Contractors: IR35 & general discussion

Contractors: IR35 & general discussion

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Discussion

Gazzab

21,061 posts

281 months

Tuesday 18th February 2020
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g7orge said:
Sounds like last time you saw a contractor invoice was in the 80s - majority of invoices will show a day rate -
Not quite. The cost of the contractor as seen on most finance spreadsheets and as sometimes spotted by perms is generally the all in rate ie includes vat and/or agency fee. Even if they saw ‘my’ rate then they of course don’t know what I am paying in insurances, accountancy fees, live away from home costs, how long my time between contracts might typically be, what I am self funding re hol pay, pension, life assurance, health insurance, gym membership etc etc. All of a sudden the gap shortens. Yes my rate might look like 2 or 3 times that of a perm salary at the same ‘level’ but take all this stuff off then it’s not such a gap. Then of course if I was perm then I wouldn’t be doing this job, I’d be a couple of grades further up the food chain.
It isn’t great though when you hear that people are gossiping about your rate as someone has spotted it on a renewals spreadsheet.

Clockwork Cupcake

74,402 posts

271 months

Tuesday 18th February 2020
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Gazzab said:
Not quite. The cost of the contractor as seen on most finance spreadsheets and as sometimes spotted by perms is generally the all in rate ie includes vat and/or agency fee. Even if they saw ‘my’ rate then they of course don’t know what I am paying in insurances, accountancy fees, live away from home costs, how long my time between contracts might typically be, what I am self funding re hol pay, pension, life assurance, health insurance, gym membership etc etc. All of a sudden the gap shortens. Yes my rate might look like 2 or 3 times that of a perm salary at the same ‘level’ but take all this stuff off then it’s not such a gap. Then of course if I was perm then I wouldn’t be doing this job, I’d be a couple of grades further up the food chain.
It isn’t great though when you hear that people are gossiping about your rate as someone has spotted it on a renewals spreadsheet.
Indeed.

The other thing that a lot of salaried employees don't realise is how much they cost their employer before anything shows up on their payslip. For example, a lot of employees won't realise that their employer is paying Employer's National Insurance for them, as (and please correct me if I am wrong) this doesn't show up on their payslip.
And, even if they do, they probably won't understand that headline rate and headline salary do not equate, and they conveniently forget their paid holiday, paid sick days, pension contributions, etc.

It reminds me of my mum bhing and moaning about the cost of food in a restaurant. I remember her saying "I could make this meal for a fraction of the price!" and me asking her how much she was paying herself, and how much she was apportioning for rent, electricity, gas, water, maintenance & upkeep, spoilage, wastage, advertising, telephone, taxes, insurance, and (gasp) profit. She retorted that this wasn't the point, and I replied that on the contrary it most certainly was.

Edited by Clockwork Cupcake on Tuesday 18th February 18:17

wombleh

1,778 posts

121 months

Tuesday 18th February 2020
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Similar experience here, I was freelancing for about 18 years and can’t say I ever saw any contractors gloating about their day rate to permanent staff, would have just caused problems. Not worked in O&G though.

Countdown

39,690 posts

195 months

Tuesday 18th February 2020
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g7orge said:
Countdown said:
hyphen said:
Countdown said:
With regards to permies knowing what rates Contractors are on, pretty much most people in the Finance team will know, and I'd be surprised if Managers in the IT team didn't know. It would be a relatively junior member of the IT team who raised a Purchase Order and office gossip is what it is.
Will they know what the contractor is on? Or what the contractor + agency is charging....
The latter (as most of our Contractors are/were from Randstad) and their invoices don't break it down. Unfortunately people assume that's what the Contractor is on hehe

Randstad's invoices tend to say "Mr Jim Contractor X hours @ £00 per hour". Our SAP Support invoices just say "Quarter 3 209/20, X hours @ £00 per hour". In the first case it's always "Jim" who's been on site, and had his timesheets signed off by a member of staff. In the latter case we ask for a job doing, they quite X hours, and they'll bill for X hours
Sounds like last time you saw a contractor invoice was in the 80s - majority of invoices will show a day rate -
I don't tend to see that many tbh, but I've been seeing a lot recently because of the work we've done on IR35. At a rough guess I'd say 70-80% quote an hourly rate, not a day rate. The SAP support invoices always quote for a job in hours (in fact I think the maintenance contract specifies so many hours per quarter). If we ask them to amend somebody's SAP profile, or to add a new set of reports, that's not a "1 day job". Equally anything more complicated they'll quite "X hours to load onto DEV environment, Y hours in TEST, and Z hours in LIVE". It's not a "X days" quote

768

13,601 posts

95 months

Tuesday 18th February 2020
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My invoices quote a day rate, but I bill in half hours (based on 7.5 hours to a working day).

