In the context of low albedo kitchen utensils...
Beginning with "revolving door" civil servants?
The UK government is gearing up for a massive tax clampdown on private sector contractors, in an extension of its IR35 regime to hundreds of thousands of freelancers outside the public sector. This according to multiple contractor recruitment heads, with one claiming those plans have already started and will be introduced next …
Which given the current governments ability to balls everything up that they touch AND this clampdown on those they see as scumbags (Contractors) stacking shelves even on a zero hours contract for the next 6-9 months might be a good idea. Keeps your head down and all that.
It won't take long for half a dozen ministers to round up on one P. Hammond and complain that essential projects to their departments are up the khyber because of the Treasury. Another 'U' will no doubt happen.
In my office we have contractors from Australia, Belgium, Britain, Bulgaria, Cyprus, Poland, and Portugal. Even if the British contractors don't emigrate, the foreigners have fewer ties to this country and are far more likely to try their luck elsewhere. They're already moaning enough about the exchange rate.
I live in Asia and often have recruiters send me emails about jobs. I add up the costs and factor in the exchange rate (and tax uncertainty) and find that due to the exchange rate the UK doesn't pay very well anymore. Now USA, Australia and most of Europe pay better. Years of little pay rises and a sudden drop in the pound value. It's not a personal gain thing, its a "now you are level with alot of other potential employment locations" .
ie. not competitive.
That basically seems to be it. As with the US this government wants to extract as much tax as possible from the people in the middle, and as little as possible from the people who profit from their work. They rely on the middle class being too individualistic and fragmented to get together and find a way to strike.
ALL governments want to maximise revenue without demotivating people from bothering to work or incentivizing them to leave the country and work somewhere with a more wealth-creation-0friendly environment. That doesn't make them evil, it just means they're trying to do their job.
I've always been permie though I've looked at contracting a couple of times I've some sympathy with anyone who has to do their own tax return, and having your financial chain jerked abuot by forces out of your control must be stressful and tedious.
That said... presumably if this change makes contractors worse off than they would be in permanent roles, they'll all pack it in and go switch to perm. Either employers will have to up contractor rates to compensate, or reconcile themselves to doing without extra heads and delivery stuff more slowly, or just hiring on more permies. (Given the ease with which permanent employees can be fired in the UK I've never really understood what the problem was with permies anyway...)
On the other hand if contractors still save more on tax than they lose in sick and holiday pay (and whatever other benefits there are, I don't know) , then they'll stick as contractors and carry on complaining, even though they're better off than the ppl at the next next on a permanent contract.
In summary market forces ftw.
So if Recruiter A forces almost all of its contractor down the IR35 route but Recruiter B sticks up for them, taking on a test case or two, with support from the PCG (now IPSE, it seems), which Recruiter will most contractors choose to work with / refuse to work through?
I hear a death knell for a few spineless recruiters. Quickly followed by the collapse of IR35. Again.
They haven't thought this through.
Sure, there will be some who just hike their rates to cover the extra tax, and there will be some who head abroad, but I reckon a lot will just go permie and at least have the comfort of sick pay and paid holidays, medical care, pension contributions etc.
Trouble is, permie work pays less, so there's less overall tax for HMRC.
Net result: Lower tax receipts, loss of skilled consultants, huge impact to workforce flexibility - inability for companies to hire on a project (ie revenue) basis - increasing risk all round.
The field I work in, Network Security, is comprised of about 80% freelance, 20% permie. Is that really an area where the government wants to reduce effectiveness?
Depending on how Brexit pans out for foreign workers (I should also mention that it's probably about 10-20% native Brits in my field as well, almost everyone I work with is from another country) we could end up with a perfect storm in which we red-tape ourselves to death :(
@Tom 7 - dear oh dear, such cynicism. All they are doing is making it the perfect world for those whose votes showed they don't want the flexibility or freedom to work where they choose, who are happy to pay into HMRCs coffers without asking any questions about why people who get fewer benefits should actually pay more tax ... what could possibly be wrong with that, as long as they keep buying my newspaper? (c) Editor, Daily Fail
Exactly what happened to me, after being told I would be caught by IR35 for a long term contract I was on I decided to go back to being permie.
Living in the back end of nowhere the combination of travel costs weekly accommodation and then IR35 just made the hassle of the contractor life not worth while.
Net result I finally found a job at home, now have a life and only earn 5K more than I used to pay in tax so quite a loss to the revenue.
"Net result I finally found a job at home, now have a life and only earn 5K more than I used to pay in tax so quite a loss to the revenue."
