Company wants me to go self-employed

Pupnik

Hi all,

I have been working for a large company for about 9 months but my contract has ended. The company has now requested me to stay on but as a freelancer which is not ideal in the least but until I can find something else I don't really have much choice. I know my take home pay will be quite a lot less as I won't have holiday pay and will have to pay extra NI, so I am going to keep looking for a proper job anyway, but it is better than nothing.

I am going to be doing essentially the same 9-5 office job I was doing before but billing them each month, this doesn't seem right to me. They say they don't have enough money to create a role for me but I don't see why they couldn't just keep me on a temp contract or something. They also say they have no idea how long this arrangement would go on for- but I know there are 'self-employed' people who have been there for years working as what I would consider (and presumably also HMRC) employees.

I'm pretty certain that this way of not having staff as employees is just a way for them to save some money but I am concerned it could cause problems for me. I will need to register as self employed plus pay my own taxes and student loan, it's all a little confusing.

Can this company really do something like this? Is it common?
Could I personally get into trouble with HMRC?
If I am able to find something else can I easily de-register myself as self-employed?

Russe11

Pupnik wrote: »

Hi all,

I have been working for a large company for about 9 months but my contract has ended. The company has now requested me to stay on but as a freelancer which is not ideal in the least but until I can find something else I don't really have much choice. I know my take home pay will be quite a lot less as I won't have holiday pay and will have to pay extra NI, so I am going to keep looking for a proper job anyway, but it is better than nothing.

I am going to be doing essentially the same 9-5 office job I was doing before but billing them each month, this doesn't seem right to me. They say they don't have enough money to create a role for me but I don't see why they couldn't just keep me on a temp contract or something. They also say they have no idea how long this arrangement would go on for- but I know there are 'self-employed' people who have been there for years working as what I would consider (and presumably also HMRC) employees.

I'm pretty certain that this way of not having staff as employees is just a way for them to save some money but I am concerned it could cause problems for me. I will need to register as self employed plus pay my own taxes and student loan, it's all a little confusing.

Can this company really do something like this? Is it common?
Could I personally get into trouble with HMRC?
If I am able to find something else can I easily de-register myself as self-employed?

Go for double the rate you currently get PAYE, worst case settle for about 40% gross more.

No doubt they are trying to just cut costs rather than wanting you to be a contractor opposed to employee.

InsertWittyName

Be careful, it's not yours or the companies say on if you're truly self employed or not.

Worth a read: http://www.hmrc.gov.uk/employment-status/index.htm#1

InsideInsurance

Pupnik wrote: »

Can this company really do something like this? Is it common?
Could I personally get into trouble with HMRC?
If I am able to find something else can I easily de-register myself as self-employed?

It seems to be becoming increasingly common.

De-registering as self employed is a single phone call (though normally 30 minutes on hold to get through)


As you have said, a contract can say one thing but HMRC can decide another and if they do they will adjust the taxes due by both as if they'd had an "employee" and "employer" relationship.

Most larger companies avoid this risk by requiring their freelancers to either operate their own Ltd or go via an umbrella company. The issue of employee or not then disappears as legally the person is an employee but of their Ltd or umbrella company rather than the client.

If the freelancer goes down the traditional umbrella route then everything is ok as taxes are paid as normal PAYE. With a Ltd you start to get into the territory of IR35 which if found to be inside it also pushes you towards having to take most money out as salary rather than the usual dividends tricks etc.

paddyrg

If you're currently working as an employee, and will be doing the same job as a contractor/freelancer, you will almost certainly be caught up in IR35, and taxed/NI, etc as an employee anyway.

Rule of thumb, take your annual salary, divide by £1000, and that's your freelance hourly rate. A £30k employee would therefore charge approx £30/hr for parity once you account for pension, NI, Tax, sick pay, and other employee benefits

InsideInsurance

Ok, I am more generous then and go for take annual salary and divide by 100 for the day rate so a £30k employee becomes a £300 a day contractor

paddyrg

InsideInsurance wrote: »

Ok, I am more generous then and go for take annual salary and divide by 100 for the day rate so a £30k employee becomes a £300 a day contractor

I'll split the odd £20/day with you ;-)

But I'd tend to agree by and large, if quoting a dayrate £320 rounded down, of they're offering an hourly rate, call it £30 :-)

Pupnik

Thanks for all your replies, everyone.

InsertWittyName wrote: »

Be careful, it's not yours or the companies say on if you're truly self employed or not.

Worth a read: http://www.hmrc.gov.uk/employment-status/index.htm#1

I've read this and I'd say I am definitely an employee but since there are several people who have been working like this for years at this company I don't think they really care what HMRC think. I'm not really sure what HMRC could / would do about it anyway since they probably don't know I'm there - I spoke to a friend in human resources and they weren't even aware the company had any freelancers. When they looked up the names of some of the long term freelancers I knew about they do not even show up on their systems, in fact some of them - like me, used to be employed but according to their systems have not worked for the company for years. No idea what would happen if there is some kind of staff audit and they find all these people still working there with their swipe cards still working, computer access, probably not insured.

Thanks for all the advice on how to charge however I cannot set my own rate, I have been told I will need to bill for £x each day, using the calculations above it is £170 less than what I should be charging to be on a comparable wage to what I was on before. It really is the worst of both worlds I think - no job security, holiday or sick pay but I can't set my own hours or fee which for me would be the only benefit of being self-employed.

I guess my only option is to look for a new job with a more professional company and get out of this mess as soon as possible.