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In the UK there's a set of criteria (IR35) that attempt to codify the distinction. The hiring business has to make the assessment. One of criteria is right to

In the UK there's a set of criteria (IR35) that attempt to codify the distinction. The hiring business has to make the assessment. One of criteria is right to subcontract and freedom to work with multiple clients. If they get it wrong, they're liable for taxes, not the Contractor. HMRC, the UK tax body is responsible for this, and therefore it is an utter mess in practice and has had chilling effects on the UK IT consulting market.

gumby 4y ago
The US tax authority (IRS) has a similar set of rules; if you can set your hours and working conditions and have your own equipment or tools it justifies not being an employee. There are of course important corner conditions like hiring a contractor who operates some machine you own. In general, though some people prefer to be contractors, these rules are in place because some employers try to classify de facto employees as contractors to avoid paying taxes or providing required benefits. Google, FB etc have complex contractor rules for their third party contractor agencies to steer clear of that and make sure they save on taxes and benefits.
- thaumasiotes 4y ago
  > if you can set your hours and working conditions and have your own equipment or tools it justifies not being an employee. There are of course important corner conditions like hiring a contractor who operates some machine you own. Note that security guards can be structured as contractors despite obviously not being able to choose where or when they work. There's a big list of things that "weigh in favor" of one status or the other. There aren't definitive answers unless you've recently won a lawsuit against the government (which always wants employee status for everyone).
  - hervature 4y ago
    I think guards are a bit different. Don’t companies usually contract a security company and they hire employees (or get contractors who might work for multiple companies)? Those companies are free to choose which gigs they want.
  - SllX 4y ago
    The guards are still usually W-2 employees; but they’re employees of the firm that’s been contracted. Referring to them as “contractors” is more a colloquialism, but it marks someone that works for an outside firm versus someone that’s in-house and on the company team, even if they work in the same office day in and day out.
    - b800h 4y ago
      Yeah, there's a big disparity between UK and US terminology here. I'm the UK, a "contractor" is typically in business on their own account, applying for jobs directly to the end client. In the US, it seems like a "contractor" frequently works for an outsourcing company. In the UK we'd typically call these people "temps" or "consultancy staff" depending on the source.
      - nicoburns 4y ago
        > In the US, it seems like a "contractor" frequently works for an outsourcing company. In the UK we'd typically call these people "temps" or "consultancy staff" depending on the source. I think contractor is still used in that case in the UK sometimes too. The obvious example being construction firms.
      - lupire 4y ago
        It's Temp/Vendor/Contractor lumped together as "people who work here but allegedly aren't legally employees of thia company, so we can deceive about all the great benefits "all" our "employees" get.
      - WastingMyTime89 4y ago
        Doesn’t consultancy staff also cover people working for an actual consulting company? I have worked on long contract - one or two years - for clients in the past helping them structure and put in place large projects and while I was technically there full time it was pretty clear that this was temporary, I was filling a punctual need the business wouldn’t have after and there was a somewhat clear idea of when we would part. These relations are not necessary a way to pay less or not give benefits. I was actually paid a lot better than if I had been working there.
trollied 4y ago
IR35 is going away. It got the axe in the insane mini budget a few weeks ago.
- nprateem 4y ago
  No, the changes to it are going away, not the legislation. It'll be back on contractors to make the determination of IR35 status again
  - BerislavLopac 4y ago
    And it's not even certain that this is going away; even if it does, it won't be before the next tax year at the earliest.
    - VBprogrammer 4y ago
      By which point we might be onto the next PM. Or the one after that going by the current rate of attrition...
  - sgjohnson 4y ago
    Which in practice means that yes, IR35 is going away, because HMRC is not going to audit every single contractor, unless they make a significant amount of money, and those that do make a significant amount of money, are almost certainly going to fall outside of IR35
  - trollied 4y ago
