Tag Archive | "contracting"

Employers Not Prosecuted for Paying Below Minimum Wage


In the last 4 years there have been 700 firms “named and shamed” for not paying workers at least minimum wage, but no prosecutions have followed.

This all comes at a time when many people in the government are constantly attacking the so called gig economy and contracting industry, claiming that employers are taking advantage of these workers, but it just goes to show that they won’t even take action once they have all the facts.

It’s all about getting the headlines for most of these MPs, but when it comes time to do their job they don’t have a clue, and then they wonder why so many people are turning towards working gigs or contracting? Well, it’s because they are not getting paid minimum wage in a normal job, something it seems no-one is prepared to do anything about.

Funnily enough, it was recently announced that the government are going to be launching a new watchdog agency that has the goal on finding employers who don’t pay workers minimum wage and look to cheat the system.

You already have 700 names though, and nothing has been done…what is the point of collecting another list of names, so you can then pointlessly file them away in a folder somewhere..just what is the point? Go after the companies you already know about before you start spending more money on looking for others.

At the end of the day, minimum wage is a law as far as I’m aware, and like any law it should be enforced.

If the Police stop a driver and he doesn’t have any insurance then he is breaking the law and should be fined, they don’t just write their name down on a piece of paper and then say on your way. Action is taken. Some people even go to prison for no car insurance, but that is a story for another blog.

Put simply, any employer that is caught paying below minimum wage should be at least fined, and repeat offenders must even face prison time or having their companies closed down.

It really is the only way to stop this kind of thing happening, because if all you do is name them and then do nothing, they will just keep doing it.

The message to people in the government is clear. Start focusing on those companies that break the law by not paying minimum wage and then take action. Less talk and more doing is what we want to be hearing about, not another list of names that grabs a few headlines and makes someone look good.

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Up, up and away: contracting jobs go through the roof


When you set yourself up as a specialist contractor accountant, it pays to keep tabs on the market. Of course there are all the changes in tax law to consider. But we’re talking here of another beast: the jobs market for contractors.

It’s not as cut and dried as you’d expect. On the one hand, we see the government taking huge steps towards cleansing umbrella and intermediary practises.

How far they’ll go with offshore trusts remains to be seen. Many politicians owe their own fortunes to such mechanisms, so they’re not going to shoot themselves in the foot.

On the other, we keep a track on the UK self-employed and agency jobs market. And it’s this area that helps define demand for our services.

It’s not always good news. There are times when the outlook is downright bleak. When Scotland went to the polls for their independence referendum, for instance, the outcome was uncertain for a long time.

Even more unclear was the how a devolved Scotland would treat English contractors heading up north to earn their crust in the lucrative oil and gas industry.

But there are good times, too, when we see the wind change and start blowing in our direction. After reading this week’s headlines, I can feel the breeze chafing my cheeks already. Let’s explain.

What happens in the managed service or umbrella market is beyond our catch net, if you like. Those practises deal with accounts in-house and use many different mechanisms to save tax for contractors.

But how they’re performing – and what’s guiding their hands – that can be a barometer for our sector.

And talking of ‘our sector’, these two polls from official bodies representing staffing agencies this week are of particular interest:

Demand for interim managers increases | IMA

First off, IMA‘s new Ipsos MORI poll has only good news from the interim management sector.

Demand for temporary specialist staff is increasing. The private sector is also rediscovering its confidence in and appetite for hiring on an ad hoc basis.

Here’s a snapshot of those highlights (based on Q4 2014 figures):

  • average number of enquiries: up 23% (year on year);
  • new assignments: up 5% (year on year);
  • billable days: up 12% (Q3-to-Q4 2014);
  • finance industry accounts for almost 4-in-10 private sector assignments (39%);
  • private sector (in total) accountable for two thirds of all completed assignments compared to just 51% in Q3, 2014.

The full article has a more in-depth overview.

Professional hiring up 16% | APSCo

Then, APSCo report on the increment of both permanent and contract vacancies on its members’ books. Citing ONS employment figures, up by more than 200k in the rolling quarter to March, as an indicative value, APSCo confirms the IMA data.

June 2015 Week 1 - Tag Cloud, what's making the temp staffing news

It’s all good news!

Agencies supplying professional staff have 16% more permanent vacancies across the board than they did a year ago. Contracting vacancies have risen by 3% over the same period. Even better news is that salary has also increased, up by 2.9% year-on-year.

Once again, the finance and accounting sector is quoted as being “particularly strong”. Permanent vacancies here are up 11% alone. For temporary jobs, media and marketing were the outstanding performers. They’re up 9% compared to last year’s figures.

Temporary workforce to contribute £2bn to GDP in 2015(?)

