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Helpful Advice

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    Helpful Advice

    I get frustrated reading so many posts where it is evident that contractors don't seem to know what they're entitled to know or not when dealing with recruiters. Obviously, newbies to contractors aren't necessarily going to know, so I'm not expressing criticism at all. My post is intended to help them out too. Most of the information you need to know can be found on the PGC website and other contractor forums that inform newbies to contracting.

    Who the heck do you think you are?

    For those who don't know, I'm not a solicitor, accountant or a recruiter - I'm a contractor working at fairly senior level in a project management and change management capacity. I have both private clients and use recruiters too. If you are in any doubt about the information provided below I think it is accurate, and lay authoratitive but in no way should be taken as legal advice. However, I have gleaned all of it from reading the legislation and getting advice from legal advisors and accountants who do know the ins and outs of what contractors need to know from an formal authoratitive standpoint. Some of what I've written below is also my opinion and guidance based on experience with recruiters.

    So here goes.....


    Read the Employment Agencies Act thoroughly - particularly the bit on employment businesses and what they are supposed to represent and what they are legally obliged to do before 'supplying' candidates to the end-client. You can find this information under the DTI website. Remember that employment businesses aren't 'agencies' at all even though we constantly inaccurately refer to them as such. They are working on behalf of the end-client to source candidates, they are not there to 'find you work' on act on your behalf in any way.

    Employment business can't charge you for 'job finding services.' I don't think many of us are in any doubt about that and most employment business won't try to charge anything. They may, however, try to disincentivise you to remain opted in by offering a lower rate than advertised or what you know the job is worth or charging you an admin fee for carrying out the mandatory checks. Again, I doubt this is legitimate unless they can justify these additional charges realistically.

    Employment Businesses are meant to state specifically on their job board adverts that they are acting in the capacity of an employment business. This is law but not really that important to us as far as finding new gigs. It might be useful to make a note of when they don't though if you have any further problems with the recruiters further down the line though. Always take a copy of the job ads you use to find new business because once the role is sourced, the job ads disappear never to be recovered.

    Before forwarding your CV to an end-client they must tell you who the end-client is. It's not OK for them to only tell you who they are when an interview is arranged. I'm surprised at how many contractors are happy to be kept in the dark over something so important. It's also the case that the role is likely to be live rather than fake if the recruiter tells you the client's name, it may also demonstrate that they have a good relationship with the client and that they're not using your CV for speculative purposes and are on their PSL as a first tier supplier if that's a supply side requirement, and they should also forward you the job spec that outlines fully what the role requires. Do you want to be represented without this information????

    Employment businesses must carry out mandatory checks to ensure 'suitability' of candidates before supplying a candidate to the end client. As I've said recently on other threads, this means basic ID checks (passport), qualifications and references. This may not be the case if the candidate has already expressed an early desire opt out and signed the opting out form, but in practice, you should only be given the option to opt out not expected to sign the form opting out prior to being interviewed. You can tell the agency you intend to opt out if you think you might not be represented but then you are perfectly entitled to tell them afterwards you are remaining opted in once you are offered the gig.

    Once you have been interviewed the agency may still pressurise you to opt out. In fact, I believe that it is the case that you must stay opted in once you've been introduced to the client and interviewed. Therefore, if you get the gig, signing the opt out form would be daft unless you have given reason to (like your brolly will only deal with opted out contractors) but if you do make this mistake you should be able to reverse this decision, should you want to, before you start on site. You might have a fight on your hands though but the dates the form was signed and the date of the interview should clarify any discrepancies about where you actually stand.

    If an agency tells you that the end-client won't consider taking on any opted out contractors and make this a condition for representing you to the end-client this is unlikely to be true and the recruiter is acting unlawfully. However, it is hard to prove because when they send you an e-mail and opt out form the form will specifically state that the contractor has 'agreed' to opt out which suggests that it is something you actually wanted to do rather than something you felt obliged to do. Some will tell you that opting in is only for Chinese cockle pickers and minimum wage temps not for professional contractors on high rates. This is not true at all, the legislation applies to ALL contractors. As far as the end-client is concerned, the opt out regulations are nothing to do with them, it's strictly between employment business' relationship with candidates. If you are concerned you won't be represented or interviewed due to recruiter sabotage favouring opted out contractors just express an intention to opt out until after the interview and offer and then state that you have changed your mind and wish to remain opted in. If you then mysteriously don't get the gig when you were led to believe it was pretty much in the bag then you should, by then, know who the end client contact is and you should really report the agency to the company. Otherwise, you should report them to the DTI Agency Standards Office. Don't bother with ATSCO because they are a huge waste of time. They act for the recruitment business, not contractors and all their efforts will be ploughed into getting their agency off the hook not backing you up.