Tax breaks are used to encourage investment in housing, the film industry, new factories, forestry, private savings etc, according to the projected needs of the next few years.
It is clear that the UK authorities no longer see any value in having a flexible workforce.
"They haven't thought this through"
Too right they haven't.
Even if the anticipated exodus from the public sector doesn't happen, what does the HMRC in its infinite
fuckwittery wisdom think will happen? Contractors will put up their hourly rate significantly to compensate for higher taxation. Great, thinks HMRC, lots more lovely tax revenues.
Except that public sector project costs will have gone up significantly as a result, and where does the extra money for this come from? Yes, you've guessed it, the selfsame tax revenues, so the public purse is hardly any better off than it was before...
"Except that public sector project costs will have gone up significantly as a result..."
One would hope having the real costs of being so reliant on contractors and outsourcers would finally force the public sector departments to sort out their employment and hiring practises so they can hire their own techies, but we all know that won't happen.
"One would hope having the real costs of being so reliant on contractors and outsourcers would finally force the public sector departments to sort out their employment and hiring practises so they can hire their own techies, but we all know that won't happen."
Of course that wont happen because that would be mental, contractors are not employees, contractors are there to fill short term requirements or to provide skills that the company doesn't need to pay for long term (eg if you need a tonne of work done as a one off there's no reason to hire permanent staff knowing full well that when the project comes to an end your not going to need them at the end of the project.
The field I work in, Network Security, is comprised of about 80% freelance, 20% permie
Really, where's that? I've been in security as a perm for ~15 years and I can only think of one contractor I've worked alongside in that time (over five employers) and he was a specialist ISO 27001 expert.
Perhaps this is why I can't afford to run a car when everyone else in infosec seems to be rolling in money... :S
"Really, where's that? I've been in security as a perm for ~15 years and I can only think of one contractor I've worked alongside in that time (over five employers)"
These days I tend to work for large multi-national suppliers who have large multi-national clients (think companies > 10000 employees).
The team I'm currently working with is about 15 strong now (up from 1 about 3 years ago :) ) and only 3 of them are permie. The supplier just can't seem to find enough good people for these consultancy gigs who are permanent workers. To be honest they struggle to get decent contractors as well - especially on the account I work on - it isn't an easy customer :)
They asked me if I would be interested in a permie role about 2 years ago, and when I expressed my starting price I didn't hear anything back. However, they did keep me on for another two years on my day rate (which has gone up several times due to all the extra value I bring). Based on what I originally asked for they would have made an absolute packet out of the client had they taken me on as a permie back then.
"Perhaps this is why I can't afford to run a car when everyone else in infosec seems to be rolling in money... :S"
Too many variables to comment on that, I have no idea what kind of area you work in and for what type of clients, but if I told you that the technical aspect of my job, whilst still challenging on occasion, is only about 25% of what I actually do it might give you some idea of where to focus. If you would class yourself as a 'techie' then you're missing out on a huge market that wants people with a broad range of people/admin/management skills on top of being technical. That's when the rates start to shift up a gear or two.
I might be expensive, but I'm good *value*. ;)
I know it's almost unfathomable to conceive, but it's almost as though we have two different Government departments here working at complete odds with each other. On one one hand we have BERR / DIUS who preach for a mobile, flexible, responsive and highly skilled workforce to power the future economy; and on the other hand we have HMRC who's overall strategy seems to drive anyone who chooses to work in a mobile, flexible and responsive manner - into the terms of inflexible and unresponsive permanent employment.
And if any permies here want to go down the route of "but you pay less tax, or dodge tax, as a contractor", then please, let me know how much you paid overall last year off of the back of your labours, and then I'll tell you what I paid off of the back of mine. I'll pretty much guarantee that you paid less overall than I did.
i pay ~30% of my pre tax wage in taxes.
out of my post tax earnings i have to pay:
travel including car costs, fuel, trains, busses, taxis
lunch, drinks, snacks, entertainment
purchases related to my profession, i.e tech stuff like computers, phones, tablets, internet connection etc.
contractors get to reclaim vat and tax on fuel & get to pay for the above out of pre tax earnings thereby further reducing the taxes paid and making their purchases generally cheaper effectively subsidised by permies who pay full tax.
either pay full tax or pay additional taxes due to benefits in kind gained by purchasing through your business.
if permies and contractors where on an even footing with regards to taxes and expenses no one would begrudge contractors earning more due to short contracts, lack of sick pay, holidays etc.
that £1200 laptop effectively costs me ~£1560 pre tax earnings, the same machine costs a contractor at most £1000 as they can claim vat back and they could also expense the machine against current or future profits, effectively purchased by other tax payers as the cost is offset against less tax paid.
its a fact that contractors pay less in direct and in direct taxes.