Ann Swain, APSCo CEO, adds her insight to the rise in staffing vacancy figures article on their website.

Her predictions for the ‘professional flexible workforce’ are bold and interesting. She believes that the sector will contribute more than £2bn to GDP for the first time this year.

If we’re feeling the breeze here, the winds of change are blowing a gale across the contracting community. It looks like us, as their accountants, are going to be busy.

If you want to be a part of this force majeure, it’s time to get serious about working for yourself. The change in the way we work is approaching a new dawn; this is one sunrise you don’t want to miss!

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HMRC launches crackdown on cricket clubs


Well, it’s finally happened – with reports of HMRC targeting cricket clubs, the government is officially leaving no stone unturned in its quest for revenue.

The taxman is reportedly going after cricket clubs left and right, if reports rolling in from Hampshire Cricket Board can be believed. In fact, the Board’s Southern Electric Premier League has three of its clubs currently under investigation for possible tax avoidance. Critics of the move have dubbed HMRC’s move as trying to institute some sort of ‘cricket club tax’ as a pretense for wringing just a few more pennies from people and organisations who have already paid their fair share.

Tax inspectors have visited Burridge, Bournemouth and Alton, and St Cross Symondians and have begun poring over their accounting practices, looking for evidence of untaxed earnings to anyone affiliated with the club. This includes coaches, bar workers, or anyone who might have done a bit of contracting for a cricket club once or twice over the past year or so; so far there have been more than a few tax bills issued, some as high as £15,000 or more – leading to concerns that these massive, unexpected costs could place the future of more than a few clubs in serious jeopardy.

Of course there’s plenty of people, like me, pointing out the obvious: why in the world is HMRC going after small-time sports clubs like this? Last time I checked, a £15,000 tax bill is nothing in comparison to the hundreds of millions – or even billions – that multinationals such as Google and Amazon owe the UK government.

The official line from HMRC is that the taxman works very hard to make sure that any employer in the UK is paying the proper amount of tax, and inspectors are fully qualified to investigate a given company’s payroll system to ensure that this is exactly what’s happening. However, if this is so why has Starbucks been conveniently avoiding paying billions in taxes for years?

The truth is – at least how I see it – is that tax loopholes prevent HMRC going after the big fish, so instead they go send their tax collectors out in droves to recover that lost revenue piecemeal from anywhere and everywhere they can, and this includes organisations such as local cricket clubs. Meanwhile if the government wasn’t so damned afraid of these firms pulling up tent stakes and moving out of the country if those tax loopholes were closed, maybe we wouldn’t have this problem any more!

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Working somewhere new as a contractor


As a contractor it’s likely you’ll be moving about to different places of work much more often than your average worker. It’s all part of the job in the end, but it can have a big impact on your relationships. With all that moving around, it can be hard to truly get settled in and feel like part of the team. Work environments can be a minefield of unspoken rules and conventions that are easily broken by a newcomer. Here’s a couple of tips to help you get to grips with your new desk.

Learn the Rules and Stick To Them

It’s not unlikely that at times you’ll be faced with some rules that seem arbitrary, stupid and occasionally just utterly insane. You’ll look at them and think them the work of a madman. You’ll think that no one could possibly follow them day in, day out.

Well, as idiotic as the rules maybe, chances are there is a reason for them. People who work together very rarely share the same opinions and thoughts on how things should be done. This can lead to something as simple as the office mugs escalating into month long arguments with the only solution being some convoluted rule that manages to cover all bases and keep everyone happy. Flaunting this rule could upset the delicate ecosystem you’ve entered into and plunge the entire office into civil war.

Build a Good Relationship With Your Co-Workers

You should make an effort to get to know the people you’re working with, even if you’re only there for a couple of weeks or not working as part of a team. It’s not hard to do either, really. Striking up a bit of conversation in the kitchen is a piece of cake, while being willing to join the others for a drink after work is even better. As long as you’re following the rules and being friendly, you’ll start to fit in quickly.

Building up some good relationships with the other people you work with is a great idea. First of all, it will help your time there go smoother. It goes without saying that people will be more willing to help you if they like you or see you as part of the team, plus it’s just nice to be on good terms with the people you work with. It’s also a great way to gain a few new contacts. You never know if the administrator is about to create his first startup and will need your help a month down the line. Keep in mind that each new job has the potential to give you more work later on.

Joshua Danton Boyd is a writer for online accountancy firm Crunch.

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Will GAAR simplify UK tax or just make things worse?


Tax avoidance is a serious problem in the UK, especially when it comes to multinationals, but is the new General Anti-Abuse Rule going be a help or a hindrance?