Clockwork Cupcake

74,402 posts

271 months

Tuesday 18th February 2020
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Countdown said:
I don't tend to see that many tbh, but I've been seeing a lot recently because of the work we've done on IR35. At a rough guess I'd say 70-80% quote an hourly rate, not a day rate. The SAP support invoices always quote for a job in hours (in fact I think the maintenance contract specifies so many hours per quarter). If we ask them to amend somebody's SAP profile, or to add a new set of reports, that's not a "1 day job". Equally anything more complicated they'll quite "X hours to load onto DEV environment, Y hours in TEST, and Z hours in LIVE". It's not a "X days" quote
It's quite usual to engage people on a "time and materials" basis though - mechanics, builders, plumbers, lawyers, etc. So I don't think hourly rate vs daily rate makes a huge difference.

Personally I prefer an hourly rate as there is less scope for taking the piss. With a day rate, there is sometimes the expectation from a client that a "day" is "every waking hour".


Countdown

39,690 posts

195 months

Tuesday 18th February 2020
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Clockwork Cupcake said:
Countdown said:
I don't tend to see that many tbh, but I've been seeing a lot recently because of the work we've done on IR35. At a rough guess I'd say 70-80% quote an hourly rate, not a day rate. The SAP support invoices always quote for a job in hours (in fact I think the maintenance contract specifies so many hours per quarter). If we ask them to amend somebody's SAP profile, or to add a new set of reports, that's not a "1 day job". Equally anything more complicated they'll quite "X hours to load onto DEV environment, Y hours in TEST, and Z hours in LIVE". It's not a "X days" quote
It's quite usual to engage people on a "time and materials" basis though - mechanics, builders, plumbers, lawyers, etc. So I don't think hourly rate vs daily rate makes a huge difference.

Personally I prefer an hourly rate as there is less scope for taking the piss. With a day rate, there is sometimes the expectation from a client that a "day" is "every waking hour".
To clarify - I wasn't using the hourly rate/daily rate in relation to the "Inside/Outside" debate. It was in relation to explaining how people in the company would find out about a Contractors daily rate even if they didn't boast about them. People enjoy gossiping and information flies around at the speed of light.

Clockwork Cupcake

74,402 posts

271 months

Tuesday 18th February 2020
quotequote all
Countdown said:
To clarify - I wasn't using the hourly rate/daily rate in relation to the "Inside/Outside" debate. It was in relation to explaining how people in the company would find out about a Contractors daily rate even if they didn't boast about them. People enjoy gossiping and information flies around at the speed of light.
Ah, ok. Apologies for my misunderstanding.

Yes, you are quite correct.

worsy

5,776 posts

174 months

Tuesday 18th February 2020
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https://norightsemployee.uk/

Someone needs a round of applause.

StanleyT

1,994 posts

78 months

Tuesday 18th February 2020
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tighnamara said:
GT03ROB said:
I've worked O&G in the major EPC contractors at home & abroad. Contractor rates are well know from the contractors telling staff they are mugs........ until the industry turns down.
I’ve been 30 years as staff and contractor and can safely say that is not the case working in operators offices, the contractor wouldn’t last 5 mins if that was the case.
It has been that way at Woods, Parsons, Amec, Talisman, Genisis, Xodus etc in Aberdeen for a couple of decades, with contractors telling staff how they are moving to the next door office of the competitor for an uplift greater than the permies hourly rate. Of course, when the cull came a few years ago though the contractors were not so quick to tell the staffies they were getting 20% pay cuts.

Anyway, today our Human Remains department, after months of faffing, CESTing etc etc decides that contractors are outside IR35. Why? Right of substitution issues over security clearance? Using work computer software to do their jobs? Nope, because Worley down the road two weeks ago said their contractors were outside and HR have seen the outpouring of contractors to there!!!!!!! Hmmm, wasn't there supposed to be some corporate level responsibility on the decision? Rather than doing i because you're losing (and have lost) a significant portion of your contractors.

