5 reasons why Freelancers are taking over the world 15


MISSION: IMPOSSIBLE

Last week Zero Hours Contracts were in news, the BBC reported on 5th August 2013:

The Business Secretary Vince Cable fears zero-hours contracts are being abused after research suggested a million people could be working under them.

I think that employers may be tempted to switch from Zero Hours to Freelance Contractors.

PCG published this story on 3rd July 2013:

Demand from UK businesses for contract workers is continuing to rise in 2013, which could be good news for freelancers looking to get their foot in the door on a lucrative new project.

Why is it attractive to use Freelancers?

  1. Skill is more important than location in many business sectors – we live in world where internet can allow you to work with anyone at anytime, you can now track down the best person to work with even if they live thousands of miles away
  2. Lower fixed costs – Using Freelancers will lower your fixed costs (in similar way to Zero Hours Contracts), you employ them for a specific project and only pay for what you need so there isn’t any surplus capacity
  3. Tax advantages – Freelancers run their own business and that means they pay less tax than employees. Employers save tax too, such as Employers NI.
  4. Competitive Advantage – You can put together a team for a contract rather than finding contracts that fit your workforce, this means you can hire the best.
  5. 110% Commitment – A Freelancers success and future work depends on them performing to the highest level on every contract, failure is not an option for a successful contractor.

So is it a mission impossible for salaried employees to make the transition to Freelancers

steve@bicknells.net

15 comments

  1. Works for me. As a freelance photographer I’ve just landed a long term, ongoing contract to photograph houses for a very upmarket estate agency, because it saves them having to employ a photographer to sit on his backside for half the day doing nothing……and I’m good at it too, obviously. 😉

  2. We have a thought piece related to this, due to be published on 13 August 2013, which we will link to this post, with the editor’s permission.

    We discuss Factors of Production in the Labour and Skills supply markets and the news today about ‘real wages’ in Britain declining relative to Eurozone countries. Watch this space…

  3. Is there any difference in risk of getting hit with IR35 if you engage a sole trader freelancer as opposed to a limited company one? One of the key points in the Dragonfly case you’ve linked to in your previous post is that Dragonfly was a one man business. Is there even more risk of HMRC saying ‘you fail the Substitution Test’ if you engage a sole trader? In which case do I need to direct my sole trader to use an umbrella company?

    • @Rob,

      Ultimately, in law, you have to look at substance over form in these situations. Because IR35 legislation is very murky on these issues, even after Dragonfly clarified some of the tests to apply, etc., most advisers err on the side of caution, because that is the default risk management position for the adviser to take.

      Our view is that if any legislation tries to trump the common law (and common sense), a proper judicial review will always ensure that the common law position is maintained and clarified (to the benefit of all market participants in that particular jurisdiction).

      With IR35 legislation, always remember that HMRC dies often overstep the mark on interpretation. [Especially in times of fiscal constraint]

    • Hi Rob

      If you use a sole trader they must pass the employment status tests which are similar to the IR35 tests if the sole trader fails HMRC will re classify them as your employee

      If you subcontract to a limited company IR35 is their problem not yours

      Hope this helps

      Steve

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