If you're a contractor and you want to sign a contract to work with Barclays in future, you will not be able to do so as either a sole trader or a limited company. In a memo issued yesterday, and seen by eFinancialCareers, the bank instructed UK line managers to employ only new contractors who work like employees on a PAYE basis. The implication then being that they're not really contractors.
The move follows the UK government's much-flagged move to shift the responsibility for determining whether a contractor is really a contractor (or actually an employee in disguise) to employers themselves from April 2020. If contractors are deemed to be employees, employers must pay 13.8% of their salary in employer's National Insurance. Over time, this can turn into a significant liability for - say - a large bank with a lot of employees who are wrongly categorised.
Barclays didn't respond to a request to comment on the memo, which says the new rules come into effect from 1 October for existing contractors who want their contracts extended. The memo says that Barclays contractors who are paid through agencies or via the bank's procurement teams must not have their contracts extended beyond February 2020, and that any new 'contractors' hired from January 2020 must be PAYE.
The implication seems to be that Barclays will hire staff directly via short term contracts instead.
Dave Chaplin, CEO of of ContractorCalculator said contractors should save their ire for the UK government rather than Barclays: "Under the new Off-Payroll legislation, Barclays is not prepared to take any risks come April 2020 when the reforms hit the private sector...This move is a direct consequence of very bad legislation. It’s absurd to suggest that 100% of the contractors working on critical Barclays projects are caught within IR35."
Barclays is likely to pay for its contractors as a result of the move, says Chaplin. Contractors themselves, meanwhile, will be taxed far more heavily on PAYE than as sole traders or limited companies.
"It is those contractors who have been at the same place for a long time, claiming travel expenses to the office (sometimes lunch too), who claim for home office space, make their wives directors, take most income as dividends, who will suffer most," says one experienced banking contractor. "That is all being curtailed now."
Barclays isn't the only bank clamping down on contractors. HSBC and Morgan Stanley have already announced that they will only engage contractors employed by large consulting firms, or as PAYE staff similar to Barclays.
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