Becoming a contractor

LittleFox

Hi All,
Quick question my partner is currently working in a job as a electrical engineer subcontractor through a recruitment agency. The agency are taking a large portion of his wage. He has been offered the chance to become his own contractor which would greatly increase his wage. This would involve him leaving the job on the Friday and restarting on the Monday but under a different contracting company to whom he would pay a much smaller fee.
His current recruitment agency have stated they would report him to revenue if he did this as they claim it would be fraud. Does anyone know if this is correct or if they are just trying to scare him so they can continue to make money off him?
Thanks

srsly78

So long as you make your returns and pay your tax it's fine. Agency is lying to keep the business.

Should not be paying ANY fee to an agency, setup own company and pay accountant instead.

CPTM

LittleFox wrote: »

Hi All,
Quick question my partner is currently working in a job as a electrical engineer subcontractor through a recruitment agency. The agency are taking a large portion of his wage. He has been offered the chance to become his own contractor which would greatly increase his wage. This would involve him leaving the job on the Friday and restarting on the Monday but under a different contracting company to whom he would pay a much smaller fee.
His current recruitment agency have stated they would report him to revenue if he did this as they claim it would be fraud. Does anyone know if this is correct or if they are just trying to scare him so they can continue to make money off him?
Thanks

For something to be deemed fraud, there needs to be an element of deception. I can't see that in your scenario. I would check his current contract to make sure there is nothing stating a minimum notice period when leaving, and nothing barring him to leave the recruiters to work for their clients. Sometimes there is something stating that.

Edit: Even if something like this exists, it's not a matter for Revenue. It sounds like a bluff, and to be honest a very weak bluff.

Mrs OBumble

srsly78 wrote: »

So long as you make your returns and pay your tax it's fine. Agency is lying to keep the business.

Should not be paying ANY fee to an agency, setup own company and pay accountant instead.

If he is currently a temporary employee of the agency, and he does then the same work, same place, same hours, using supplied equipment as a contractor ... then yes, it likely is tax fraud of the part of the customer.

Does he get holiday pay now?

LittleFox

Mrs OBumble wrote: »

If he is currently a temporary employee of the agency, and he does then the same work, same place, same hours, using supplied equipment as a contractor ... then yes, it likely is tax fraud of the part of the customer.

Does he get holiday pay now?

He is deemed a staff member of the recruitment agency but working for a client site. The agency pay his holidays and do his payroll that's it

ZX7R

Recruitment agency ,is only worried about loss of revenue to them,one he is registered nothing they can do.

Eric Cartman

revenue, register for income tax, cro register a business name, boom self employment.

Mrs OBumble

LittleFox wrote: »

He is deemed a staff member of the recruitment agency but working for a client site. The agency pay his holidays and do his payroll that's it

So realistically he would likely fail Recenue's test of whether it's a genuine self employment situation or not.

It's likely the client who would get into trouble for tax evasion rather than him. But if he's just a self employed contractor they will likely drop him like a hot potato once they realise.

Skihunta13

LittleFox wrote: »

He is deemed a staff member of the recruitment agency but working for a client site. The agency pay his holidays and do his payroll that's it

Under this arrangement he is not deemed as a contractor in the revenues eyes. Employment law is being broken here by the agency, ie the contractor is being treated as an employee but nit receiving the beneifits if an employee- prsi, redundancy etc. the contractor will need to register with the cro, file tax returns every year and take out employee/public insurance. All work expenses( travel, vehicle, tools,accountant) are treated as overheads and paid fir by the contractor.
Does not make sense what this agency is offering but you can bet ine thing, its for their benefit.

OMM 0000

It seems this is a complicated issue.

I wonder is there some sort of compromise?

For example, agree with the agency that they half their fees so he gets a salary bump, and he continues being employed by the agency.

ZX7R

More to the point , since 0 hour contracts are now illegal Wich are what most agency work with , plenty of workers are been hired directly by employers,it's cheaper ,it's gone full circle

whatnext

Skihunta13 wrote: »

Under this arrangement he is not deemed as a contractor in the revenues eyes. Employment law is being broken here by the agency, ie the contractor is being treated as an employee but nit receiving the beneifits if an employee- prsi, redundancy etc. the contractor will need to register with the cro, file tax returns every year and take out employee/public insurance. All work expenses( travel, vehicle, tools,accountant) are treated as overheads and paid fir by the contractor.
Does not make sense what this agency is offering but you can bet ine thing, its for their benefit.

What??? What law is being broken??
From what I read they are a PAYE contractor engaged directly by the agency who have contacted him to their client.. fairly standard stuff.
For a law to be broken the law that you refer to would need to exist and I don’t believe it does.

Where does the op state PRSI is not being paid and that their partner is not entitled to redundancy?

