ClientCo's own 2-year rule

[BuachaillDana]

Hello All

I have been in a contract at ClientCo (government agency) since Nov 07. Latest extension expires end July 09. ClientCo now says there is a new policy not to extend contract of any one contractor beyond 2 years (in fact, they won't even go close to 2 years). One other contractor has been terminated with notice because his current extension would have run past the 2 year limit.
When I asked the reason, I was told that it is for "tax reasons", i.e. that ClientCo would suddenly become liable for all employer NI etc retrospectively once in place for over 2 years.
My take on this is that it is complete nonsense - it is either:
- paranoid miscomprehension of the law by HR
- an attempt by HR to big themselves up and keep busy
- or even a scare tactic from the preferred supplier agency to keep the churn rate up

Has anyone else come across this?

[Moscow Mule]

It caused by confusion between contractors & temps. New rules came in for temps this year (IIRC) that gives them certain employment rights once they've been at the same place for a while.

If you run your own Ltd, ask them how they would treat an Accenture (or similar) employee who had been on site for two years.

[BuachaillDana]

Thanks, that is interesting. I need to have a look and see if I can find anything concrete about this.

[Fred Bloggs]

I had an 18 month contract at a large Pharm Co a few years ago. They brought in an 11 month rule and binned quite a few good people who were over the 11 months. It was quietly forgotten about shortly afterwards but sadly, that didn't help those unfortunates who had already been canned. Sad really, but that's what happens when you get draconian but badly drafted, legislation on the statute books.

[thelace]

Also a shame that these pieces of legislation are misinterpreted by Numpties which is the biggest blight on the safety profession currently (hence lots of headlines in the daily wail)

[Fred Bloggs]

Also a shame that these pieces of legislation are misinterpreted by Numpties which is the biggest blight on the safety profession currently (hence lots of headlines in the daily wail)

Sure, but if you're a safety case author in the nuclear industry you're never going to be out of work in the next 100 years or so! (I'm not, BTW).

[BrilloPad]

There are a couple of banks in the city that operate rules. Deutsche bank have a 9M rule. JP Morgan have 2Y/3Y/10Y rules!

[interested]

These policies are implemented as a result of advice given by law firms on co-employment risk. I have also attended seminars with Tax consultants at E&Y which confirmed this view.

Should HMRC investigate ClientCo (and they do, often) and decide that you are in fact a disguised employee (which let's face it, a large proportion of contractors are) on the basis of the tests they employ - ClientCo can be held liable for retrospective employers NI and PAYE on a grossed up basis for 7 years.

So - it's not complete nonsense at all. If you have a manager who is able to side-step policy then you're OK; if not, you're out.

To Moscow Mule's point - the tests that HMRC use (that are essentially defined by case law) would not conclude that an employee of another organisation such as Accenture is a disguised employee of ClientCo.

FYI the tests are:

1) Contract status - is it a contract of services?
2) MOO
3) Control (master/servant)
4) Integration into workforce
5) Individual on business in their own account.
6) Substitution

HTH

[Hex]

There are a couple of banks in the city that operate rules. Deutsche bank have a 9M rule. JP Morgan have 2Y/3Y/10Y rules!

Merrill Lynch have an 18 month rule (although they seem quite willing to bend it).

[Bumfluff]

My current client operates the 2 year max rule on contractors and this was in place before the change is legislation. By the end of this renewal I hit the 2 year max, personally it doesn't bother me 2 years at any one client for me is more than enough, and IMO greater than 2 years smells of permy. I know RBOS doesn't care though when I was there some contractors had been there for between 5 and 8 years !!