Author Profile Picture

Cath Everett

Sift Media

Freelance journalist and former editor of HRZone

Read more about Cath Everett

News: Whitehall contractor status crackdown mauled for ‘missing the point’


 Plans outlined by the chief secretary to the Treasury to crack down on 2,000 senior civil servants who are being paid as if they were contractors rather than staff have been criticised by industry experts.

The coalition government started to investigate the issue, which has been branded in some quarters as tax evasion, in February when it emerged that Student Loans Company’s chief executive, Ed Lester, received his £182,000 salary without adequate deductions for tax or national insurance by being paid through a company that he controlled rather than through payroll.
But now Danny Alexander has told Cabinet colleagues that he intends to take it a step further and crack down on the situation across Whitehall, according to a letter obtained by investigative website, Exaro.
The letter states that more than 2,000 such workers have been identified, 1,500 of whom are paid at least £380 a day. At least 1,600 have been working for their departments for at least six months, and of these, 1,200 have been working there in excess of a year and 800 for more than two years.
But Stuart Davis, chairman of the Freelancer and Contractor Services Association, attested that there was "nothing wrong or inappropriate for any employer, including the government, to engage contractors at any level of the civil service, if done properly, for the right reasons and where those concerned pay appropriate taxes".
Therefore, he said that he would like to remind the government and other critics that freelance contracting work was undertaken by thousands of workers up and down the UK and was a legitimate and valued way of working.
Missing the point
Taking on contractors gave employers "considerable flexibility to hire workers as and when they are needed" and also meant that they did not need to provide workers with pensions, paid holiday leave and other benefits, Davis added.
But he also pointed out: "The key issue is compliance and all stakeholders in the supply chain are responsible for engaging correctly and appropriately."

On the other hand, Cormac Marum, former direct entrant Inspector of Taxes, a tax partner at KPMG and now a consultant to Harwood Hutton, believed that the probe had so far missed the point.
“Surely the Chief Secretary to the Treasury ought to understand the tax rules in the UK? What is he doing in his job if he doesn’t? Let me explain the tax rules. If the public sector has a senior post, it can fill it either by employing an individual directly or by outsourcing the post," he said.

If the post was outsourced, a contract was put in place between the public authority and the service company that supplied workers.

"As the public sector does not employ the individual, this arrangement does not go on the public sector payroll and the public sector does not have to pay employer’s national insurance at 13.8%. It is this saving which encourages outsourcing solutions and it’s a common commercial arrangement across the private sector," Marum added.

Author Profile Picture
Cath Everett

Freelance journalist and former editor of HRZone

Read more from Cath Everett

Get the latest from HRZone

Subscribe to expert insights on how to create a better workplace for both your business and its people.


Thank you.