Reply to: Contracting for my (soon-to-be ex-) permanent employer

[arty]

Sounds like sage advice to avoid my ex-employer. I'm certainly already giving careful consideration to all of the costs & pitfalls you mention.

Thanks,
Arty.

[malvolio]

Thanks for all you comments and the somewhat lively debate. Please accept my apologies if I seem to be ignoring some points that people are making - its not deliberate, rather that I'm suffering from newbie-lag syndrome, where my responses are being moderated and therefore only appear sometime after I post them - by which time others may have made more comments.

Accepted - I personally forgot about that featurette,...

Back to the IR35 question. The response below seems a bit harsh.



My original post I hope makes it clear that I was not expecting to have my cake and eat it, just seeking clarification of what was likely. Fred Bloggs - I'm not entirely sure why you hope I have to pay full tax on my PAYE and get clobbered for IR35, even less why you think "it's only fair" . I guess you have your reasons.

...snip...

As I said in my first post, I’m serious about doing this as a long term career change.

Arty.

Taxation for contractors is a serious matter. Go back to an ex-employer in any role that vaguely resembles your old one - even if it's based on simply knowing the company - and you are 99% sure to be liable for IR35 (certainly the way you describe it, anyway). If you want to pay that then fine, it's your 20% gross income. The redundancy rules may also seem harsh but that's deliberate: there are too many way for an employer to reduce costs by making staff disappear on to a different ledger otherwise. So be very clear about what you're doing and why, and be vary careful how you work out the money: there is a long list of things you will have to pay for (such as accountancy fees, protection insurance, PCG memberhsip (oops...), PI/PLI, health insurance, sickness insurance, holidays, bank holidays, training, expense, etc., etc....) that you don't pay now that come out of your rate..

If you want to go contract long term, make sure you know what you're doing and why - it's not yet clear that you do. Read the guides carefully: you do not know how much you don't know.

And FWIW long-standing advice is that going contract by using your old employer as the first step is a very bad idea: apart from anything else (including IR35) your next contract role will suffer since the recruiters won't see you as a proper contractor with history, merely someone who's changed hats mid-stream.

HTH...

[SueEllen]

I certainly never expected such militant replies regarding my redundancy to what was, after all, really just a question about IR35! To those of you feel my redundancy is unjust, I thank you for your sentiment but in all honesty I don't see it so. If my employer had said to me "you are no longer a departmental manager - you are now a project manager, and here's a pay cut to go with it" then I could have resigned with real grounds for constructive dismissal.

Companies are allowed to re-structure.

As long as they go through the process fairly - offering employees who could be made redundant the positions - even if the positions and terms and conditions are different- and going through a fair process to place an employee in the new position, then you have no grounds for constructive dismissal.

But they didn't. What they actually did was offer me pretty good redundancy terms then, as they are obliged to, offered me the chance to apply for the other vacancies they had open (not just the PM one).

They are suppose to do that before making you redundant.

I worked for a large permie company who did their redundancies unfairly and a client who did their redundancies fairly.

The permie company ended up paying out more than redundancy money to the ex-employees because they got rid of all the people with disabilities (and the majority were minor ones) , they tried to hide they were doing this and were still recruiting for other positions in the company.

The client who did the redundancies fairly told everyone in the company including the contractors what was going on just in case anyone in the company had a lead for the people they were making redundant.

I genuinely feed that constructive dismissal is a non-starter (for the reasons above), and in any case what would I gain? Its a big risk and most cases fail. Even if I won I'd probably get a few thousand quid in compensation - would it be more than my redundancy payment? - I doubt it.

The cases that are unlikely to fail are settled before reaching a hearing. I have friends' who are lawyers which is why I know this. (And I only bother arguing with people who aren't lawyers.)

Naturally, if they now need a temporary fix to a short term recruitment problem I'm ideally placed to help out - and willing to do so on my terms. We can both get something out of this situation.

Either come back and help them ad-hoc for a week here and there in between working for other clients, or leave a good year before you go near them.

Back to the IR35 question. The response below seems a bit harsh.

The responses are realistic. We are giving you information you can understand in a tone that makes it clear what your employer is trying to do is not right.

My original post I hope makes it clear that I was not expecting to have my cake and eat it, just seeking clarification of what was likely. Fred Bloggs - I'm not entirely sure why you hope I have to pay full tax on my PAYE and get clobbered for IR35, even less why you think "it's only fair" . I guess you have your reasons.

He is politely warning you about the taxman. If you can't take a sarcastic post on a forum then you are not going to cope with a letter from the taxman asking you about your affairs.

Now the payment of 40% tax on my redundancy is a real concern. In my own mind I have no doubt that this is redundancy and nothing less, but I can see that the taxman might not see it the same - and that alone may mean I walk away from any short-term contact with my former employer and seek my first contract elsewhere. As I said in my first post, I’m serious about doing this as a long term career change.

The best thing to do as suggested by Fred Bloggs is walk away.

If they needed your expertise that badly they wouldn't make you redundant, or offer you a post with a smaller salary.

[arty]

If you're going back to work immediately with the same employer, how can you be considered redundant.

I thought I'd explained that it's a different role.

If you were real contractor material you'd be busy searching for a new contract now instead of mooching on about how to get a couple months more work from a company thats just binned you.

Errr... what makes you so sure I'm not doing that too? I just didn't want to discard out of hand what could potentially be a lucarative first contract. I hadn't realised that by asking a few questions I would so quickly discover that I'm not real contractor material. I'll get my coat.

Arty.

[FiveTimes]

If you're going back to work immediately with the same employer, how can you be considered redundant. As for being outside IR35

Would it be OK for the OP to have a bit of time off ? one to two months then go back contracting with the client ?