Much of the problem is that the tax system here at home is a right mess, and it’s something that George Osborne referenced several times in his Budget this past week. Things need to be simplified, and the Government seems to think that introducing GAAR will be a proper move towards those goals, but industry experts are most certainly torn on whether or not GAAR is going to simplify things or if they’re just going to put the kind of red tape in place that will confound contractors and small businesses while not actually making a difference when it comes to the true perpetrators of tax avoidance in the UK: multinationals that shunt their pre-tax profits overseas such as Starbucks, Google, and Amazon.

Everyone needs to pay their fair share to the taxman – there’s certainly no one arguing against that. GAAR is, in spirit, supposed to soothe Brits finding it hard to make ends meet by reassuring hem that HMRC is doing it level best to collect the taxes owed by anyone engaging in tax avoidance, thus providing more revenue for the Government to provide aid in the form of schemes and programmes to help fund the economic recovery, but just how effective is GAAR going to be towards these goals in the end?

Bad news is that no one truly knows how easy – or hard – it’s going to be to deal with GAAR at the moment, as this is certainly new ground being broken. If these new rules turn out to be not restrictive enough, it’s not going to make a lick of difference in catching anyone particularly adept at navigating tax loopholes – and let’s face it, most contractors and SME business owners don’t have the type of accounting expertise at their disposal to do a good job of that, unlike multinationals who can afford to throw shedloads of time and money at their accountancy departments in order to get results. Meanwhile, if GAAR is too tough, there are some real fears that these same multinationals will exit from the UK posthaste in search of greener pastures, which could strike a serious blow to the nation’s economic recovery efforts; even though these firms aren’t paying their fair share of taxes, they’re employing countless numbers of Brits in their UK headquarters, and if these firms pick up their tent stakes and relocate, the number of job losses could be catastrophic.

I suppose in the end we just have to cross our fingers and hope for the best, which is frustrating in the extreme for anyone trying desperately to meet ends in the current economy. Let’s hope the Government treads that fine line between ineffective and stifling for once, shall we?

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How to successfully complete an IT contract – then rinse and repeat.


I’m coming rapidly to the end of my current engagement and have been reflecting on what I’ve been doing. Not out of any great sense of sadness or nostalgia but because I have to hand over to the permanent guys that I’ve been covering for while they were off doing more interesting stuff. Which means doing the Great Chinese Examination and writing down everything you know for them to pick up and carry on doing.

Then, while pondering how best to describe one less than dynamic project without embarrassing the Project Manager too badly, it occurred to me that my job is actually pretty varied in one way and very consistent in the other.

Don’t believe all that rubbish about monster pay packets, most contractors actually do it for the chance to work in different places with different people learning different things.

Although, to be fair, the monster pay packets might also have a certain appeal…

Anyway, my usual contract is to parachute into an existing team where I’m either filling the seat of someone off doing something else for a while, or adding some resource because the guys haven’t got enough hours in the day. It’s a case of turn up, get introduced, sometimes in detail, sometime very sketchily (although with my appalling memory for names and faces, it matters not a lot which!), work out the key players, the quick way to get to work and the coffee supply and get on with it. With a bit of luck I’ll also be asked to make things work better or even work completely differently, which is the bit I quite enjoy. But the real challenge is that steep learning curve where you have to fit into the team like you’ve been there for years. Then the real guy comes back and you’re out of a job again. Rinse and repeat.

So as I say, interesting work in a boring sequence. And I wouldn’t have it any other way, to be honest.

But there’s another thing I keep seeing, everywhere I go. Basically I work in and around Service Management, which is the bit that turns the technical wizardry of the data centre into the mundane consistency of the user’s desktop environment. All that stuff that ITIL used to be about before V3 came along and made it incomprehensible and expensive in equal measure. But ITIL has been around for a long time now, and certainly predates the working lives of a lot of the people I work with. So why does nobody know how to use it properly?

Everywhere I go, they have a Service Desk. The usually have a Change Manager. They may have got really enthusiastic and have a CMDB that works. Usually they’re just an asset register with aspirations; the test is to see if it can tell you who will shout if you turn something off. Which is all well and good, if you like your cappuccinos without milk.

Where is the Service Catalogue? I’ve yet to work somewhere that has even a pale shadow of the ITIL ideal. It’s not like it’s all that complex either, the broad brush approach will work perfectly well – email , internet, Office, Security, User Management, assorted approved applications, that kind of thing. Not the tin and wires, that’s for the propeller heads in the back office. The Service Catalogue is the glue that holds it all together, the steamed milk that makes your breakfast coffee sing and stops the cinnamon sinking. Without the Service Catalogue, how do you know what you’re providing, what your Change Manager is changing and what your Service Desk is servicing?

