment would have meant missing university.
    Also the employer did have enough work to employ full-time staff but it wanted any bright lads with an Oxbridge place and relatives working there to try out the work environment so we should return after graduating if it suited us – much cheaper than trying it out after getting a degree.

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