Clockwork Cupcake

74,402 posts

271 months

Tuesday 18th February 2020
quotequote all
worsy said:
Someone needs a round of applause.
Someone also needs to pay more attention to the thread, as it has been linked to several times already. wink

mondeoman

11,430 posts

265 months

Tuesday 18th February 2020
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StanleyT said:
tighnamara said:
GT03ROB said:
I've worked O&G in the major EPC contractors at home & abroad. Contractor rates are well know from the contractors telling staff they are mugs........ until the industry turns down.
I’ve been 30 years as staff and contractor and can safely say that is not the case working in operators offices, the contractor wouldn’t last 5 mins if that was the case.
It has been that way at Woods, Parsons, Amec, Talisman, Genisis, Xodus etc in Aberdeen for a couple of decades, with contractors telling staff how they are moving to the next door office of the competitor for an uplift greater than the permies hourly rate. Of course, when the cull came a few years ago though the contractors were not so quick to tell the staffies they were getting 20% pay cuts.

Anyway, today our Human Remains department, after months of faffing, CESTing etc etc decides that contractors are outside IR35. Why? Right of substitution issues over security clearance? Using work computer software to do their jobs? Nope, because Worley down the road two weeks ago said their contractors were outside and HR have seen the outpouring of contractors to there!!!!!!! Hmmm, wasn't there supposed to be some corporate level responsibility on the decision? Rather than doing i because you're losing (and have lost) a significant portion of your contractors.
If everyone did that, we'd be fine.

Tim330

1,125 posts

211 months

Tuesday 18th February 2020
quotequote all
StanleyT said:
It has been that way at Woods, Parsons, Amec, Talisman, Genisis, Xodus etc in Aberdeen for a couple of decades, with contractors telling staff how they are moving to the next door office of the competitor for an uplift greater than the permies hourly rate. Of course, when the cull came a few years ago though the contractors were not so quick to tell the staffies they were getting 20% pay cuts.

Anyway, today our Human Remains department, after months of faffing, CESTing etc etc decides that contractors are outside IR35. Why? Right of substitution issues over security clearance? Using work computer software to do their jobs? Nope, because Worley down the road two weeks ago said their contractors were outside and HR have seen the outpouring of contractors to there!!!!!!! Hmmm, wasn't there supposed to be some corporate level responsibility on the decision? Rather than doing i because you're losing (and have lost) a significant portion of your contractors.
Out of interest where do you currently contract? I heard about Worleys decision for outside. I'm currently at Fluor and all contractors have completed an assessment with QDOS but Fluor hasn't announced the determinations yet.
I heard KBR has said outside as well so it's looking better on the O&G contractor side rather than the operators (BP, Shell, INEOS inside, Chevron not issued determinations yet)

GT03ROB

13,207 posts

220 months

Tuesday 18th February 2020
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Tim330 said:
StanleyT said:
It has been that way at Woods, Parsons, Amec, Talisman, Genisis, Xodus etc in Aberdeen for a couple of decades, with contractors telling staff how they are moving to the next door office of the competitor for an uplift greater than the permies hourly rate. Of course, when the cull came a few years ago though the contractors were not so quick to tell the staffies they were getting 20% pay cuts.

Anyway, today our Human Remains department, after months of faffing, CESTing etc etc decides that contractors are outside IR35. Why? Right of substitution issues over security clearance? Using work computer software to do their jobs? Nope, because Worley down the road two weeks ago said their contractors were outside and HR have seen the outpouring of contractors to there!!!!!!! Hmmm, wasn't there supposed to be some corporate level responsibility on the decision? Rather than doing i because you're losing (and have lost) a significant portion of your contractors.
Out of interest where do you currently contract? I heard about Worleys decision for outside. I'm currently at Fluor and all contractors have completed an assessment with QDOS but Fluor hasn't announced the determinations yet.
I heard KBR has said outside as well so it's looking better on the O&G contractor side rather than the operators (BP, Shell, INEOS inside, Chevron not issued determinations yet)
I think I know what the decision will be wink

StanleyT

1,994 posts

78 months

Wednesday 19th February 2020
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Tim330 said:
StanleyT said:
It has been that way at Woods, Parsons, Amec, Talisman, Genisis, Xodus etc in Aberdeen for a couple of decades, with contractors telling staff how they are moving to the next door office of the competitor for an uplift greater than the permies hourly rate. Of course, when the cull came a few years ago though the contractors were not so quick to tell the staffies they were getting 20% pay cuts.