    Always back up important negotiations in writing. Don't rely on recruiter testimonies over the phone about your CV being forwarded. Always get e-mail confirmation about rates agreed too, CV being on the end-clients' desk, references checked and satisfactorily concluded and so on. Most recruiters rely on the phone far to much to convey such information, but that is a strategy to ensure that if they lie about any important negotiation outcomes they can't really be held to account because no one can prove that they did say what they told you.

    Never give a bottom line rate to the recruiter about what you are prepared to get for a role. This is always likely to be your top rate because the recruiter will try to increase their own mark-up at your expense whilst still billing the client for a rate commensurate with your top desired rate. Instead, give a recruiter a between X and Y rate which is dependant on the scope of the role and other important information that might come up at interview. When the gig is then offered you are in a stronger position to negotiate toward the top end as your agreed daily or hourly fee, if you think it is justified, but at least you will be happy with the bottom rate if the client or recruiter won't budge. Most recruiters won't risk losing the sale if they think you will pull out due to a too low rate. In practice though, your bottom line rate should always also be a rate you would be happy with because pulling out is bad for you too if you haven't got anything else lined up.
    Last edited by Denny; 12 February 2006, 14:19.

    #2
    Continued....

    References

    Never ever give out references to a recruiter prior to being interviewed or forwarded. This is a common practice recruiters do to source new leads free of charge at your expense. There is usually no gig in mind for you at all.

    Same goes for interviews line up. Never tell a recruiter which end-clients you are going to be interviewed with through other agencies. Once you give the name of the end-client the probing recruiter will simply contact them to put up candidates against you and may even sabotage your efforts of getting the gig by claiming that your references or experience was doubtful based on past experience with you or word of mouth testimonials. If you're still in contract but covertly looking around for a new gig, but don't want to announce anything formally to your line manager, don't tell a recruiter what organisation you are working at. Otherwise, they may well contact your organisation and try and replace you with one of their own candidates and you could end up not being extended if you don't get anything else lined up.

    On contracts:

    Some employment business contract or registration terms and conditions try to circumvent the spirit of the opting in legislation by claiming that you must have a timesheet signed to be paid and they also state that you can't go direct at the end of your contract and so on. What they are effectively doing is trying to get you to sign up to 'opted out' terms when you clearly haven't opted out. They should not do this, but some of the more well established big-guns will try. Capita for one. In practice, these clauses wouldn't stand up in court when challenged because the original legislation is what matters to the judge but other judges may conclude that you signed up willingly and should honour the contract terms you've signed. It's a bit hit and miss to know what they would do really. The best course of action, if you feel strongly about such matters, is to negotiate them out of your contract before starting on site rather than wait for an expensive legal battle to materialise if you aren't paid by a non-paying recruiter who claims the client won't sign a timesheet for time you've worked on site or kicks up a fuss to the client if you've asked to go direct. Chances are the client will find it a lot easier and a lot cheaper just to replace you hassle free than challenge an agency's civil action, particularly if they're big and well established with the same end-client supplying plenty of contractors.

    Brollies

    My advice is not to use them unless you really don't want the hassle of starting and administering your own limited company. If you do use them, don't use anything dodgy with too good to be true allowances of 85% of income after tax and NI - like EBT or offshore loan schemes (Norla, Wistoni etc.) and don't for god sake believe the more plausible ones that claim that they have an agreement with the IR that allows contractors to claim genuine dispensations for travel, accommodation and so on without receipts or else offer you a set food allowance or accomodation allowance whether you actually use them or not. It's all bulltulip. The IR, should they eventually investigate your tax affairs, will only allow genuine dispensations strictly for genuine business purposes backed up by receipts to demonstrate that the claim was bona fide. Keep business expenses separate from private use expenses - that means no travel cards, monthly mobile phone tariffs with all inclusive free minutes and text messages. If you want to use a tariff service then ensure you have a separate phone that you only use for business purposes and use another for private calls.