    Which means it’s essentially going away. I first encountered it in 2005 when I first contracted & it has never affected me. It nearly affected me with my previous contract a couple of years ago as the business really didn’t understand it and was “playing safe” by trying to go “inside IR35” for the role, but that’s utter nonsense for a 3 month engagement such as the one I was doing. I’ve always paid employers NI etc. I don’t understand why they don’t change Ltd company dividends & up the %age for the first £100k or so - it’d effectively solve the problem they’re trying to fix (lost tax/NI revenue), without all the messing about.
sgjohnson 4y ago
> The hiring business has to make the assessment. not anymore
- sirsinsalot 4y ago
  Quite, though given the state of the gov, I expect a few flip-flops and anything could be true in 6 months!
EdwardDiego 4y ago
I think it's a great idea, there's far too many businesses that exploit employees by labelling them contractors. Of course, idea and execution are two very different things. In NZ, it's often found in courier companies and telecommunications, where you're an owner-operator! Except you have to do what the company you work for says, when they say, and you have to provide all your own equipment, and of course, pay for your own sick leave, accident insurance and holiday pay. And no you can't work for a competitor, are you nuts? At one point our tax department started cracking down on this, then stopped, I'm not sure why. But it needs to be done. And let's not even discuss the infamous Hobbit law, where a right leaning government passed legislation under urgency to make all film industry employees contractors, with no rights to unionise, to keep Peter Jackson (he can get the Sir back when he redeems himself in my mind) and Warner Brothers happy after Jackson's Weta Studios lost an Employment Court case brought by a "contractor" who they very vigorously treated as an employee.
- Tade0 4y ago
  > At one point our tax department started cracking down on this, then stopped, I'm not sure why. But it needs to be done. Around here (Poland) they tried to focus the crackdown on... contractors, planning on requiring a contractor to have at least 25% of their income from a second client to be considered self-employed and not an employee. The local IT lobbyists had a hearty laugh about this idea and that was the end of it.
  - dbetteridge 4y ago
    We have a similar rule in Australia that unfortunately was introduced, so called 'personal services income' if you make over 80% of your money from a single source you effectively can't make tax deductions like a business.
  - EdwardDiego 4y ago
    Yeah, that's definitely the wrong place to focus - focus on the employers, as they're the ones who reap the benefits of treating employees as contractors.
VBprogrammer 4y ago
There was a significant part of the UK IT consulting market which was not really consulting though right? People turning up and doing the same job day in day out for months or years. At least in the IT industry people legitimately had some freedoms. I was amused to learn that a lot of lorry drivers were operating as contractors outside IR35. Not even those driving their own vehicles. The driving regulations make it pretty difficult for one driver to do anything different from another driver.
- PUSH_AX 4y ago
  100%. I’m a contractor, and for many companies and recruiters it was a wink wink nudge nudge arrangement to keep a gravy train running. An element of that will return when the reform is scrapped.
  - VBprogrammer 4y ago
    Comically the revert of the revert has now been pushed and we're back to businesses deciding inside or outside of IR35.
varispeed 4y ago
There is a lot of misconceptions about this. > One of criteria is right to subcontract It's not entirely true. Just because such right exists in the contract, does not mean it is valid. HMRC guidances have a ton of rules where it does not count. For instance if the business could use the sub-contractor directly. > and freedom to work with multiple clients. This is also irrelevant, because exclusive supply agreements is a normal business practice. Also people can hold multiple employments and that does not make them "contractors". People can also be contractors and employees at the same time and anything in between. > If they get it wrong, they're liable for taxes, not the Contractor. That's not entirely correct either. The client can claw the money back from the Contractor and very much every contract I have seen has clauses ensuring that any unpaid tax the client is liable for will be re-paid by the contractor.
- sirsinsalot 4y ago
  Seeing as I worked on a CEST adjacent tool in the legislative area, if I don't understand it, then you can see why it is such a mess!
stuaxo 4y ago
In the UK, them using the data in this way would be a breach of GDPR. You can only use the data for the purpose you originally stated, and this is not it.
mr_gibbins 4y ago
Luckily, this mess is due to be repealed, it was one of the lesser-known Trussonomic decisions made in the last few weeks. Assuming, of course, that Truss does not repeal the repeal. It's not like she is known for doing screeching U-turns...

