Lloyds Banking Group has decided to either scrap contractors or force them in to umbrella companies, a move that has been dubbed as “bad for contractors and bad for business”.
The Association of Independent Professionals and the Self-Employed (IPSE) is warning other businesses to not follow suite and said this move “could not only harm the self-employed, but also long-term flexibility and productivity.”
At the same time, work-life balance charity, Working Families announced Lloyds as one of the top 10 family friendly employers in the UK due to their flexible and family friendly policies.
Also, just yesterday, the Office of National Statistics (ONS) announced that April – June 2019 saw UK productivity fall at its fastest rate in five years, as it dropped by 0.5 per cent.
Contractors who work for Lloyds will either be moved onto pay as you earn (PAYE), work through umbrella companies which will result in a pay cut of 30 per cent or stop working there altogether.
Andy Chamberlain, IPSE’s deputy director of policy, said:
This is a short-sighted and extremely damaging decision – and not just for the self-employed. It will be bad for contractors and bad for business.
IR35 is impossibly complex, and for a long time, we have warned the Government against forcing this complexity onto businesses across the UK. The risk is that they will panic, as Lloyds seems to have done, and harm the self-employed and the wider economy.
The self-employed are an enormous asset to UK businesses and the economy as a whole. They provide businesses with invaluable flexible expertise and, as a result, add over £275 billion to the economy every year. Decisions like this risk undermining that immense value.
Perhaps worst of all, this may just be a taste of things to come when the changes to IR35 come in to force next April. We urge the government to halt and rethink this dangerous policy. Now, facing an uncertain economic future, this country needs the flexibility and dynamism of the self-employed more than ever, and the government must do more to support them.
This news shortly follows on from Barclays Bank announcing it will stop using off-payroll contractors through limited companies, which IPSE described as “a taste of the IR35 chaos to come”.
The motive behind this move is to circumvent the IR35 regulations which will come in to effect in the private sector in April 2020.
Darius is the editor of HRreview. He has previously worked as a finance reporter for the Daily Express. He studied his journalism masters at Press Association Training and graduated from the University of York with a degree in History.
Oh dear, the end of the gravy train is in sight – and ‘contractors’ will have to start paying proper tax and NI like the rest of us. Maybe that will add £275b to the economy ?
I would suggest that this is merely putting a long overdue end to an ‘anomaly’.
A question for Mr Chamberlain regarding the £275 billion added to the economy. Please show your working, as my old maths teacher used to say.
Also, how would this figure be affected by those same individuals undertaking the same work, at the same rate of pay, but on a PAYE footing ? Would it be more, or less ? – and by how much ? Again I would be grateful if you could show your working.
I sense this comparison would help inform any meaningful discussion on the matter.
The gravy train of no sick pay, holiday bonuses, no final salary increases, paying for own training, accountancy, employers adding 60% toward pensions…… If there were the jobs out there to become permanent staff on decent salaries I would make the transition. I support the previous persons request to justify the arbitrary £275B added to the economy. I would hope the individuals calculations consider the jobs which are lost due to the additional burden on SME are considered. Are we to sub contract all our work to China…..?
I think John makes a very valid point which I hadn’t considered – that not only is there the benefit in regular employment of paying proper statutory PAYE contributions, but also benefitting from Company Sick Pay, paid annual leave, Employers’ pension contributions (although, to be fair, I have never comes across a 60% rate – it’s more usually 5-10%), bonuses from some employers and so on.
Sounds like a win-win to me.
I note with disappointment the stony silence from Mr Chamberlain regarding the underpinning calculations/assumptions for the £275bn figure quoted, despite the passage of several days.
Does anyone else suspect he may have just made it up ?