by Satnam Brar, Managing Director, Maximus IT
The continuing buoyancy of the ERP market in the UK, if not the whole of the wider IT scene behind it, has always been built on the high calibre of the people it employs. Unlike many other business sectors, where the permanent employee is the norm and short-term workers the exception, ERP depends heavily on the services of contractors – self-employed specialists working at every level from junior programmers to some of the most experienced individuals in the industry. But these key players in the success of products, such as Oracle, are now increasingly under threat, because, while employers in both the private and public sectors may like them, governments most certainly do not.
The problem seems to arise from the fact that, while employers see a rapidly deployable and reliable resource when they look at a contractor, the government, and more particularly, the Treasury, only see a potential loss of income. There is a definite government policy to push as many people as possible into formal employment structures, the reason for which is simple. Such formal structures put employees through the PAYE system which makes the collection of personal taxation and national insurance a relatively simple and straightforward matter. And for a Chancellor of the Exchequer (and potential Prime Minister) who prides himself on fiscal prudence, this is a very attractive prospect indeed.
The first major assault on contractors came in 2000 with the introduction of IR35. This new measure was designed to tackle the substantial number of workers, particularly in the IT sector, who were claiming self-employed status by setting up their own limited companies. “In effect the new measure stated that acting through a limited company did not automatically mean that a contractor was self-employed,” says Mark Fordham of the accounting firm, TaxAssist. “What now counted was the exact nature of the relationship between the contractor and their client. If there was any suggestion that the client was controlling that relationship, perhaps through dictating the hours and place of work, then it could easily be re-classified as one of employer and employee.”