Perhaps I should get out more, but one day in my serial existence I’ll come across a site that uses the basic ITIL structure properly. And that would be really very interesting.

About the author: Alan Watts

Alan has worked in IT for most of the last 35 years, and first went freelance in 1996. He has been a PCG member from its start and has been spreading the message that freelancing is a professional career choice for many years. Alan also runs Malvolio’s Blog, a personal but highly informative take on the life of the modern freelance.

Alan Watts, Principal Consultant, LPW Computer Services

© 2012 All rights reserved. Reproduction in whole or in part without permission is prohibited.

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If you think a professional accountant is expensive, wait till you hire an amateur!


For some reason I’ve seen a whole raft of questions and complaints about that most retiring of professionals, our friend the humble accountant. What is more, the questions and complaints being raised tend to demonstrate why they need an accountant in the first place.

There are two basic themes, best summarised as “How much?!” and “My accountant won’t let me…”.

The “How much” brigade really amuse me. They usually ask for recommendations for a good accountant who only charges £50 a month. Well look, I used one of them when I started out in contracting, on the recommendation of someone who knows about these things and I was young (ok, youngish) and naïve. After a couple of years, when I’d learned what I was doing, I worked out he’d cost me a few thousand in unnecessary taxes, late filing penalties and generally weak advice. Rather more than I‘d paid him for his services, in fact. So I switched to one of the contractor specialist accountants who recovered that money over the next year or two by giving rather more appropriate advice and stayed with them ever since.

I’ve always said that a good accountant is free anyway. Let’s face it; I do two kinds of stuff. Some stuff is for clients and I get paid for doing it, at an hourly rate well above what my accountant charges. The other is stuff I want to do – well, OK, more usually stuff that She Who Must Be Obeyed wants me to do – and I don’t get paid for it (usually quite the opposite, in fact!). And doing accountancy beyond the bare minimum of logging what money went where does not fit into that category. So as far as I’m concerned the accountant is doing stuff I don’t want to do that has to be done, more accurately and far more cheaply than I could do it. So something of a no-brainer.

On the other hand, the members of the “Won’t let me” brigade are seriously deranged. In the last couple of days I’ve seen someone trying to claim spending £5500 on a single PC (including £2400 on two monitors) as a business expense, someone asking about charging his MBA course as a necessary business cost and someone asking about making his three year old a shareholder to save tax, then having a go at their accountant for asking questions. There are others – just wait a day or two and another one will be along…

OK, the first guy might have a point (he’s certainly got one hell of a home entertainment system …) but the other two not only don’t know the relevant laws, they’re actually complaining that their qualified, expert, paid advisor is telling them why it won’t work. Totally barking.

And just going back to costs again, I was challenged today on why I need to spend any more than £50 a month for a simple business model and can’t I see I’m being ripped off when his high street guy does all he needs doing. Fine, I replied, just ask him about a few contractor-related basics, such as what is the definition of a PSC, what’s IR35 and how it is assessed, what is the tax treatment of training to expand your skill set, how to correctly answer the questions on the P35 and why, and why he isn’t an MSC. He may well know all the answers, in which case well done him, but I know more than a few ACCAs who don’t.

As Red Adair said, “If you think a professional is expensive, wait till you hire an amateur”.

About the author: Alan Watts

Alan has worked in IT for most of the last 35 years, and first went freelance in 1996. He has been a PCG member from its start and has been spreading the message that freelancing is a professional career choice for many years. Alan also runs Malvolio’s Blog, a personal but highly informative take on the life of the modern freelance.

Alan Watts, Principal Consultant, LPW Computer Services

© 2011 All rights reserved. Reproduction in whole or in part without permission is prohibited.

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Modern Britain in a nutshell


I’ve been having a funny old week at work. For once I’ve got up to date on my deliverables and am waiting on assorted worthies to review and respond to the results. Meanwhile the technical team next door are working all hours God sent to keep up, while my in tray is almost empty. Well, it makes for a quiet, if rather boring life.

So I find myself taking a look around the world of contracting to fill in the time. And it seems there are some odd things going on out there in Reality.

My old mucker St Vince of Cable is at it again. So busy earning money he failed to notice he was over the VAT threshold. Luckily his accountants did notice – months late, but hey – and he sorted it out, paid the tax and the (very) small fine, job done. Silly mistake by someone with his vast experience of real business (two whole years as an Economics Advisor, wasn’t it?) and no real harm done. But on that subject, could I ignore a hard and fast taxation rule, forget to declare some taxable income for a few months, then discover my mistake and pay it back with a tiny penalty and a smack on the wrist? Don’t think so, somehow.

