2-year rule for PAYE contracts

[Phillwin]

Is an employer going to get rid of a PAYE contractor after 2 years because of IR35 or does that not apply to PAYE contractors?

[eek]

Is an employer going to get rid of a PAYE contractor after 2 years because of IR35 or does that not apply to PAYE contractors?

That is up to the individual policy of the end client and the agency.

I suspect a lot of firms will continue such a rule because large firms are paranoid for reasons that range from perfectly valid to having experienced similar things in the US and never wanting the same risk.

[jmo21]

IR35 does not apply to PAYE contractors.

Many companies have x month/year limit rules to avoid employment claims (whether that is likely or not), which is what you be getting confused with.

[northernladuk]

Is an employer going to get rid of a PAYE contractor after 2 years because of IR35 or does that not apply to PAYE contractors?

Need to be careful with the term employer. An inside contractor still isn't employed by their client in most cases. If you understand that a bit better you may not need to ask questions about the difference between an outside and a PAYE contractor. Just saying like, but onwards.

There is no 2 year rule per se. It's a misconception that clients are on the hook for employment benefits after this point. Every time I've come up against it I've pointed this out and they know but still stick with the rule. Bit silly really. But that risk doesn't exist for PAYE so you'd think not BUT clients might still keep the rule in just to not have long term contractors on site, which is sensible really. Daft thing is they will get rid of the contractor at 2 years and replace them with another. Ho hum.

So it's really down to the individual client and you need to ask them what their policy is.

[Paralytic]

I wonder if, by PAYE contracts, the OP means FTCs and the rule on unfair dismissal if they have more than 2 years service.

https://www.gov.uk/fixed-term-contra...dterm-contract

Not sure what the reference to IR35 would be in that case though.

[northernladuk]

I wonder if, by PAYE contracts, the OP means FTCs and the rule on unfair dismissal if they have more than 2 years service.

https://www.gov.uk/fixed-term-contra...dterm-contract

Not sure what the reference to IR35 would be in that case though.

That's the confusion. Clients have it completely mixed up thinking if you are contracted to them for two years you get rights which is defintely not the case. Some know this but still opt to use the 2 years as a check point. Many Public Sector gigs do and enforce it rigourously. IR35 isn't an issue because they've got it wholly wrong anyway.

There are, however, contractors that have claimed they've been on site so long they are effective employees and gained employment rights which is a proper disgrace and hasn't helped this situation. Cable and Wireless vs Muscat was one of them. That might not be the best reference as there was a point about him being employed previously so old contracts and that but I'm sure there has been another case where a contractor decided he wanted the employment rights so argued he was an employee. HP seems to ring a bell but I can't find it. Was a long time ago. Kinda shoots his own IR35 status in the foot so should pay all the taxes back but dunno what happened.

So maybe companies are aware of this and just use the two years as a dead stop so not to get in to long contract situations which are risky.