How to convince a business to move employees to contractors?

[evo17paul]

Hi all newbie here, please be gentle

OK at the moment I am one of a number of IT engineers who are employees. The company is going through a rough time and a company-wide consultation process is in effect and today we had our second consultation.

A proposal was put by the HR person in the meeting that because of certain T&C's not in align with the parent or group of companies they are 'suggesting' we take a hit for the best interests of the company into saving costs.

I am convinced that the company can save costs but allowing the IT engineers to become contractors and I have read the benefits / disadvantages to being an employee/contractor from both sides and intend to submit this to the business, but I was wondering if someone could help me with producing some figure based proposals based on an average wage and benefits included with an employee against using a contractor.

Obviously worse case scenario would be the contractor works the total amount of workable days in a year, but in reality the work our business/the IT employee undertakes means that not all engineers would be required all the time for the whole year.

Any advice/help would be much appreciated and thanks in advance

Paul

[Sockpuppet]

You'll all fall under IR35 so from your point of view not worth it.

THe company would love it though....resign and we'll give you a 3 month contract. Oh, 2 days into the contract there is no work. Bye and don't expect any redundancy.

[Wanderer]

I am convinced that the company can save costs but allowing the IT engineers to become contractors and I have read the benefits / disadvantages to being an employee/contractor from both sides and intend to submit this to the business, but I was wondering if someone could help me with producing some figure based proposals based on an average wage and benefits included with an employee against using a contractor.

Which ever point of view you look at it from, (the company or the worker), it doesn't really make good business sense.

If a company has a permie on 25k then they also have to pay employer's NI (~10%), sick pay, annual leave, pension, maternity leave, redundancy pay etc. If they can convert this worker to a contractor paying the same amount then they they potentially make a big saving in Employer's NI. Initially it might look attractive to the worker but the worker will be caught by the IR35 legislation and will be forced to pay employers and employees NI themselves. The company may still have to pay redundancy pay too. Later on the company can sack employees without notice or compensation.

The risk is that a worker will get upset with the deal and take the employer to a tribunal for constructive dismissal. The business could lose the case, get investigated and be forced to re-employ all their staff rather than treating them as disguised employees.

If the business is failing then this is probably not the right way to restructure it. A better thing to do is for the business to spin off or drop some of the unprofitable parts of the operation and make those people redundant. These people are free to go their separate ways or form their own business and take on the unprofitable parts and turn them around if they think they can.

In all, a difficult situation but converting permies to contractors is going to end in tears for all concerned in my opinion.

[Bluespider]

As sockpuppet says, danger will robinson, danger...

If you want to bea contractor go elsewhere, you can alewys go back at some future point, on better terms.

[malvolio]

Which ever point of view you look at it from, (the company or the worker), it doesn't really make good business sense.

If a company has a permie on 25k then they also have to pay employer's NI (~10%), sick pay, annual leave, pension, maternity leave, redundancy pay etc. If they can convert this worker to a contractor paying the same amount then they they potentially make a big saving in Employer's NI. Initially it might look attractive to the worker but the worker will be caught by the IR35 legislation and will be forced to pay employers and employees NI themselves. The company may still have to pay redundancy pay too. Later on the company can sack employees without notice or compensation.

The risk is that a worker will get upset with the deal and take the employer to a tribunal for constructive dismissal. The business could lose the case, get investigated and be forced to re-employ all their staff rather than treating them as disguised employees.

If the business is failing then this is probably not the right way to restructure it. A better thing to do is for the business to spin off or drop some of the unprofitable parts of the operation and make those people redundant. These people are free to go their separate ways or form their own business and take on the unprofitable parts and turn them around if they think they can.

In all, a difficult situation but converting permies to contractors is going to end in tears for all concerned in my opinion.

Agreed except you won't be eligible for redundancy if you back doing much the same role (well, you can get it but you'll have to pay NICs and PAYE at 40% on it...). The end result is that you end up with much the same take home, zero employee benefits like paid leave and sick pay and zero job security. You would be better off taking a voluntary 10% pay cut, to be honest.

[nomadd]

OK at the moment I am one of a number of IT engineers who are employees. The company is going through a rough time and a company-wide consultation process is in effect and today we had our second consultation.

You are a permie, in a job. If you were a contractor, the company would have long since let you go. You'd probably be sat on the bench right now. Lesson? Know when you are well off.

And "IT engineer"? Sounds like "Support Bod", which in recent years has become "Support Bob". You'll probably find that behind the scenes your company is strongly looking at the "offshore Bob" solution to their current predicament.

If you think the world of contracting is a rosy alternative to what you currently have - and thus ignore the great replies on this thread you've received from my fellow contractors - then jack your current job in and give it a try. I'd guess that six months or so of seeing things from the "other side" would prove quite enlightening.

[evo17paul]

Firstly, apologies for posting in the correct forum.
Secondly, I bow to all yours greater knowledge and appreciate all the comments, these have certainly given food for thought.

Thanks again

Paul

[Sysman]

A proposal was put by the HR person in the meeting that because of certain T&C's not in align with the parent or group of companies they are 'suggesting' we take a hit for the best interests of the company into saving costs.

Alarm bells are ringing here. If you don't already know, you should find out precisely what T&Cs are not aligned and what their real aim is here.

It sounds to me as though you could easily lose some attractive rights here such as redundancy payments, length of notice etc. Are pensions involved?

Never trust HR to do things to your benefit. They are working for the company, not the employees.