    If you go limited, start up a business bank account (unnecessary with brollies) and make sure that your salary reflects the market rate for the specialism you're in (not £5 grand a year with the rest payable as dividends). Only pay yourself a dividend once every quarter minimum or preferably 6 monthly. Otherwise, regular dividend payouts will attract the attention of Gordo. You will still need to pay corporation tax of 19% on dividend payouts. If you manage your tax affairs properly this is far and away the best way to go, if you attract a large fee income every year. Not worth it if you don't.

    If you make more than £60K per year, you should register and pay VAT too.

    Never use agencies that insist you go through a brollie of their own choosing. Some do and it's not something they should do. Computer People and Hays do, I believe. I expect most of these 'approved' brollies will only deal with opted out contractors anyway (but perhaps not). In any event, you run your business, not the recruiter, so tell them to hop it or use another agency that allows you the freedom to manage your own tax affairs.

    IR35

    Read the DTI's criteria for what Gordo views as a 'proper' IR35 exempt business. Most contractors won't be IR35 exempt if they work on site, use the end-client equipment, are managed by the end-clients' staff, have to work set hours on site and don't have rights of substitution. If you are in any doubt about your status, then forward your contract to an accountant or legal advisor specialising in tax matters. Make sure the contract reflects the true working conditions because Gordo is not interested in 'words on paper' only true working conditions. Gordo will certainly contact the end-client to ensure that the wording reflects the truth and that will determine if you are caught or not. Never believe any recruiter who says that their contracts are IR35 friendly or that opting out makes you IR35 exampt. This is absolute rubbish. If recruiters tell you otherwise, then tell them to piss off.

    Another way to go, if you are limited and you do many different contracts per year that may or may not be IR35 exempt is to take out IR35 investigation insurance (the PGC offer this scheme if you're a member at reduced rates) pay the full whack and claim back any backtax owing if any of your contracts during the year were in fact exempt from IR35. Far better to do this than risk not paying the right amount and being stung for back tax, an expensive investigation and accumulative surcharges and interest. Otherwise, if you don't want all this hassle, just use a PAYE brollie (bearing in mind what I said above about dispensations).


    This and other contractor forums:


    No one on here are legal, accountancy experts so their advice is merely a guidance based on experience not a rulebook. It's useful but not authoratitive. Always get a good accountant and lawyer on your side when you need proper advice.

    Many people on here are recruiters, some pretend to be contractors and others don't. My advice to you is to take with a mega huge pinch of salt any so called 'contractor' advice that appears to suggest that you 'roll over the die' to suit the whims of the latest recruiter risk-free practices at your own cost. No contractor, whose been in this game for years, actually trusts or believes what most of them say and this is very wise advice.
    Last edited by Denny; 11 February 2006, 14:43.

    Comment


      #3
      There is also a difference between being an "employment business" and an "employment agency" (or what ever that second one is.

      The f*ckers who tried to do me out of several thousand pounds tried this ploy but unfortunately for them the wording of the contract disagreed with what they were trying to claim!

      Mailman

      Comment


        #4
        Originally posted by Mailman
        There is also a difference between being an "employment business" and an "employment agency" (or what ever that second one is.

        The f*ckers who tried to do me out of several thousand pounds tried this ploy but unfortunately for them the wording of the contract disagreed with what they were trying to claim!

        Mailman
        That's what the Act distinguishes. Employment Agencies source candidates for permanent appointments whereby the organisation directly employs the candidates either full or part time or on fixed term contracts for a limited time, usually a minimum contractual period of 6 month, but more often than not a year or more. Neither of these can charge candidates for sourcing work for them. Employment Businesses are what we are all dealing with because they only deal with flexi-staff - contractors and temps. Of course, some recruitment organisations dealing with office based staff have both arms to their business because the professional sector ones deal with permies and contractors and the high street ones, typically dealing with low level admin staff deal with permies and temps.

        An 'agent' is someone hired and paid by individuals to help them find work. These are normally in the show biz world, sports personalities and modelling and so on. The Act covers these too types of organisations too.

        Comment


          #5
          Don't send your contracts to the IR for " IR35 assessment" either. They will say you're caught, and then you have to prove you are not. Send it to one of the specialists (Bauer & Cottrell are very good but there are several others) and then you will have an informed view. Make sure you take out investigation insurance, preferably through one of the recommended suppliers (see here) and if you get a notice of PAYE investigation from the IR, speak to your advisors immediately. A PAYE investigation is usually a precursor to an IR35 investigation.