How long is long enough ?

[Turion]

If you're going back to work immediately with the same employer, how can you be considered redundant. As for being outside IR35

If you were real contractor material you'd be busy searching for a new contract now instead of mooching on about how to get a couple months more work from a company thats just binned you.

[Fred Bloggs]

I don't wish to be harsh. I too suffered a redundancy 6 years ago. I moved on and now earn 2 x what I did then. I really do think you need to put the previous employer behind you and move on. There are hundreds or thousands of other opportunities out there where you will have much less risk of being IR35 caught and all that it entails. Good luck.

[Lockhouse]

It's not a redundancy situation.

If you can be re-deployed in a different role then you haven't been made redundant.

If you have got some emails or letters about the situation then you better go off to an employment solicitor.

I'm really surprised your employer hasn't done this as they are asking for trouble.

I'm surprised too - they are not allowed to re-hire if they make the position redundant. I'd go to an employment solicitor for a free initial consultation.

[arty]

Thanks for all you comments and the somewhat lively debate. Please accept my apologies if I seem to be ignoring some points that people are making - its not deliberate, rather that I'm suffering from newbie-lag syndrome, where my responses are being moderated and therefore only appear sometime after I post them - by which time others may have made more comments.

I certainly never expected such militant replies regarding my redundancy to what was, after all, really just a question about IR35! To those of you feel my redundancy is unjust, I thank you for your sentiment but in all honesty I don't see it so. If my employer had said to me "you are no longer a departmental manager - you are now a project manager, and here's a pay cut to go with it" then I could have resigned with real grounds for constructive dismissal. But they didn't. What they actually did was offer me pretty good redundancy terms then, as they are obliged to, offered me the chance to apply for the other vacancies they had open (not just the PM one). As those roles all commanded a lesser salary (but they didn't want to lose my company experience) they tried to sweeten the pill of the reduced salary by offering a loyalty bonus if I stayed for a year. For my own reasons (diminishing job satisfaction, 130 mile daily commute) I prefer to take the redundancy route and new challenges. Time will tell if this is wise.

I genuinely feed that constructive dismissal is a non-starter (for the reasons above), and in any case what would I gain? Its a big risk and most cases fail. Even if I won I'd probably get a few thousand quid in compensation - would it be more than my redundancy payment? - I doubt it.

Naturally, if they now need a temporary fix to a short term recruitment problem I'm ideally placed to help out - and willing to do so on my terms. We can both get something out of this situation.

Back to the IR35 question. The response below seems a bit harsh.

The employee though, sees a chance to make a few quid out of the deal so he wants to have his cake and eat it too. He wants redundancy pay and also the tax breaks + higher rate that he thinks he can get as a contractor. I can see the attraction, but Hector saw it first. I hope the employee has to pay full PAYE tax on his "redundancy pay" and gets clobbered for IR35. After all, this is actually what IR35 was all about. Under these circumstances, "it's only fair".

My original post I hope makes it clear that I was not expecting to have my cake and eat it, just seeking clarification of what was likely. Fred Bloggs - I'm not entirely sure why you hope I have to pay full tax on my PAYE and get clobbered for IR35, even less why you think "it's only fair" . I guess you have your reasons.

To be clear, this situation is not of my own making and I'm just trying to make the best of it within the rules that apply. If I have to take the IR35 hit so be it. That in itself would not deter me.

Now the payment of 40% tax on my redundancy is a real concern. In my own mind I have no doubt that this is redundancy and nothing less, but I can see that the taxman might not see it the same - and that alone may mean I walk away from any short-term contact with my former employer and seek my first contract elsewhere. As I said in my first post, I’m serious about doing this as a long term career change.

Arty.

[Fred Bloggs]

But they offered to re-deploy on less money. That's not allowed. Constructive dismissal or similar case can be had here.

Fairy snuff.

[Turion]

But they offered to re-deploy on less money. That's not allowed. Constructive dismissal or similar case can be had here.

[Fred Bloggs]

I suspect the employment law position is significantly clouded because the employer made a reasonable offer of redployment that was rejected by the employee.

The employee though, sees a chance to make a few quid out of the deal so he wants to have his cake and eat it too. He wants redundancy pay and also the tax breaks + higher rate that he thinks he can get as a contractor. I can see the attraction, but Hector saw it first. I hope the employee has to pay full PAYE tax on his "redundancy pay" and gets clobbered for IR35. After all, this is actually what IR35 was all about. Under these circumstances, "it's only fair".

[Turion]

The whole things stinks to me. Why are you even thinking of this scheme when clearly the company has acted improperly. Two things to do. 1) Walk away now, and 2) contact an employment solicitor. You have permie rights so use 'em to get some compensation.

[SueEllen]

It's not a redundancy situation.

If you can be re-deployed in a different role then you haven't been made redundant.

If you have got some emails or letters about the situation then you better go off to an employment solicitor.

I'm really surprised your employer hasn't done this as they are asking for trouble.

[moorfield]

It transpires that they really thought I’d accept their offer, and now there is a strong possibility that they cannot find a suitable replacement and will offer me a contract PM position for a short while they do. It’s a small company, so they can be flexible about their own rules (employment law aside).

On principle I would tell them to stuff it and walk, but I suspect that doesn't help you!

Do a little market research on your role / rate in the contract market - www.itjobswatch.co.uk is a good indicator - and try to negotiate that up say 10-15% to counter IR35 and factor in your familiarty with the company etc. (if they want you that badly). If it's a short contract stint take the IR35 hit and use the time to concentrate on getting yourself setup properly if you think contracting is the way forward for you.