Reply to: Moving on to a contract from permenant

[splatt]

Thanks for your frank and honest opinions everyone, it is much appreciated.

[malvolio]

BEWARE, contract notice periods can be worth less than the paper they're written on.
To me this smacks of a company in trouble that would love you to chuck away your employment and redundancy rights. I'm sorry if it sounds harsh, but if they're really in the financial cacky then it's a great way to keep you available, unload the cost of redundancy and move you to the suppliers who wait for their cash list. If they do go mammaries up then as a contractor you will be right at the bottom of the creditors list so they will have more cash to pay their critical creditors.

Reading your posts and with only that info it feels to me like they're out to roger you while keeping you available to look after their IT for a while.

Yup, good summary of my own thoughts. Right now you have the uppper hand: use it wisely.

[TykeMerc]

I definitetly see how they would be using this as a way of not making me redunant, but I would look to have a notice period in place on the contract (which is still under negotiaition) to avoid getting booted out straight away.

BEWARE, contract notice periods can be worth less than the paper they're written on.
To me this smacks of a company in trouble that would love you to chuck away your employment and redundancy rights. I'm sorry if it sounds harsh, but if they're really in the financial cacky then it's a great way to keep you available, unload the cost of redundancy and move you to the suppliers who wait for their cash list. If they do go mammaries up then as a contractor you will be right at the bottom of the creditors list so they will have more cash to pay their critical creditors.

Reading your posts and with only that info it feels to me like they're out to roger you while keeping you available to look after their IT for a while.

[splatt]

Hi all, thanks very much for all your feedback. I'll have a serious think about this.

Just to clarify, yes they would be looking to change the terms of my contract rather than make me redundant, and are offering me a very good retainer. The new contract would be no more than one day a week on an ad-hoc basis. So it would be very different to my current role (will this affect the IR35 status?).

They have made other people in the company redundant with no offer on contract roles, although I am the only person in IT.

I definitetly see how they would be using this as a way of not making me redunant, but I would look to have a notice period in place on the contract (which is still under negotiaition) to avoid getting booted out straight away.

[malvolio]

And I thought the PCG had killed off IR35.....

Do you pay it?

[BlasterBates]

Good advice....assume IR35 in your calculations for the Friday-Monday perm-contract, at the very least take some legal advice, and weigh up potential income in comparison to redundancy. The second contract shouldn´t be a problem as you´ll probably br able to get insurance.

In the current market quite a tricky one as conracts, even perm jobs are hard to come by.

Good luck.

[BrilloPad]

And I thought the PCG had killed off IR35.....

[BlueElise]

Another view

I think you would be IR35 caught (the original name for the legislation was 'Friday to Monday' after all - however even if you are caught you basically just pay tax and NI on your income (minus the 5% running fee). The point is you would still HAVE an income.

So I guess if the choice is between not having a job and having a job then take the contract position.

[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.

[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).

[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....

[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.

[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.

[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]

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.