OP does your partner invoice the agency or use an umbrella company, or does the agency pay your partner net after tax? If the latter they are an agency employee for tax purposes. If they invoice the agency, are VAT registered (I suspect all electrical engineers rates exceed the threshold) then they are a contractor/ sub contractor in the true sense already.

IF they bypass the agency it is likely that the end client would be due to pay a significant fee to “buy out” the agency contract.

Skihunta13

whatnext wrote: »

What??? What law is being broken??
From what I read they are a PAYE contractor engaged directly by the agency who have contacted him to their client.. fairly standard stuff.
For a law to be broken the law that you refer to would need to exist and I don’t believe it does.

Is the op partner not acting as self employed? Details are vague and confusing. That the way i took it up.

whatnext

Skihunta13 wrote: »

Is the op partner not acting as self employed? Details are vague and confusing. That the way i took it up.

The say they agency are doing the payrolling. I don’t get any sense they are self employed either as a sole trader (which most agencies wouldn’t dare consider) or as a ltd co contractor

Skihunta13

whatnext wrote: »

The say they agency are doing the payrolling. I don’t get any sense they are self employed either as a sole trader (which most agencies wouldn’t dare consider) or as a ltd co contractor

The terms sub contractor and contractor are used in relation to the op partner. To me that is self employed.

whatnext

Skihunta13 wrote: »

The terms sub contractor and contractor are used in relation to the op partner. To me that is self employed.

Still don’t see what law is being broken.

I suspect the term contractor is being miss used, could of course be wrong. To me sub contract is being used in the sense that they are not contracted directly by the client.

Skihunta13

whatnext wrote: »

Still don’t see what law is being broken.

I suspect the term contractor is being miss used, could of course be wrong. To me sub contract is being used in the sense that they are not contracted directly by the client.

Subcontractor is self employed or independent business. They do not pay paye but pay corporation tax on profits at 12.5% at year end.
A sub contractor operates under a main contractor. The main contractor works directly for the client.

You cannot set up as a sub contractor and work solely for a contractor. This has been rife in the building industry for yeas and revenue are clamping down on it because of loss of entitlement to the sub contractor and less paye paid to the revenue.

Op maybe use the term wrong but i can only go on the terms used.

whatnext

Skihunta13 wrote: »

Subcontractor is self employed or independent business. They do not pay paye but pay corporation tax on profits at 12.5% at year end.
A sub contractor operates under a main contractor. The main contractor works directly for the client.

You cannot set up as a sub contractor and work solely for a contractor. This has been rife in the building industry for yeas and revenue are clamping down on it because of loss of entitlement to the sub contractor and less paye paid to the revenue.

Op maybe use the term wrong but i can only go on the terms used.

Because the OP refers to the agency taking a large portion of the Wage, (while this is not technically true as the client makes the payment to the agency and the agency does not and can’t charge the worker) I am inclined to believe they are a contract worker as opposed to a sub contractor. The agency are likely to be the sub contractor as opposed to the OPs partner.

Mrs OBumble

ZX7R wrote: »

More to the point , since 0 hour contracts are now illegal Wich are what most agency work with ,

Nope, wrong on both counts.

Most agency workers have fixed hour contracts.

ZX7R

Mrs OBumble wrote: »

Nope, wrong on both counts.

Most agency workers have fixed hour contracts.

Ok stand corrected, thought it was o hours for agency workers.
Zero hour contracts bill singed into law on Christmas day makes zero hour contracts illegal in most circumstances I was tought was the understanding of it???

Bicycle

Take a look at this pdf https://www.revenue.ie/en/self-assessment-and-self-employment/documents/code-of-practice-on-employment-status.pdf

The Denny Case was well documented. https://www.irishexaminer.com/ireland/food-demonstrator-sets-legal-precedent-in-employment-law-440275.html

Basically, if you are only working for one individual, cannot control when you are working, cannot subcontract the work out to others, do not provide your own equipment, then you are pretty much deemed an employee.

Mrs OBumble

ZX7R wrote: »

Ok stand corrected, thought it was o hours for agency workers.
Zero hour contracts bill singed into law on Christmas day makes zero hour contracts illegal in most circumstances I was tought was the understanding of it???

There are plenty of cases where zero hour contracts are still legal - it just has to be genuinely casual work. More about it here: http://www.staff-wanted.net/2019/03/employment-laws-ireland-zero-banded-hours-contracts-guaranteed-minimum-pay.html

Agency workers can be casual. But they can be full-time-permanent too. And everything in between.

ZX7R

Mrs OBumble wrote: »

There are plenty of cases where zero hour contracts are still legal - it just has to be genuinely casual work. More about it here: http://www.staff-wanted.net/2019/03/employment-laws-ireland-zero-banded-hours-contracts-guaranteed-minimum-pay.html

Agency workers can be casual. But they can be full-time-permanent too. And everything in between.

Ok thanks for the information