Contracter / Interim Holiday question ?

[phib]

Just a quick one, after running my own business for 6 years I have been offered a 9 month contract by one of my customers to act as a consultant for them (management consultant) A very good offer !!!

The question is I can't remember what the score is on the company paying me for holiday. I will be working on a daily rate for them for a maximum of 9 months.

I am sure that there was an eu directive on consultants / inerims that stated they have to be paid holiday

Is that the case ?

Does anyone know the facts ?

Thanks
Phib

[romanymagic]

This will depend on how you are going to go contracting with them i.e. are you going to be a contractor with a Ltd Company or go through an umbrella company or are you contracting on a fixed term contract arrangement like a temporary worker? This comes under the "opt-in" / "opt-out" system which came into place sometime ago the opt-in was desinged to provide maternity/paternity, annual leave, sick leave payments to temporary agency workers so they had the same rights as permanent employees. Opt out is designed for Ltd Co contractors who by opting out waiver the rights to be paid for holiday etc. but at the same time enables them to prove they are working through their own Ltd Co so gain the necessary tax deductions, pay themselves dividends etc. It may be worth checking with thie company that has offered you the contract!

[phib]

My plan is to invoice the company I will be working for from my Ltd company.

At the moment I have given them an initial daily rate of X and they are happy with it, the difficult bit is we have not really discussed holiday (as the contract has not been finalised)

I have to go back next week to finalise and am not sure if they think the day rate would be plus holiday or including holiday ?

Now this could be quite a big difference in money terms i.e. an extra 20ish days at x

The main reason for doing this contract is to gain enough cash to launch my own business in a new direction in early 2007 so cash is key but I dont want to loose the contract ?

I just wansnt sure if there was a "Standard" in interim management consultancy ?

[Eric Mc]

I wouldn't think that you have any form of holiday entitlement in this type of situation as the contract is not with you personally but with your limited company. Indeed, trying to insist on holiday entitlements could increase your exposure to an IR35 assessment.

[JonRB]

Eric Mc said:

I wouldn't think that you have any form of holiday entitlement in this type of situation as the contract is not with you personally but with your limited company.

Absolutely. Your client pays your company, and it is your company that pays you, not the client. You can arrange your company affairs any way you like, within reason, and you can call your holiday paid or unpaid, but the bottom line is that your client pays your company on the days that you provide a consultant. On those days that you cannot provide one, then you would not expect the client to pay for something they have not received. Or, to put it another way, if the only consultant your company can provide is you, and you want to take holiday, then it's going to be unpaid (by the client) as your company is not providing anyone. Of course, your company can still pay you and you can call it paid holiday if you want, but that is completely irrelevant with regards to the client.

Eric Mc said:

Indeed, trying to insist on holiday entitlements could increase your exposure to an IR35 assessment.

Quite. I'd be far more concerned about IR35 issues that holiday issues for maximising profits on a contract.


>> Edited by JonRB on Monday 15th May 15:30

[phib]

All very clear thanks for the info guys .. I had thought this was the case the only thing that had made me a little confused is that I have a consultant who works through my business and our client insists on paying holiday !!!!!

They are quite a large company and a good customer and we don't really want to start an argument as they have insisted they pay it (not us trying to pull a fast one)

Thanks
Phib

[JonRB]

I'm very concerned that your client wants to pay you holiday. I'm sure they are trying to be really nice to you and are trying to give you a 'good deal' but you are going to find your IR35 position severely weakened by it, especially if the wording of the contract calls for personal service by you by name (rather than just a consultant of MyCompany Ltd.)

If this is a direct contract with the client without an intermediary and they are expecting personal service, you may be better off working as a Sole Trader and not involving your limited company.

Edit: Having said that, I'll defer to Eric on that one and look forward to his comments.

>> Edited by JonRB on Monday 15th May 15:55

[Eric Mc]

The problem with trying the Sole Trader route is that the "employer" would find themselves exposed for failing to put the individual on their payroll in the first place. It was this exposure which encouraged potential employers to persuade individuals to set up their own limited liability companies. That removed the risk from the employers and placed the onus on accounting for tax and NI on the individual and their company.

Obviously, before IR35, many individuals used their own companies to pay themselves dividends rather than salary - thus reducing the NI amounts due. However, as I stated above, the prime motive for setting up these copmpanies was to get the "employers" off the hook.

[JonRB]

Hmm. Ok, well given that, I'll return to saying that I would be very nervous with the concept of the client paying for work that you had not undertaken (ie. paid holiday) unless it could be worded in such a way as to be a 100% retainer. And even then I'd be worried of it being a very serious pointer to disguised employment and hence bringing the contract into being caught by IR35 with all the extra tax burden that entails.

>> Edited by JonRB on Monday 15th May 16:08