HMRC are apparently cheering about improving their take from IR35. Say what? It seems they are getting more money back from the pitifully few cases they manage to pursue to completion. What is more, this has been seized on by some who should know better as an example of the deterrent effect of IR35. Their argument is that people are paying taxes via umbrella companies rather than risk an IR35 investigation. So that’s OK then. After all, what could possibly be wrong about scaring people into paying taxes they don’t actually owe by threatening them with a piece of legislation so badly drafted it needs a three year investigation and court case to determine if it actually applies to this single set of circumstances?

AWR is continuing to cause hilarity among those who understand it. Not only are some agencies sending out letters asking contractors to declare themselves outside its scope – something you can’t actually do in any meaningful sense, of course – but they are persuading assorted Human Remains teams that using agencies protects them from the AWR. Say what (again)? Take someone on directly with no intermediate agency and the AWR is dead and buried. Using an agency increases the risk, not reduces it. Doublethink at its best, and a good illustration of why contractors don’t want anything to do with HR if they can possibly avoid them. Or agencies, come to that.

And finally, credit rating agencies. Not the big ones who are randomly downgrading assorted banks and even whole countries, although they’re bad enough, but the ones being used to credit check job applicants in line with FSA regulations and failing them, often on some pretty flimsy histories. Which means no job offer. Fair enough?

Well no, really. For one thing the FSA rule being quoted applies to people in a limited number of roles within financial services; directors and those who advise customers on fiscal matters, for example. It’s not actually meant to apply to the third DBA from the left in the support team. But hey, it’s an income stream for someone, so who cares that it’s both utterly irrelevant and genuinely damaging; I know someone who regularly has to turn down good people because of this nonsense.

Modern Britain in a nutshell. Never mind the outcomes, follow the rules no matter how idiotic and irrelevant those rules are. Truly we are a nation of jobsworths; after all, there’s no money in being a shopkeeper any more.

About the author: Alan Watts

Alan has worked in IT for most of the last 35 years, and first went freelance in 1996. He has been a PCG member from its start and has been spreading the message that freelancing is a professional career choice for many years. Alan also runs Malvolio’s Blog, a personal but highly informative take on the life of the modern freelance.

Alan Watts, Principal Consultant, LPW Computer Services

© 2011 All rights reserved. Reproduction in whole or in part without permission is prohibited.

Image: Ethan Nichtern Banner Illustration by bainesmcg

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AWR – everyone ready for the end of the world?


It’s happening on Saturday and no, I don’t mean Scotland beating England by eight points. Although that would be fun for us Welsh…

No, Saturday is the day the eagerly anticipated Agency Workers Regulations come into force. And for such a significant event – and not just significant in our little world of contracting but in its potential impact on the UK economy and businesses – it all seems remarkably low key. And I find that both surprising and just a shade encouraging.

Of course it could be because everyone understands the new world and have prepared accordingly. Well not us Limited Company contractors of course, since we are out of scope so don’t have to do anything. This didn’t stop one poor soul asking questions about how he could persuade his agency that he was actually in scope. God knows why he thought that might be a good idea. Of course, he may simply be winding us all up – very occasionally that seems to happen on the internet, you know – and for his sake I hope that’s the case.

And, needless to say, there have been questions about does it really, really apply because of the ominous “genuinely in business” caveat the BIS or DBERR or whoever they are decided to add in for the fun of it. To which the answer is who knows, until it goes to court. Which I suspect it won’t, but you never know.

That reminds me of one of the better ideas I heard over the weekend. A group of us were pondering the work of the OTS (remember them? They’re still going you know) and how they could better focus their efforts. OK, so perhaps some of us should get out more, or perhaps drink less, but we found it worthy of discussion. The suggestion was made that the OTS could very usefully start with the various tax laws that have required a court case or two in order to figure out just what the hell the real rules are. Still, I digress…

So clearly the umbrellas and the agencies are well prepared, to the extent that I’ve heard of one agency that was trying to get its contractors to move to the right vehicle – PAYE through an agency, umbrella or limited Company – depending on their rates. Which is slightly deranged in one way but you can see the logic of it. So well done all.

But it does beg an interesting question. Why?

I mean, why is everyone so well prepared? Previous changes of similar magnitude – stopping MSCs, killing off some of the more imaginative offshore schemes, the Arctic Systems case, even IR35 itself – sort of burst upon a world that wasn’t really ready for them. That doesn’t seem to happen any more.

