Re: Missing the point
"You are completely missing the point."
I rather think everyone is, since this thread has (maybe inevitably) descended into a contractor vs employee pissing contest.
The point here is that, due to various unintended tax loopholes caused by wildly different taxation regimes, contractors are underpriced.
A contractor ought to be something of a last resort, used for very short-term outsourced work. You shouldn't be hiring in a contractor for 9-5 work for over a year. The benefits of contractors from the employer's point of view should be that you can just drop them in and let them hit the ground running, and then get rid of them the moment the job is done with no messy entanglements. This ought to come at a slight premium over permanent employees, so that for long-term work a permie is preferred.
Unfortunately, the way the tax code has shaken out, this is not how the market pricing works. Despite the healthy premium that contractors can enjoy in take-home pay, from the employers point of view it is often cheaper to take in contractors for long-term work they ought not to be doing. I've worked in IT deepartments where literally everyone aside from management was a contractor, from the helpdesk on up. Those kids weren't doing it for the tax benefits, and weren't setting up ltds to get paid through - they were just contractors so that the employer didn't have to offer them the benefits that they ought to have.
Contractors should do exactly what any other business does when an expense like this crops up. Pass it on to your clients. They've been employing you at some 20% or so less than they should have been, because tax loopholes allowed the contractor market to compete more aggressively than it should.
To be honest, I think that this should really be more up to the contractor, so that if he only works for one client, who he works for for over 35 hours a week, for a period of over a year, he can elect to make the business start paying the employer share of NI. I suspect that the number of contractors would drop by about 40% overnight if that were permitted, since a lot of them aren't the high-paid consultant types, but rather kids who can't get a permanent job due to dubious employer practices.