Executive Director job offer on contract basis

aroominyork

I was recently offered a job as first Executive Director of a small charity. The job was advertised as permanent, initially three days a week. I have now received an offer letter which says I would be engaged on a contract for services with the aim of moving onto an employee contract when they have the “infrastructure” in place, which I take to mean when they are more financially secure. The offer includes a bonus plan for generating stated levels of income. It also states I would have leadership responsibility for the operational team comprising four staff.

Putting aside that the offer is different from the advertised role, I wonder whether HMRC would consider this a genuine self-employed role. It is not for a fixed period, it reports to the charity’s Chair, has overall management responsibility, and would be representing the organisation to a range of external stakeholders. I think it is also questionable whether the bonus arrangement is appropriate, given potential conflicts an ED might have with stakeholders.

Views on this would be appreciated before I carefully start drafting my reply.

kinger101

HMRC would almost certainly view this as disguised employment but the devil will be in the detail of the "contract".  But the "infrastructure" reason they've provided is either bogus or shows a dangerous level of ignorance of the law.  Putting you on a contract for service because they haven't got their sht together won't sound too clever in front on HMRC.

I personally don't see the conflict of interest provided the means of raising money are legitimate.

I'd question whether I'd want to work of somewhere like this.  They seem somewhat reckless.  Though that does explain the need for a leadership position.  
  

Marcon

aroominyork said:

I was recently offered a job as first Executive Director of a small charity. The job was advertised as permanent, initially three days a week. I have now received an offer letter which says I would be engaged on a contract for services with the aim of moving onto an employee contract when they have the “infrastructure” in place, which I take to mean when they are more financially secure. The offer includes a bonus plan for generating stated levels of income. It also states I would have leadership responsibility for the operational team comprising four staff.

Putting aside that the offer is different from the advertised role, I wonder whether HMRC would consider this a genuine self-employed role. It is not for a fixed period, it reports to the charity’s Chair, has overall management responsibility, and would be representing the organisation to a range of external stakeholders. I think it is also questionable whether the bonus arrangement is appropriate, given potential conflicts an ED might have with stakeholders.

Views on this would be appreciated before I carefully start drafting my reply.

I'd be asking some searching questions before accepting any offer, such as:

• what has changed since the advertisement was placed/your interview(s) took place?
• have they confirmed with HMRC that this can genuinely be classed as self employment?
• given the benefits you'll miss out on (e.g. pension, paid holiday), how do they intend to adjust the salary?
• if the notice period is simply statutory, and any redundancy provisions are also statutory minimum, why is this seen as a better/less risky option for the charity?

The fact this is a charity doesn't alter the requirement for it to comply with the law, and to behave in a straightforward and open manner with employees and others they are trying to engage.

Having said all the above, how strongly do you believe in what the charity does, and how much do you want the job? Life is about taking considered risks and doing things you believe in.

aroominyork

Thanks for your comments. Re what has changed since the advert was placed: a number of things have shown they are developing their thinking as the process has progressed – in a way this is not surprising. As kinger said, it shows their need for a leadership position, and I have interest and plenty of experience of sorting out small charities’ governance processes. Marcon, you raise the question of the A/L & pension I would lose, which is something like 20% of salary. They may be trying to compensate for that through the bonus structure but i) I lose more than I would likely gain, and ii) it raises a number of questions around the focus of the job, the input of other staff to fundraising, transparency to funders etc.

The Chair is not UK-based and, like Marcon suggested, might be seeing risks that do not exist. But if, as seems likely, this is not legit self-employment, then I need to get them to re-consider. That starts with raising some of these issues and checking if they have consulted an employment lawyer.

aroominyork

I wrote to them and they replied referencing IR35, saying this is allowed due to the small size of the organisation. It would be transitional and I would set up payroll processes to move staff to employed status. A detailed contract will follow but this sounds OK in principle – is it? Presumably this means there are no pension contributions, but how is annual/sick leave and other arrangements for 'embedded' staff typically managed under this type of arrangement?

DullGreyGuy

aroominyork said:

I wrote to them and they replied referencing IR35, saying this is allowed due to the small size of the organisation. It would be transitional and I would set up payroll processes to move staff to employed status. A detailed contract will follow but this sounds OK in principle – is it? Presumably this means there are no pension contributions, but how is annual/sick leave and other arrangements for 'embedded' staff typically managed under this type of arrangement?

IR35 doesnt apply to the self employed, it only applies to those operating via their own limited company/PSC.

