How much "reduction" in earnings did the April changes create

[iphigenie]

Hi

I am a consultant/contractor (tech. executive), and have always run it through my own limited company, sometimes using agencies as intermediaries, sometimes not. So I know nothing about umbrella companies and other service agencies.

In the contract I am in one of the contractors I manage (hired before I was on board) just came to me saying that since April his real income has dropped by 20-25% and he needs an adjustment asap.

To me this means that the employer is still paying the same amount, but the cut that the agency, umbrella company and the government are taking has increased.

* it could be temporary (or permanent) PAYE adjustments?
* it could be the umbrella company covering their risks and increasing their cut on the sly
* it could be the agency increasing their cut on the sly

Obviously without sitting with the contractor and looking at what he receives on his end (something we're technically not supposed to do but is that legally enforcable?), it is hard to advise him, but I suspect it is the umbrella company and they should be kicked/dumped.

But frankly my gut feeling is that it is not us, the employer, who should be footing that bill (especially since it seems that this company has never negociated with the recruiters and is paying totally silly percentages). I don't want to lose the contractor and I dont want him to suffer but I don't want the employer here to be taken for a ride.

Mostly I wanted to know
a) if others have experienced the same thing
b) what they did about it
c) am i toeing a thin line if I sit with him and review his payslip documents to help figure out if it is temporary or permanent, and if it is increased tax or the umbrella paying him less?

Thanks

PS: the agency and the umbrella company involved have so far been a lot less than impressive - including lying to us and making excuses etc. I suspect it is not ok to name-and-shame in this forum so I will abstain.

[dang65]

But frankly my gut feeling is that it is not us, the employer, who should be footing that bill...

Why not? I seem to recall that corporation tax was reduced at the same time as small company tax was increased. Seems only fair to pass that windfall on to those who have lost out.

[malvolio]

Sounds like he's gone from MSC to Umbrella and is now paying the same tax as everyone else. That doesn't justify a rate rise, his remedy is to stop pretending to be a business and get his own company. Since April, you only get the tax benefit of being a risk-taking company if you actually are one

So tell him to go learn his trade properly and stop sponging off everyone else.

[tino]

Sounds like he's gone from MSC to Umbrella and is now paying the same tax as everyone else. That doesn't justify a rate rise, his remedy is to stop pretending to be a business and get his own company. Since April, you only get the tax benefit of being a risk-taking company if you actually are one

So tell him to go learn his trade properly and stop sponging off everyone else.

Scathing as ever Malvolio

[malvolio]

Scathing as ever Malvolio

Perhaps. But since I have run my own company from Day 1, I have little sympathy for people who claim the same benefits while expending no effort. I have even less when they try to get a pay rise on the back of something they have control over and that is entirely their own problem to resolve.

[tino]

Perhaps. But since I have run my own company from Day 1, I have little sympathy for people who claim the same benefits while expending no effort. I have even less when they try to get a pay rise on the back of something they have control over and that is entirely their own problem to resolve.

You are of course absolutely correct. I used a brolly until I found out about this site and then seen how easy it was

[Ardesco]

have to agree with Mal here. If he gets his own LTD and take dividends he will find that he is earning the same as before. Hell this may even be a way for him to bump up his wage before switching to LTD in an attempt to get a 25% pay rise. (The cynic is strong in me today )

[Bluebird]

yep sounds like the new legislation has bitten him in the bum...


Have to say, that there has been a lot said about this new legislation since November of last year, so that to come in May and start complaining that "I'm not taking as much money home as I uesed to" tells me the contractor isn't as clued up about things as you'd like to think.

My advice to him would be - you've had a few years making hay, now you have to pay tax like any other employee..

[TheFaQQer]

Sounds to me like it's a great excuse for blaming the government to ask for a rate rise. Worth a try!

I'd like a 25% rate increase as well, but I'm not going to get one, but maybe his feeling is that it's worth chancing a good increase.

[bangface]

PS: the agency and the umbrella company involved have so far been a lot less than impressive - including lying to us and making excuses etc. I suspect it is not ok to name-and-shame in this forum so I will abstain.

As malvolio has already said it sounds like he's gone from an MSC to an Umbrella!!

I think you should still tell us who the agency and umbrella are though, particularly if both outfits are offering a poor and dishonest service!!