And that’s down to the wonderful Law of Unintended Consequences. In 1999, when the well-known failed tax-evader Ms Primarola introduced IR35, the aim was to punish us uppity freelancers by smacking us in the pocket. After all, given the recently released Freedom of Information answer that showed how pitifully ineffective IR35 has been financially, it clearly wasn’t done for the money. Or very well, come to that. But what it did do was galvanise a bunch of us uppity freelancers to fight back. And now, ten years on, HMG is not only listening to what we say, they are asking us what we think before they do it. Doesn’t mean they have the brains to listen, mind – else why do we have the AWR in its current foggy form – but at least we get the chance to publicise and explain things well ahead of their implementation. Which has to be a good thing.

So hopefully the AWR will do what it’s meant to do and protect the vulnerable and leave those who don’t need that level of care well alone. And we won’t get any more nasty surprises.

About the author: Alan Watts

Alan has worked in IT for most of the last 35 years, and first went freelance in 1996. He has been a PCG member from its start and has been spreading the message that freelancing is a professional career choice for many years. Alan also runs Malvolio’s Blog, a personal but highly informative take on the life of the modern freelance.

Alan Watts, Principal Consultant, LPW Computer Services

© 2011 All rights reserved. Reproduction in whole or in part without permission is prohibited.

Image: Family Circus Redemption Project #31 by cutup

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How to bid for freelance work in a fog of ignorance


Have you ever thought that contracting is about the only job where you have no idea how much you should be charging? You go for a job, you talk to the agency advertising it (assuming you can find them at their desk…) and you have a two minute chat about the work required. With a bit of luck (and some smart questions) you will know where the job is based, roughly what’s to be done and what the agency believes the key issues are (there’s always issues in my experience!).

What you don’t yet know, usually, is who the client is and quite probably not even what their line of work is. That’s because if the agent decides you’re a waste of his time, he doesn’t want you calling the client and offering your services directly, so he’s only protecting his own business.

But on the basis of this rather minimal information you will be asked how much you would charge. And that’s where it gets difficult.

Personally I have a clear idea in my head about what I would like to charge. The answer, oddly enough, is not “as much as I can” although that is certainly one of the parameters. I know what I need to live and I know my routine overheads, so I can work out how much I need to earn a year to pay the mortgage and keep the dog in biscuits. Working on the assumption I’ll probably work seven months a year (OK, that’s a bit low, but I’m getting lazy in my old age) I can set a base day rate.

To that you add the cost of getting to the job. Daily commutes are either so many miles at 40 pence per mile or the rail fares. Staying away I usually cost at £100 a day (slightly more in the Smoke, but that’s usually commutable). Either way I add that amount to the day rate; while I do an all inclusive deal for my labour, I also aim to recover all my costs.

Finally I add a fiddle factor, based on the seniority of the role (it costs more if I’m managing people, for instance) and something I call the risk factor, which reflects how hard the job is going to be and how much damage I could do if I get it wrong. Then add 15%: after all, I aim to make a profit at the end of the day.

So then I have a base price. Sadly, so does the agent, driven by what the client tells him the budget is and his own margins. If we’re really lucky the two will coincide. If we’re even luckier, the agent will be willing to beat the client up to what I want, since he gets more money that way as well. These days, though, that’s increasingly unlikely.

One problem is that the clients have a very clear idea of what they want to pay, Unless you are a serious specialist, there is very little chance you can name your own price any more. Most clients have a rate card of their own which they use to cost their own internal budgets: it’s a brave manager who will deliberately put in an overspend on his own budget. Then there are the companies who have no idea, who set the budget by dividing the permie’s salary by 260, who set the rate stupidly high – councils are good at that one – or even do a kind of Dutch auction, asking for three CVs and saying they’ll take the cheapest (oddly enough they are also the ones wondering why their delivery record on projects is so poor…).

Of course it would be good if we could delay the rate discussion until the interview stage, but that would expose the agent’s margin which would never be allowed. Or we could go in with a per diem and a percentage share of any resultant savings or client income growth depending on the role. (Someone I trained did exactly that: offered to do a job for 10% of the first year’s savings then proceeded to save his client £2.4 million…)

But at the end of the day you are having to bid for work in a fog of ignorance. This probably explains why my rate now is usually within 10% of what I was on 15 years ago when I started out.

About the author: Alan Watts

Alan has worked in IT for most of the last 35 years, and first went freelance in 1996. He has been a PCG member from its start and has been spreading the message that freelancing is a professional career choice for many years. Alan also runs Malvolio’s Blog, a personal but highly informative take on the life of the modern freelance.

Alan Watts, Principal Consultant, LPW Computer Services

© 2011 All rights reserved. Reproduction in whole or in part without permission is prohibited<

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When is a tax-efficient arrangement too good to be true?


Contractors, whether new to contracting or experienced hands, will often be approached by salesmen for tax-efficient pay structures.

