In the UK this was normal for IT (and other) contractors because there were tax advantages to the employer and to the employee/contractor. The employer could av

In the UK this was normal for IT (and other) contractors because there were tax advantages to the employer and to the employee/contractor. The employer could avoid paying National Insurance (social security) taxes of 10% as well as pension and sick pay contributions. The employee could pay themselves a small salary - enough to get social security benefits but be in the lowest or no-tax band and pay the rest as dividends from their limited company where tax was paid at a lower rate than income tax. It was a good wheeze but some years ago the govt bought in legislation "IR35" which basically says that if it looks like a employment contract then it should be taxed like a "normal" employment contract.