If the client is very small the client themselves are exempt from making an IR35 determination but that just means the responsibility falls to the PSC instead like it used to be for many years prior to the most recent changes. Obviously a low risk of being caught but almost certainly an inside IR35 role. 

Undervalued

aroominyork said:

I was recently offered a job as first Executive Director of a small charity. The job was advertised as permanent, initially three days a week. I have now received an offer letter which says I would be engaged on a contract for services with the aim of moving onto an employee contract when they have the “infrastructure” in place, which I take to mean when they are more financially secure. The offer includes a bonus plan for generating stated levels of income. It also states I would have leadership responsibility for the operational team comprising four staff.

Putting aside that the offer is different from the advertised role, I wonder whether HMRC would consider this a genuine self-employed role. It is not for a fixed period, it reports to the charity’s Chair, has overall management responsibility, and would be representing the organisation to a range of external stakeholders. I think it is also questionable whether the bonus arrangement is appropriate, given potential conflicts an ED might have with stakeholders.

Views on this would be appreciated before I carefully start drafting my reply.

Quite possibly not but it is a complex area. 

The good news, from your point of view, is that it is the "employers" problem to get this right. Providing you declare your income and pay NI and tax when it is due any comeback would be on the employer if indeed that is what they turn out to be.

Undervalued

aroominyork said:

I wrote to them and they replied referencing IR35, saying this is allowed due to the small size of the organisation. It would be transitional and I would set up payroll processes to move staff to employed status. A detailed contract will follow but this sounds OK in principle – is it? Presumably this means there are no pension contributions, but how is annual/sick leave and other arrangements for 'embedded' staff typically managed under this type of arrangement?

Whilst you are a self employed contractor that is your problem. The daily rate you are paid needs to be high enough to make up for not getting those sort of employment benefits.

For example, the statutory minimum holiday amounts to just over 12%.

Marcon

aroominyork said:

I wrote to them and they replied referencing IR35, saying this is allowed due to the small size of the organisation. 

Given the way that's phrased, it sounds like a non sequitur.

aroominyork said:

I wrote to them and they replied referencing IR35, saying this is allowed due to the small size of the organisation. It would be transitional and I would set up payroll processes to move staff to employed status. 

If it's a small organisation, then 'setting up payroll processes' is likely to be no more complicated than downloading HMRC's free payroll software: https://www.gov.uk/basic-paye-tools

aroominyork said:

A detailed contract will follow but this sounds OK in principle – is it? Presumably this means there are no pension contributions, but how is annual/sick leave and other arrangements for 'embedded' staff typically managed under this type of arrangement?

What sort of contract - a contract of service (i.e. employed) or for services (not an employee) - and when will it follow? 

Not sure what you mean by 'embedded staff' - if they are staff, they are employees. 

Has anyone stopped to consider the category known as 'worker', where auto enrolment into a pension scheme applies, as does holiday pay etc. Even if you accept your role on a self employed basis, it sounds highly likely that you'd be classed as a 'worker' for such purposes.

aroominyork

Marcon said:

What sort of contract - a contract of service (i.e. employed) or for services (not an employee) - and when will it follow? 

It will be a contract for services and will follow in early Jan for a 1 Feb start date.

So if a contract for services denotes being employed, what is the position regarding:

- employer's NIC - is this added to the base salary?

- employer's pension contributions

- annual leave and sick leave?

If employed under IR35 do I need to set up a PSC or do I just declare it on my self-assessment?

Marcon

aroominyork said:

Marcon said:

What sort of contract - a contract of service (i.e. employed) or for services (not an employee) - and when will it follow? 

It will be a contract for services and will follow in early Jan for a 1 Feb start date.

So if a contract for services denotes being employed, what is the position regarding:

- employer's NIC - is this added to the base salary?

- employer's pension contributions

- annual leave and sick leave?

If employed under IR35 do I need to set up a PSC or do I just declare it on my self-assessment?

No - a contract for services denotes you are not an employee - but you could still be a worker. That really can't be ignored or the charity is setting itself up for problems (and you as CEO will have to try and dig them out of the hole!).

It sounds as if you may be as unsure of these (murky) issues as the charity is, so some expert advice might ensure that when you start work in February you don't have to spend a large amount of time sorting out a wholly unnecessary mess.

IR35 doesn't apply to sole traders, so if you are engaged on a truly self-employed basis, it won't apply to you.