You will hear claims such as ;

• We can guarantee you 90% take-home pay
HMRC compliant
• Guaranteed legal
• Approved by leading Tax Counsel

Great – where do I sign?” might be your first thought. However, you might want to reflect and find out a few things before committing yourself.

How long has the company been around?

Claims are often made that ‘we have been providing contractor solutions for 6 or 7 or 8 years’. Check with Companies House and you may find that the company is relatively newly formed. This could mean that :

a) The company will have little or no track record with HMRC.
b) The company may have no asset base so nothing to fall back on should there be difficult times such as an HMRC investigation.

How can you guarantee take-home pay percentages?

The real answer is that you can’t. It is very dependent on personal issues such as your tax code, previous income and other income. Also, measuring take-home pay is one thing but there is often hidden higher rate tax to be paid via your Self Assessment Tax Return after the end of the tax year. You will also find that a large proportion of the sum that you don’t take home is taken in advisers fees with very little actually paid in tax.

HMRC compliant – surely that’s a good thing?

This may not be as impressive as it sounds. Compliant may mean as little as the fact that the company has registered a PAYE Scheme with HMRC, which is something that it must do to employ people in the UK. They have therefore complied with the basic rules of employing people. Not quite the same as the impression they are trying to portray – that HMRC have looked at, and are happy with the overall way that the company operates.

Guaranteed legal – can’t go wrong with that can you?

Businesses don’t normally state this – only if you are sailing so close to the wind do you think it’s necessary to state it. It may also just appear to be legal – until HMRC proves otherwise, that is.

Approved by leading tax counsel – surely you can trust the opinion of a QC?

Yes, of course you can. But was the QC given a full disclosure of all facts and what was the actual opinion? It is rarely as simple as ‘Yes, that works.’ And also very unlikely that it would be something that you could rely on in Court if you needed to.

So what do I do?

Be cautious and take professional advice from someone you can trust, like your accountant. Only proceed if you are absolutely sure about the scheme. If you get it wrong it’s you that pays the tax, and the interest, and the penalties.

John Mumford is the Accounting Director of Carrington Accountancy
© 2010 All rights reserved. Reproduction in whole or in part without permission is prohibited

Image: Seems too good to be true by mattymatt

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Contractors given temporary relief from the Agency Workers Directive


With the delay of the Agency Workers Directive (AWD) until October 2011, there is at last some relief for contractors. Make no mistake, AWD as drafted would have a big impact on contractors given that agencies and end-clients would be forced into processes that would at best delay placements and at worse, remove some of the roles available.
But it’s only a temporary relief, October 2011 is fixed in stone but at least there is time to plan properly and get all our heads around it. The really ironic thing for umbrella contractors is that much of what AWD tries to do (equal rights with permanent employees) is already provided by businesses like Parasol. On the other hand some contractors don’t want the same rights as the “permie” but because Europe and UK Government can’t differentiate between true vulnerable workers and contractors then everyone is caught. I would still urge everyone to lobby the government to push the point around understanding the labour market in the 21st century as without continued focus everyone will be classed as “vulnerable”. Make no mistake, I am no advocate of exploiting workers and some of the previous practices are rightly condemned but we seem to be blindly lumping everyone together because Europe don’t “get” contracting and the UK Government are scared to define anything. I understand the last point to some degree, they will be concerned that sharp operators will find a loop-hole and that’s another reason why umbrellas (who mainly employ professional contractors) are caught specifically.  It did not make a world of difference to Parasol contractors as we have a very robust employment model and a true accountancy practice but of course, by association we get pulled in.
So business as usual for us all in a time when that does make sense for a change. Contractors can get the roles that are coming up, agencies can plan and end clients won’t be hassled for pay rates and conditions, well not yet anyway.
I have a long held belief that UK plc is stuck between two camps and never gets clarity as a result. As a member of the EU we are held to some of the social chapter practices that don’t work for our markets. We also try to be entrepreneurial yet quite often go too far with that too (banking anyone?). AWD is a good manifestation of that problem, socially driven with the desire to protect workers not getting rights (a good thing) versus some complicated carve outs to try and allow the UK to function (excluded if you work for less than 3 months on one client) for our more flexible approach to business.  So we are stuck between the two and guess who ends up paying?
A braver person may have produced a definition of worker and a framework to prevent abuse (that’s what we lobbied for).  That’s an opportunity missed in my opinion and AWD will loom in the background as a distraction we could all do without.

With the delay of the Agency Workers Directive (AWD) until October 2011, there is at last some relief for contractors. Make no mistake, AWD as drafted would have a big impact on contractors given that agencies and end-clients would be forced into processes that would at best delay placements and at worse, remove some of the roles available.