          Also try to find yourself some clients of your own. Local small businesses are a good source. Use your social contacts. You don't necessarily need to make much of a profit from this, but it will be taken into consideration when you are being investigated for IR35. Make sure you do some advertising (in addition to your website). Operate like a genuine business and you are more likely to be treated as such by Hector.
          His heart is in the right place - shame we can't say the same about his brain...

          Comment


            #6
            Originally posted by Mordac
            Don't send your contracts to the IR for " IR35 assessment" either. They will say you're caught, and then you have to prove you are not. Send it to one of the specialists (Bauer & Cottrell are very good but there are several others) and then you will have an informed view. Make sure you take out investigation insurance, preferably through one of the recommended suppliers (see here) and if you get a notice of PAYE investigation from the IR, speak to your advisors immediately. A PAYE investigation is usually a precursor to an IR35 investigation.

            Also try to find yourself some clients of your own. Local small businesses are a good source. Use your social contacts. You don't necessarily need to make much of a profit from this, but it will be taken into consideration when you are being investigated for IR35. Make sure you do some advertising (in addition to your website). Operate like a genuine business and you are more likely to be treated as such by Hector.
            Good advice on the first para Mordac. On the last sentence of your second paragraph, I think it could be a bit misleading to the unaware. Bear in mind that each contract or piece of work you do throughout the year, whether with private clients or contracted through an employment business will be deemed independently of any other contract or work you do for IR35 purposes. Gordo isn't interested in taking an annual work status overall into account whether within the context of your own business marketing efforts or not. In other words, if most of what you do one year satisfies Gordo's IR35 exemption criteria and, say, you only had only short contract that wouldn't be IR35 exempt, they're not going to be generous and treat you overall as an IR35 exempt on everything you've done that year. That means that if you freelance and have a website of your own, your own headed paper and brochures etc that states you work as an interim IT techie or whatever it is you do it is not likely to sway things to IR35 exemption unless you've built up the business properly and tender whole jobs, take on your own staff or partner freelancers and have those vital rights of substitution.

            To put it crudely, it is possible and possibly likely for office based contractors, to only be viewed by Gordo as 'own businesses' when they're not actually deriving an income between contracts or pieces of private work. If you were normally 'employed' through an agency or direct, you'd be unemployed by comparison during these times. Of course, as contractors, any between role periods you experience during the year would still incur costs for marketing and telephone calls and so on, therefore you should still fill out a self-assessment form to gain tax exemption status on these legimate expenses if you normally rely on a PAYE brolly when in contract when expenses are only redeemable from the day you start on site to the day you leave. Unnecessary if you have your own limited company.

            Comment


              #7
              Good point. Although I did specify "more likely", to be fair. It's not cast iron, but then it is ambiguous legislation in the first place. The more pointers you have in your favour the better. Make yourself a harder target and the IR may well just move on to the next one. Remember, they are looking for quick easy wins, not complex cases with a good chance of an appeal win.
              His heart is in the right place - shame we can't say the same about his brain...

              Comment


                #8
                Originally posted by Mordac
                Good point. Although I did specify "more likely", to be fair. It's not cast iron, but then it is ambiguous legislation in the first place. The more pointers you have in your favour the better. Make yourself a harder target and the IR may well just move on to the next one. Remember, they are looking for quick easy wins, not complex cases with a good chance of an appeal win.
                Not sure I agree, Mordac. The divide between IR35 caught businesses and exempt businesses on their website seems pretty unequivocal to me. The difficulty for us before we start a contract is that we may not know what the working arrangements are likely to be before we start on site, unless we can at least raise the issue at interview before we start. Most of us can't and won't do that even though solicitors advise that the end-client signs some sort of declaration form (forgotten the name). In fact, most end-clients couldn't give a monkies whether we're exempt or not and won't want to be involved. That's why I'm a bit sceptical about the reassurance contractors get over their tax situation from letting tax solicitors look over their agency contract terms except to ensure that they match the opting out or in provisions they're entitled to. I'm not sure what their reference point is for IR35 exemption when the contractor client themselves aren't sure what working conditions they are likely to be faced with before they start. I expect most of them are simply relying on opting out terms being commensurate with being IR35 exempt (IR35 friendly) but, we should also know by now, the whole concept of IR35 friendly contracts is not a pointer to exemption alone because opting out and matching terms has nothing at all with IR35 status if the working conditions subsequently turn out to be incompatible. Unless the solicitor actually believes that legally there is such a thing as an IR35 friendly contract that will circumvent actual contradictory working conditions once you've completed the contract you're building your hopes upon a false premis. Personally, I would only get my solicitor to look over my terms to ensure that the agency toes the line over the opting in status I'm likely to choose for most contracts and to ensure that the termination clauses are watertight to prevent client abuse that are based on reasonableness not opinion. I wouldn't be remotely interested in their advice on IR35 exemption unless it wasafter I've completed the contract. Then I'm likely to get my accountant's advice not an expensive solicitor's.