What company allows contractors to use their own personal machines to connect to the corporate network and do work?
the people i work for provide us all (permie's and contractors alike) a computer to do work on their environment. They wont buy me stuff for my personal use or stuff that might help me get a job with someone else, even if i use my own personal stuff to help the business i work for.
Well if they had 'no plans' before you can bet they do now. Since Hammond was told to scrap the NIC changes by the Headmistress, even though he had cleared it with her first. He will be desperate to retireve every last penny he can find.
Somehow I can't see the Sun and Daily Mail having front page headlines to Compensate the Contractors.
One of the reasons people work as contractors is there are no full time jobs on offer for these people. Forget the bullshit peddlers of agile and business change etc I'm talking about the skilled experienced tradesmen and women who actually build systems. They have learned the hard way that what the manual says ain't true and you need to do this to get around that problem, It's a construction industry so teams are formed, do the job and split up, that level of itinerant flexibility costs money.
We are constantly told about the skills gap, the lack of a pipeline to deliver new entrants to engineering etc. and they pull stunts like this.
By extending the rules to the private sector, not only would the government raise some much-needed cash, but it could also stem the exodus of contractors to the private sector. In the medium-to-long term, at least.
When it does, freelancers will have nowhere to turn.
Oh yes they do: abroad. They'll join the other exodus from Blighty, namely the people who actually do the work in health care.
Is it just me, or is the long term intention of the UK government to end up with a country that appears to be the landing zone of the B Ark? Freelancers don't follow this strategy as a path to escape the clutches of HMRC, they do it to actually have a moderately decent wage left as taxation has reached frankly ridiculous levels compared to abroad.
If HMRC was really intent on collecting taxes they'd go after the people who have made evasion into an art and companies who sell services here but don't pay any tax on them but I guess that's too much like hard work. Robbing the peasants is easier.
There will also be a third group of people who don't want to put themselves and their families through a total economic collapse and choose to find a less small-minded place to live. Britain, and in particular England, is going to be an increasingly rubbish place to live over the next couple of decades. But the people have spoken etc etc.
taxation has reached frankly ridiculous levels compared to abroad.
Actually... I think you'll find that's not /entirely/ true.
This list has (frmo a quick copy & paste & grep & wc ) 84 countries with higher basic rates than the UK. In the UK you don;'t pay a penny below £11k, above that it's 20%. In the land of free enterprise and entrepreneurship it's 35%.
That may be true but there is still the matter of the 11 % NI contribution that is payable on salary, by the employee. This affects most middle income workers, the very well paid can treat it as a smaller hit since it stops being applied at around 45k.
To most people it changes the basic rate to 31% for a goodly chunk of their income. Contractors basically save 'tax' by saving on NI contributions.
Which seems fair since they get no sick pay, including statutory; no Maternity leave, no Paternity leave and so on. Until the pension changes were made, they also did not pay into the 'system' and so got nothing in return from that system.
Contractors can earn a lot of money when all is going well, and this is why many do it. It is, however, not always an easy gig, involving travel, living away form home for long periods etc. Often the actual work is the scut work, with permie staff getting (quite correctly) the design and architect elements of the project etc.
I have also noticed that contract rates have not risen a great deal of late where permie salaries do have appeared to.
Everyone gets a choice though, if you think contracting is easy and well paid, become one, if you think permies get a cushy deal, become one - our industry is pretty flexible and opportunities allow most to choose which to be.
I for one think it is time to stop and live on less, the tax rate changes made to dividends not that long ago basically pushed me to early retirement.
Anyone who has kept up with the recent cases ie Various~V~Uber, Maggie Dewhurst~V~City-Sprint and Gary Smith~V~Pimlico Plumbers should have seen this coming and forget next year it is already here.
The Gary Smith~V~Pimlico Plumbers case makes good reading on this as if irc My Smith was operating as a Ltd company that also employed his wife.
12 months ago any case from contractors before an Employment Tribunal failed. Now it seems every case is being won.
It would seem to me that there has been a big shift in policy and I have to wonder if this is a handed down policy from Central Government. In my (completely Amateur laymens) opinion this may be due to a loss of Tax/NI revenue in the coffers with so many people now being self-employed.
re: Gary Smith vs Pimlico Plumbers
"In this case, the Tribunal found that the Claimant was not an employee, but because the company maintained some control over the way in which the Claimant worked, he was considered to have been a worker."
I have no idea what the difference between a 'worker' and an 'employee' actually is :/
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