gumby 4y ago

The US tax authority (IRS) has a similar set of rules; if you can set your hours and working conditions and have your own equipment or tools it justifies not being an employee. There are of course important corner conditions like hiring a contractor who operates some machine you own. In general, though some people prefer to be contractors, these rules are in place because some employers try to classify de facto employees as contractors to avoid paying taxes or providing required benefits. Google, FB etc have complex contractor rules for their third party contractor agencies to steer clear of that and make sure they save on taxes and benefits.

thaumasiotes 4y ago
> if you can set your hours and working conditions and have your own equipment or tools it justifies not being an employee. There are of course important corner conditions like hiring a contractor who operates some machine you own. Note that security guards can be structured as contractors despite obviously not being able to choose where or when they work. There's a big list of things that "weigh in favor" of one status or the other. There aren't definitive answers unless you've recently won a lawsuit against the government (which always wants employee status for everyone).
- hervature 4y ago
  I think guards are a bit different. Don’t companies usually contract a security company and they hire employees (or get contractors who might work for multiple companies)? Those companies are free to choose which gigs they want.
- SllX 4y ago
  The guards are still usually W-2 employees; but they’re employees of the firm that’s been contracted. Referring to them as “contractors” is more a colloquialism, but it marks someone that works for an outside firm versus someone that’s in-house and on the company team, even if they work in the same office day in and day out.
  - b800h 4y ago
    Yeah, there's a big disparity between UK and US terminology here. I'm the UK, a "contractor" is typically in business on their own account, applying for jobs directly to the end client. In the US, it seems like a "contractor" frequently works for an outsourcing company. In the UK we'd typically call these people "temps" or "consultancy staff" depending on the source.
    - nicoburns 4y ago
      > In the US, it seems like a "contractor" frequently works for an outsourcing company. In the UK we'd typically call these people "temps" or "consultancy staff" depending on the source. I think contractor is still used in that case in the UK sometimes too. The obvious example being construction firms.
    - lupire 4y ago
      It's Temp/Vendor/Contractor lumped together as "people who work here but allegedly aren't legally employees of thia company, so we can deceive about all the great benefits "all" our "employees" get.
    - WastingMyTime89 4y ago
      Doesn’t consultancy staff also cover people working for an actual consulting company? I have worked on long contract - one or two years - for clients in the past helping them structure and put in place large projects and while I was technically there full time it was pretty clear that this was temporary, I was filling a punctual need the business wouldn’t have after and there was a somewhat clear idea of when we would part. These relations are not necessary a way to pay less or not give benefits. I was actually paid a lot better than if I had been working there.

trollied 4y ago

IR35 is going away. It got the axe in the insane mini budget a few weeks ago.

nprateem 4y ago
No, the changes to it are going away, not the legislation. It'll be back on contractors to make the determination of IR35 status again
- BerislavLopac 4y ago
  And it's not even certain that this is going away; even if it does, it won't be before the next tax year at the earliest.
  - VBprogrammer 4y ago
    By which point we might be onto the next PM. Or the one after that going by the current rate of attrition...
- sgjohnson 4y ago
  Which in practice means that yes, IR35 is going away, because HMRC is not going to audit every single contractor, unless they make a significant amount of money, and those that do make a significant amount of money, are almost certainly going to fall outside of IR35
- trollied 4y ago
  Which means it’s essentially going away. I first encountered it in 2005 when I first contracted & it has never affected me. It nearly affected me with my previous contract a couple of years ago as the business really didn’t understand it and was “playing safe” by trying to go “inside IR35” for the role, but that’s utter nonsense for a 3 month engagement such as the one I was doing. I’ve always paid employers NI etc. I don’t understand why they don’t change Ltd company dividends & up the %age for the first £100k or so - it’d effectively solve the problem they’re trying to fix (lost tax/NI revenue), without all the messing about.

sgjohnson 4y ago

> The hiring business has to make the assessment. not anymore

sirsinsalot 4y ago
Quite, though given the state of the gov, I expect a few flip-flops and anything could be true in 6 months!