Anyway, today our Human Remains department, after months of faffing, CESTing etc etc decides that contractors are outside IR35. Why? Right of substitution issues over security clearance? Using work computer software to do their jobs? Nope, because Worley down the road two weeks ago said their contractors were outside and HR have seen the outpouring of contractors to there!!!!!!! Hmmm, wasn't there supposed to be some corporate level responsibility on the decision? Rather than doing i because you're losing (and have lost) a significant portion of your contractors.
Out of interest where do you currently contract? I heard about Worleys decision for outside. I'm currently at Fluor and all contractors have completed an assessment with QDOS but Fluor hasn't announced the determinations yet.
I heard KBR has said outside as well so it's looking better on the O&G contractor side rather than the operators (BP, Shell, INEOS inside, Chevron not issued determinations yet)
If I told you where my current gigs are, that Wood be telling wouldn't it and I'd be sent on an Xodus if either of my bosses found out. The whole in/out thing doesn't bother me though as I deliver multiphase process simulations currently which I do via my own company for fixed prices anyway. (Though I have just worked out that one job that I got too interested in when it turned out to be harder than expected, that I spent too much time upon, my wage was £8.88 per hour!!! Ooops!).

Tim330

1,125 posts

211 months

Wednesday 19th February 2020
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StanleyT said:
If I told you where my current gigs are, that Wood be telling wouldn't it and I'd be sent on an Xodus if either of my bosses found out. The whole in/out thing doesn't bother me though as I deliver multiphase process simulations currently which I do via my own company for fixed prices anyway. (Though I have just worked out that one job that I got too interested in when it turned out to be harder than expected, that I spent too much time upon, my wage was £8.88 per hour!!! Ooops!).
At least it was above minimum wage. Thanks for sharing, good to know there are still other local options.

8bit

4,846 posts

154 months

Wednesday 19th February 2020
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So I got my determination yesterday, "inside" despite being given an "IR35-friendly" contract when I started last month. My client is an IT Managed Service firm and I am currently assigned to one of their larger clients, an oil and gas exploration/production firm in Aberdeen.

My client have said that they are "adjusting" (read; reducing) our day rates to cover the ENIC and apprenticeship levy although my understanding was that it's the end user (so surely my client's client, not my client) that have to pay these, is that correct? They have said that they will pick up the costs of these for their contractors but I don't know if that means just their agency folks or if it covers people on these managed service firms as well.

Regards my options, I've been offered a staff post on a reasonable sort of deal, option to remain contracting or I can go to a FTC with my client, so in effect they act as an umbrella company. I'm having a call with my accountant later this week to go through it all and decide the best way forward.

aeropilot

34,299 posts

226 months

Wednesday 19th February 2020
quotequote all
8bit said:
So I got my determination yesterday, "inside" despite being given an "IR35-friendly" contract when I started last month.
Seriously.....WTF?

banghead

8bit

4,846 posts

154 months

Wednesday 19th February 2020
quotequote all
aeropilot said:
8bit said:
So I got my determination yesterday, "inside" despite being given an "IR35-friendly" contract when I started last month.
Seriously.....WTF?

banghead
I don't really get it either. Current contract has a clause in it which gives the right to substitution certainly, although the assessment says I wouldn't be allowed to do that.

Blown2CV

28,697 posts

202 months

Wednesday 19th February 2020
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8bit said:
So I got my determination yesterday, "inside" despite being given an "IR35-friendly" contract when I started last month. My client is an IT Managed Service firm and I am currently assigned to one of their larger clients, an oil and gas exploration/production firm in Aberdeen.

My client have said that they are "adjusting" (read; reducing) our day rates to cover the ENIC and apprenticeship levy although my understanding was that it's the end user (so surely my client's client, not my client) that have to pay these, is that correct? They have said that they will pick up the costs of these for their contractors but I don't know if that means just their agency folks or if it covers people on these managed service firms as well.

Regards my options, I've been offered a staff post on a reasonable sort of deal, option to remain contracting or I can go to a FTC with my client, so in effect they act as an umbrella company. I'm having a call with my accountant later this week to go through it all and decide the best way forward.
i dunno the ins and outs of your determination or what role you are actually doing, but i can say from experience in my role in a SI is that if you are assigned to a single dedicated end client and that is your role scope, typically you are there for the long term and it is the knowledge and understanding of the end client which makes you useful in your role. The managed service nature of the commercial engagement makes that even more so as there is no logical end date and the value to the client is in the provider understanding them and partnering effectively over a long period. I can't imagine the logic in your contract ever having been presented as outside; it just doesn't make any sense to me. You'd be required to build knowledge about the end client in order to do your job properly. That would make you inherently difficult to substitute.