Can my company employ me as a contractor following redundancy?

[mudskipper]

Hi

Our company went through redundancies in May this year, with the majority of redundant staff leaving in June. I volunteered for redundancy, which was accepted on condition I stayed until end of September, now approaching fast. I was provided with a letter saying I would be made redundant, and it would not extend beyond that date. However the company have asked me to stay longer. I am not keen to stay as a permanent employee for various reasons. If terms can be agreed, are the company able to make me redundant, then employ me as a contractor?

Thanks
k2p2

[sweetandsour]

Hi

Our company went through redundancies in May this year, with the majority of redundant staff leaving in June. I volunteered for redundancy, which was accepted on condition I stayed until end of September, now approaching fast. I was provided with a letter saying I would be made redundant, and it would not extend beyond that date. However the company have asked me to stay longer. I am not keen to stay as a permanent employee for various reasons. If terms can be agreed, are the company able to make me redundant, then employ me as a contractor?

Thanks
k2p2

So what you are asking then is whether your employer can pay you a tax-free lump sum on the basis that the work you do is no longer required and you are leaving, while at the same time continuing to employ you?

Really, what do you think the Inland Revenue would say about that?

[pmeswani]

Hi

Our company went through redundancies in May this year, with the majority of redundant staff leaving in June. I volunteered for redundancy, which was accepted on condition I stayed until end of September, now approaching fast. I was provided with a letter saying I would be made redundant, and it would not extend beyond that date. However the company have asked me to stay longer. I am not keen to stay as a permanent employee for various reasons. If terms can be agreed, are the company able to make me redundant, then employ me as a contractor?

Thanks
k2p2

They can... but you will be IR35 caught from the outset. Not only that, there is no guarantee they can offer you any work. Also, if they make the post redundant (remember it's not you that are made redundant, it's the post!).

[centurian]

So what you are asking then is whether your employer can pay you a tax-free lump sum on the basis that the work you do is no longer required and you are leaving, while at the same time continuing to employ you?

Really, what do you think the Inland Revenue would say about that?

Seen this happen a few times before. I don't think the tax free lump sum will be an issue. Especially if the contract is relatively short, because the redundancy still occurs - it's just the timing of the redundancy that's being affected.

However, you will be a Friday to Monday contractor, so your situation will be so far up the arse of IR35, that it would be suicidal to go down the dividend payment route. Forget travelling expenses as well. If your motivation for wanting to be a contractor for this short period is to capitalise on the higher earnings returns - you might want to crunch those numbers again as you may find out you will be far worse off than you might think.


HTH

[RichardCranium]

If you are made redundant and paid off then brought back as a contractor then:

a) your post was not redundant and your redundancy settlement will be taxed as PAYE (or you can try to hide it from HMRC and keep your fingers crossed for 7 years).

b) your post was not redundant and you were unfairly dismissed. You can sue them for unfair dismissal.

[mudskipper]

Thanks all - was aware of the IR35 thing, but hadn't thought about the redundancy payment being taxable - although the 'lump sum' isn't that lumpy in the first place! The reason they want me to stay a bit longer is because the outsourced project that's replacing my role is running behind schedule. But my end date was agreed months ago, and I really don't want to stay there, so perhaps time to take my money and run, and see what the big wide world has to offer!

So, anyone need a brilliant web developer...

[TinTrump]

I took VR in 2003 and went off travelling for 3 months. Depending upon your circumstances why not do that, especially during a period where work is a bit thin on the ground? There are other threads on here about this subject. There are some countries where your money will go a long way. I'm actually in Chennai for work right now where that applies, but the nightlife is dull so wouldn't recommend it on that criterion.

Good luck with whatever you decide.

[mudskipper]

Thanks TinTrump - not in a position to go travelling (no longer young, free or single), but have got other things I want to do, and am fortunate enough to be in the position where I can take a few months off if I don't go too mad.

No idea where Chennai is - but not much nightlife where I am either which is probably why I'm addicted to online scrabble!

As far as the job goes, I'm reminding myself all the reasons why I volunteered in the first place - so cut and run is my current strategy!