EdwardDiego 4y ago

I think it's a great idea, there's far too many businesses that exploit employees by labelling them contractors. Of course, idea and execution are two very different things. In NZ, it's often found in courier companies and telecommunications, where you're an owner-operator! Except you have to do what the company you work for says, when they say, and you have to provide all your own equipment, and of course, pay for your own sick leave, accident insurance and holiday pay. And no you can't work for a competitor, are you nuts? At one point our tax department started cracking down on this, then stopped, I'm not sure why. But it needs to be done. And let's not even discuss the infamous Hobbit law, where a right leaning government passed legislation under urgency to make all film industry employees contractors, with no rights to unionise, to keep Peter Jackson (he can get the Sir back when he redeems himself in my mind) and Warner Brothers happy after Jackson's Weta Studios lost an Employment Court case brought by a "contractor" who they very vigorously treated as an employee.

Tade0 4y ago
> At one point our tax department started cracking down on this, then stopped, I'm not sure why. But it needs to be done. Around here (Poland) they tried to focus the crackdown on... contractors, planning on requiring a contractor to have at least 25% of their income from a second client to be considered self-employed and not an employee. The local IT lobbyists had a hearty laugh about this idea and that was the end of it.
- dbetteridge 4y ago
  We have a similar rule in Australia that unfortunately was introduced, so called 'personal services income' if you make over 80% of your money from a single source you effectively can't make tax deductions like a business.
- EdwardDiego 4y ago
  Yeah, that's definitely the wrong place to focus - focus on the employers, as they're the ones who reap the benefits of treating employees as contractors.

VBprogrammer 4y ago

There was a significant part of the UK IT consulting market which was not really consulting though right? People turning up and doing the same job day in day out for months or years. At least in the IT industry people legitimately had some freedoms. I was amused to learn that a lot of lorry drivers were operating as contractors outside IR35. Not even those driving their own vehicles. The driving regulations make it pretty difficult for one driver to do anything different from another driver.

PUSH_AX 4y ago
100%. I’m a contractor, and for many companies and recruiters it was a wink wink nudge nudge arrangement to keep a gravy train running. An element of that will return when the reform is scrapped.
- VBprogrammer 4y ago
  Comically the revert of the revert has now been pushed and we're back to businesses deciding inside or outside of IR35.

varispeed 4y ago

There is a lot of misconceptions about this. > One of criteria is right to subcontract It's not entirely true. Just because such right exists in the contract, does not mean it is valid. HMRC guidances have a ton of rules where it does not count. For instance if the business could use the sub-contractor directly. > and freedom to work with multiple clients. This is also irrelevant, because exclusive supply agreements is a normal business practice. Also people can hold multiple employments and that does not make them "contractors". People can also be contractors and employees at the same time and anything in between. > If they get it wrong, they're liable for taxes, not the Contractor. That's not entirely correct either. The client can claw the money back from the Contractor and very much every contract I have seen has clauses ensuring that any unpaid tax the client is liable for will be re-paid by the contractor.

sirsinsalot 4y ago
Seeing as I worked on a CEST adjacent tool in the legislative area, if I don't understand it, then you can see why it is such a mess!

stuaxo 4y ago

In the UK, them using the data in this way would be a breach of GDPR. You can only use the data for the purpose you originally stated, and this is not it.

mr_gibbins 4y ago

Luckily, this mess is due to be repealed, it was one of the lesser-known Trussonomic decisions made in the last few weeks. Assuming, of course, that Truss does not repeal the repeal. It's not like she is known for doing screeching U-turns...