Contracting for my (soon-to-be ex-) permanent employer

[arty]

Hi,

I'm being made redundant from my current permanent role. My employer made me an offer that I could (and did) refuse in that they made my management role redundant, but offered me the chance to apply for a more junior role as a project manager – on less money naturally. They were prepared to sweeten this pill by giving me a bonus (i.e. the redundancy money + agents fee for recruiting the junior role) provided I stuck around for another 12 months, but I felt it was time for a change anyway. The redundancy money gives me a cushion while I look for something else.

It transpires that they really thought I’d accept their offer, and now there is a strong possibility that they cannot find a suitable replacement and will offer me a contract PM position for a short while they do. It’s a small company, so they can be flexible about their own rules (employment law aside).

Now here are the questions. What are my chances of staying outside of IR35 for this contract with my previous employer? I’m guessing somewhere between Bob Hope and No Hope, but am I being too pessimistic? It is a different role, and the contract is likely to be on the basis of delivering a particular project (with possible extensions for additional projects depending on how long the recruitment takes).

Where can I find a good template IR35 friendly contract to use as a starting point? There will be no agency involved . This is good I guess(!), but is there a downside to not having one on a first contract? I’m not worried about actually getting paid as I know the company well.

This will be my first time as a contractor, but I’m serious about doing this as a long term career change, not just to take a few quick bucks while I look for a permanent position.

Thanks.

[Hex]

It'll look fairly bad from an IR35 perspective, regardless of how good the contract and the working conditions.

The PCG (www.pcg.org.uk) has draft contracts. You will have to become a member to use them.

[malvolio]

You're looking to do precisely what IR35 is meant to stop happening. Get professioanl advice from someone like Accountax. B&C or Qdos if you like, but I think you'll find that you are firmly inside IR35-land.

Also ask yourself how you can be made redundant (and presumably paid off as such) if you can go back and do much the same thing. Doesn't exactly shout "Redundancy", does it? How do you feel about having to repay the 40% taxes on your redundancy payment, for example?

You're being stitched up here - be very careful.

[TheFaQQer]

Rather than going back as a contractor, I'd sue for unfair dismissal - there is a role for you to do at a higher rate, so why are they making you redundant?

Talk to a solicitor, but if you go contracting and work for them, then I'd be astounded if you don't end up inside IR35 and paying tax on your redundancy pay off.

[arty]

I think you've convinced me the contact will be caught by IR35. Not ideal but I'll just have to acccept it. Presumably that doesn't have any on-going implications, e.g. that I'm more likely to be deemed inside IR35 on other contracts in future?

As for being stiched up, I don't see it that way. Due to internal restructuring I could see the writing on the wall a long time ago that there would come a time when there would be management redundancies. The fact that there is a PM vacancy (which I have the skills to fill) doesn't change that fact. They tried to keep me inside the company due to the experience I have, but I have chosen a diffent path. No malice on either side - I just rode it long enough to get the redundancy money.

[arty]

... but paying 40% on my redundancy in tax is a concern.

I seem to have 3 options:

a) fight for a job I don't particularly want (for mainly geographical reasons)
b) take redundancy and find a job elsewhere.
c) take redundancy but risk paying tax on it if I take a contract with my former employer too soon.

Option b) is looking best at the moment, though I guess it depends on whether the contract role in c) can be determined to be sufficiently different from my previous role or how long "too soon" is.

Thanks for some pertinent responses.

[moorfield]

It transpires that they really thought I’d accept their offer, and now there is a strong possibility that they cannot find a suitable replacement and will offer me a contract PM position for a short while they do. It’s a small company, so they can be flexible about their own rules (employment law aside).

On principle I would tell them to stuff it and walk, but I suspect that doesn't help you!

Do a little market research on your role / rate in the contract market - www.itjobswatch.co.uk is a good indicator - and try to negotiate that up say 10-15% to counter IR35 and factor in your familiarty with the company etc. (if they want you that badly). If it's a short contract stint take the IR35 hit and use the time to concentrate on getting yourself setup properly if you think contracting is the way forward for you.

[SueEllen]

It's not a redundancy situation.

If you can be re-deployed in a different role then you haven't been made redundant.

If you have got some emails or letters about the situation then you better go off to an employment solicitor.

I'm really surprised your employer hasn't done this as they are asking for trouble.

[Turion]

The whole things stinks to me. Why are you even thinking of this scheme when clearly the company has acted improperly. Two things to do. 1) Walk away now, and 2) contact an employment solicitor. You have permie rights so use 'em to get some compensation.

[Fred Bloggs]

I suspect the employment law position is significantly clouded because the employer made a reasonable offer of redployment that was rejected by the employee.

The employee though, sees a chance to make a few quid out of the deal so he wants to have his cake and eat it too. He wants redundancy pay and also the tax breaks + higher rate that he thinks he can get as a contractor. I can see the attraction, but Hector saw it first. I hope the employee has to pay full PAYE tax on his "redundancy pay" and gets clobbered for IR35. After all, this is actually what IR35 was all about. Under these circumstances, "it's only fair".