But it’s only a temporary relief, October 2011 is fixed in stone but at least there is time to plan properly and get all our heads around it. The really ironic thing for umbrella contractors is that much of what AWD tries to do (equal rights with permanent employees) is already provided by businesses like Parasol. On the other hand some contractors don’t want the same rights as the “permie” but because Europe and UK Government can’t differentiate between true vulnerable workers and contractors then everyone is caught.

I would still urge everyone to lobby the government to push the point around understanding the labour market in the 21st century as without continued focus everyone will be classed as “vulnerable”. Make no mistake, I am no advocate of exploiting workers and some of the previous practices are rightly condemned but we seem to be blindly lumping everyone together because Europe don’t “get” contracting and the UK Government are scared to define anything.

I understand the last point to some degree, they will be concerned that sharp operators will find a loop-hole and that’s another reason why umbrellas (who mainly employ professional contractors) are caught specifically.  It did not make a world of difference to Parasol contractors as we have a very robust employment model and a true accountancy practice but of course, by association we get pulled in.

So business as usual for us all in a time when that does make sense for a change. Contractors can get the roles that are coming up, agencies can plan and end clients won’t be hassled for pay rates and conditions, well not yet anyway.

I have a long held belief that UK plc is stuck between two camps and never gets clarity as a result. As a member of the EU we are held to some of the social chapter practices that don’t work for our markets. We also try to be entrepreneurial yet quite often go too far with that too (banking anyone?). AWD is a good manifestation of that problem, socially driven with the desire to protect workers not getting rights (a good thing) versus some complicated carve outs to try and allow the UK to function (excluded if you work for less than 3 months on one client) for our more flexible approach to business.  So we are stuck between the two and guess who ends up paying?

A braver person may have produced a definition of worker and a framework to prevent abuse (that’s what we lobbied for).  That’s an opportunity missed in my opinion and AWD will loom in the background as a distraction we could all do without.

Rob Crossland is the Managing Director of Parasol
© 2009 All rights reserved. Reproduction in whole or in part without permission is prohibited

Image: FuBe vorm Pool (27c) by Jorg Weingrill

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What all contractors should know about the agency workers directive


Many contractors have already heard about the proposed Agency Workers Directive (AWD), but not everyone truly understands how it will affect the contracting and recruitment markets in the UK.

Whlst attempting to establish the EU economy as the best in the world, the AWD’s objective is to create the most appropriate framework of employing temporary workers in the EU and to ensure that these individuals are not discriminated against.

Of all the countries in the EU, only the UK has such a well established recruitment marketplace, which is why approximately 1/3 of all EU agency workers are based here. In Italy, employment agencies were considered illegal until only very recently.

With consultations on-going until 18th October 2009, the Government is now studying the possible impact of the AWD on temporary agency work in the UK. The EU is expected to adopt the proposed directive by September next year, to be implemented into UK Law in two years time.

Impact on UK Contractors

So what does all this mean for UK freelance contractors? Well, there are several proposals currently in consideration, most of which have been included to provide temporary workers with the same (or at least similar) rights and conditions to permanent workers. Recruiters are being asked to scrap Temp-to-perm transfer fees and end clients will need to inform agency workers of available permanent positions.

According to the proposals, member states may refuse the equal treatment of temporary workers but only in the following circumstances:

* temps are paid between assignments (this is rare in UK);
* they are covered by collective agreements (this is also very rare);
* the assignment is for less than 6 weeks (the Government is pushing for a 12-month limit whilst some MEPs believe that there should be no limit at all)

The DTI predicts total costs of between £80 and £194 million to recruitment agencies and the cost for clients between £239 and £387 million. Costs to payroll and umbrella companies have not been estimated. According to some, the DTI’s Regulatory Impact Assessment lacks any objective data on temporary work in the UK and the EU – its quoted figures are therefore questionable.

Since the AWD requires equal pay and benefits for temps, it is believed that temporary work on the whole in the UK could decrease considerably. The UK government contests that the AWD must not include workers pay since Article 137 of the EC Treaty clearly states that, ‘the provisions of this article shall not apply to pay’. The inclusion of pay would mean that the payroll company (umbrella) or recruitment agency must obtain detailed information on a client’s pay standards in order to ensure that temps are not paid less.

Conclusion

The proposed AWD, once adopted, could greatly impact the freelance recruitment industry in the UK and contractors should prepare for the possible consequences. We recommend that you write to your MP and MEP to explain and give examples of how much this proposed directive could cost you.

© 2009 All rights reserved. Reproduction in whole or in part without permission is prohibited.

Image: Danger extreme by Dano

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