Moving on to a contract from permenant

[splatt]

Hi all,

It looks like my company (who I am currently a permie with) is drastically downsizing so there won't be enough work for my permenant role. The company have said they would like to offer me on to a retainer type contract to provide support for the systems I have worked on, though I don't know the details of this yet. This would leave me free to get other contract work.

My question is, how do you all think the transition of me from permie on to this contract would go? Will they have to make me redundant (hence me serving my notice period and getting at least the staturatory redundancy pay off) and then get my contract to start after that?

They can just ask me to switch over can they?

Thanks in advance for any help/advice.

[malvolio]

Ever heard of IR35? I suggest you read the guides, but you will be caught. Given you are caught, you are trading pension and employment protection rights, paid holidays, SSP, training and several smaller odds and sods to do the same job at much the same, or even less, take home. They should either make you redundant and pay you accordingly, or move you to short-time working. Switching you to being a contractor in this market has lots of upside for them and none for you.

And unless you're very good or very specialised (and you possibly aren't, I'm afraid, despite what you may think), you will be end of the queue for any contracts that are going, so don't rely on that to fill in the income, especially if you already have a contract.

If you're going freelance, then do it properly. Don't rely on your ex-employer, stand up by yourself. Sounds harsh, but it's a harsh world out there right now.

[splatt]

Thanks for the response malvolio.

Yes, I have heard of IR35 and intend to get any contract check over to see whether I fall in to it or not. I actually do not think it will come uinder IR35 (they will have certain number of days they can use me for support at mutually agreeabole times say), plus this will only form a small part of my income as I intend to take on another contract to fill most of my time (and may already have that lined up). Anyway, IR35 wasn't my questions.....

So in short I am not relying on my ex-employer, it will just so happen that they may be my first contract.

Now, back to my question.... they have to make me redundant right, if they want to hire me under my new guise as a contractor?

[malvolio]

Think about it. If they take you back on, even only part time the post is clearly not redundant, is it? And if it isn't your pay off will not be tax free. Also, IR35 is meant to stop Friday-to-Monday permie-to contractor transfers. It doesn't matter what the contract says, that arrangement will fail any IR35 investigation. And I'm not kidding when I say you as a newbie contractor will have problems finding work in this current climate.

I think you need informed legal advice, just to be safe. There are a couple of minefields you could fall into.

[Crossroads]

It doesn't matter what the contract says, that arrangement will fail any IR35 investigation.

Why?

If new contract and working practices really are those of an external consultant, and are very different to the previous employment then why should the previous employment dictate IR35 caught?

If (as is far more likely) it is approached as part time / ad hoc employment then of course if would be IR35 caught.

[malvolio]

Why?

If new contract and working practices really are those of an external consultant, and are very different to the previous employment then why should the previous employment dictate IR35 caught?

If (as is far more likely) it is approached as part time / ad hoc employment then of course if would be IR35 caught.

But he wasn't saying he would be doing a different job (which may or may not be IR35 caught although proving it would be harder than doing it for a wholly new client), merely the same old one. Hence, no escape, it's caught. I'm actually more concerned he's going to blow his redundancy package; that would be serious.

[TykeMerc]

But he wasn't saying he would be doing a different job (which may or may not be IR35 caught although proving it would be harder than doing it for a wholly new client), merely the same old one. Hence, no escape, it's caught. I'm actually more concerned he's going to blow his redundancy package; that would be serious.

I agree with Mal on this

1. A persons position can't be redundant if they're immediately (or even fairly rapidly) contracted back to do functionally the same role.
2. IR35 was setup partially to stop this specific scenario, I doubt that even the most optimistic IR35 savvy lawyer could paint a Friday perm - Monday contractor situation as IR35 exempt.

Mal is right that the redundancy payoff would be subject to full income taxation, plus Splatt would lose real redundancy rights by electing to voluntarily change his working arrangements as well as the benefits of being a permie.

In the current economic situation becoming a contractor is unwise especially in the scenario that Splatt has outlined.

[Ardesco]

Deffo IR35 caught. You are finishing as a permie on Friday and walking into the same job as a contractor on Monday.

It doesn't matter what your contract says, you will be 100% caught and nobody is going to want to represent you in court (unless they are bloody stupid, and then you will lose anyway).

If you want to be a contractor make a clean break, but really this is not the time to be jumping into contracting on a whim. There are a lot of people on these boards who have been benched for a long time who are experienced contractors with a lot more skills and experience in the contracting world than you. Are you sure you want to fight them for jobs?

Get your redundancy and then work out what you want to do, if you do what they are suggesting chances are they will terminate you after a week anyway, sounds like a ploy to get out of paying you redundancy to me....

[ASB]

Saying "you will be IR35 caught" is a little pessimistic. Though it is quite likely. It would be possible to avoid capture but you will need to be very clear about what they are getting and what you are supplying.

Certainly there is no reason why an ongoing relationship with your previous employer must be IR35 caught, but agreeing terms and realities which are outside and both parties are compfortable with will prove very difficult.

You could, for example agree a flat rate for dealing with certain aspects of the system in terms of it's maintenance. This would expose you to significant risk. Are you going to have to expend one day a week or 5. In this scenario you are much more likely to pass IR35 (but it is by no means certain).

[zara_backdog]

Thanks for the response malvolio.

Now, back to my question.... they have to make me redundant right, if they want to hire me under my new guise as a contractor?

No, they could just change your contract of employement. It is the role that is being made redundent not you. They can not employee anyone ( permie or contractor) for that role for 6 months after the redundancy, if they do they are breaking the law. Normally firms get around this by changing job title.

Be very careful as it could be a way round of not paying you redundancy money, also if anyone else is being made redundant and not offered a contract wheb you do they would have a very good case for unfair dismisal.

Know someone in the same situation who took the contract ( no redundancy money but on a good day rate) and they terminated the contract after the first week.