Contractors under pressure to switch to PSC
30 March 2012
Contractors are switching from umbrella companies to setting up their own limited companies due to pressure from agencies and employers, according to directors of umbrella companies.
January 2012
Contractors are switching from umbrella companies to setting up their own limited companies due to pressure from agencies and employers, according to directors of umbrella companies.
The pressurising stems from organisations seeking either to avoid requirements of the Agency Workers Regulations (AWR) or administration related to implementing the AWR, claim the directors. By creating their own limited companies, contractors say they are self- employed.Simon Last-Sutton, managing director of umbrella company FPS Group, told Recruiter that since the implementation of the AWR last October “between 90 and 100 agencies [that his firm does business with] have been pressurised into getting their workers into PSCs [personal services companies]”.
He went on to say: “They have been backed into a corner … where they are told that if they didn’t go down this route they wouldn’t get the job.
“More often than not, the client calls the agency in for a meeting to make their requests… so it’s a very formal procedure,” he added.
Brian Keegan, MD of umbrella company 360 Group, agreed that contractors were being pressurised. He told Recruiter: “Contractors are being told by end clients ‘you should be satisfied to have the contract, change your structure or lose the revenue for that assignment’’.”
Keegan said he saw this happening particularly in the mid-range market — around £15 an hour — across IT, technology, and engineering.
He estimated that of the several hundred contractors he works with that had switched to limited companies, “half have done so due to pressure from the agency client and the agency”.
However, Alex Spendley, sales director at contactor accountant and umbrella company Nasa Consulting, told Recruiter it was “too strong to suggest” clients were giving agencies an ultimatum. While he agreed some end clients expressed a preferred employment status, “at the end of the day the contractor chooses”.
Kevin Barrow, a partner at Osborne Clarke, told Recruiter that the PSC option was “not a panacea”. He added: “It effectively exposes staffing companies to debt transfer if they encourage or facilitate the worker to work for a PSC.” This could result in the agency being liable for a contractor’s tax debts.
COLIN COTTELL
Contractors are switching from umbrella companies to setting up their own limited companies due to pressure from agencies and employers, according to directors of umbrella companies.
The pressurising stems from organisations seeking either to avoid requirements of the Agency Workers Regulations (AWR) or administration related to implementing the AWR, claim the directors. By creating their own limited companies, contractors say they are self- employed.Simon Last-Sutton, managing director of umbrella company FPS Group, told Recruiter that since the implementation of the AWR last October “between 90 and 100 agencies [that his firm does business with] have been pressurised into getting their workers into PSCs [personal services companies]”.
He went on to say: “They have been backed into a corner … where they are told that if they didn’t go down this route they wouldn’t get the job.
“More often than not, the client calls the agency in for a meeting to make their requests… so it’s a very formal procedure,” he added.
Brian Keegan, MD of umbrella company 360 Group, agreed that contractors were being pressurised. He told Recruiter: “Contractors are being told by end clients ‘you should be satisfied to have the contract, change your structure or lose the revenue for that assignment’’.”
Keegan said he saw this happening particularly in the mid-range market — around £15 an hour — across IT, technology, and engineering.
He estimated that of the several hundred contractors he works with that had switched to limited companies, “half have done so due to pressure from the agency client and the agency”.
However, Alex Spendley, sales director at contactor accountant and umbrella company Nasa Consulting, told Recruiter it was “too strong to suggest” clients were giving agencies an ultimatum. While he agreed some end clients expressed a preferred employment status, “at the end of the day the contractor chooses”.
Kevin Barrow, a partner at Osborne Clarke, told Recruiter that the PSC option was “not a panacea”. He added: “It effectively exposes staffing companies to debt transfer if they encourage or facilitate the worker to work for a PSC.” This could result in the agency being liable for a contractor’s tax debts.
COLIN COTTELL