                If you're not already aware, the IR are carrying out more investigations than ever before. About 16 per cent of all small businesses now in the south of England are being investigated, although I expect that most of these are proper small businesses that would qualify for exemption. That may not seem a lot overall, but it's up on the percentages previously. It used to be around 11% in 2004. They're not giving up the battle easily to curb tax avoidance and evasion. I also know that Gordo has set up two teams in the south and north of England to investigate the workings of freelancer brollies of all kinds (not just composites). I spoke with a representative of the southern team recently and they are clearly unahppy with the way they operate now, particularly over dispensation allowances. They're currently carrying out a risk assessment to identify the impact of any changes they would like to make against the cost benefits of taking the appropriate action they want to take. There is also evidence on the PGC website and others that the IR lose the vast majority of IR35 investigations too. That's good news, but that it should also demonstrate to us that they are no less willing to investigate and will seem to go the ends of the earth to prove a point - bad or otherwise. Look what's happened to that Arctic husband and wife case (even though that's not about IR35).

                Given the costs and hassle involved I would strongly advise against relying upfront on solicitor advice over IR35 exemption and how this marries up with opting out. Some solicitors like Egos wouldn't countenance this advice because I know that Roger Sinclair doesn't agree that opting out has anything to do with IR35 exemption but others might if they can rake in the cash. I would much rather pay IR35 tax on contracts where I'm not sure what my working conditions are likely to be, I'd rather opt in for the safety net of being paid with or without a timesheet and I'd much rather claim any IR35 caught tax owing back should some of my contracts subsequently turn out to be exempt rather than risk doing the opposite and not paying enough.



                Avoidance is much better than fighting, and that was the point of my advice above.
                Last edited by Denny; 12 February 2006, 23:20.

                Comment


                  #9
                  The only problem with determining what is and isnt IR 35 caught is that the decision is made by dodgy IR f*ckers who have no real regard for how business works today.

                  We can argue the wording of specific peices of legislation until the cows come home but thats not going to change the fact that any company that gets investigated for being inside IR35 legislation is going to be found against by IR's commissioners.

                  Mailman

                  Comment


                    #10
                    Originally posted by Mailman
                    The only problem with determining what is and isnt IR 35 caught is that the decision is made by dodgy IR f*ckers who have no real regard for how business works today.

                    We can argue the wording of specific peices of legislation until the cows come home but thats not going to change the fact that any company that gets investigated for being inside IR35 legislation is going to be found against by IR's commissioners.

                    Mailman
                    Very true Mailman. My advice, though, was based on the 'as is' picture as I see it not the 'we wish' picture. I'm not at all in favour of the way the IR work nor do I agree that their website criteria for determining what is an IR35 exempt business and what isn't is fair either. How, for instance, should it ever be possible let alone legal to be an employee for tax purposes but still be expected to pay employers NI, but not an employee for any other purpose?

                    However, it is important that we don't allow our ideals over what should happen cloud our judgement over how we should arrange our tax affairs because the IR 'as sure as hell' won't.

                    Same is true of some dodgy ****er recruiters and their end-client HR bods who have yet to cotton onto the fact that we don't have agents, they have or are employment businesses. They also seem unaware of the fact that we are human beings not commodities, as the recruitment model demonstrates time and time again, and by treating us so badly at times it is unlikely to improve on-site performance or morale and keep the best contractors, they rely on so heavily, in the contractor game much less committed to the full length of a contract. No wonder so many of us can't be arsed to blow the whistle or give sound professional advice to permie heads when obvious malpractices or costly errors occur on a project and why it is that so many of us are happy instead just to keep our heads down just to keep the pennies rolling in.
                    Last edited by Denny; 12 February 2006, 23:46.

                    Comment

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