Employing a Contractor

The Contract Recruitment FAQ

What is the role of a contractor?            

Contractors are professionals who provide services to clients for a set period or for the duration of a project, working through an umbrella company or agency.

How do I pay my contractors?    

Contractors are paid by Heat Recruitment. We will in turn invoice you weekly, fortnightly, or monthly.

How quickly can Heat Recruitment find me a contractor?              

We can have a contractor with sometimes the next day, most likely the start of following week from the day enquired (unless the contractor needs security clearance).

I need to fill multiple open positions. Can you help?   

Absolutely, we have multiple teams on of contractors  that have worked together (either currently or in the past) Heat Recruitment also speak to hundreds of contractors a day to keep our books fresh , up to date and relevant.

What is the average contractor rate?      

If you want to know more about contractors’ rates, you have available our Digital Contractor Salary Survey where you will find all the information updated for 2023. You can access it here.

Who is my main point of contact at Heat Recruitment?   

As a Heat client, you will have assigned an account manager who with solve all the questions you might have and will help you with anything you need.

What is IR35 and does apply to our company?    

We are experts at navigating the IR35 process and can help you follow all of the correct assessments and ensuring the contractor does as well even when the GOV CEST tool is inconclusive

IR35, also known as “off-payroll working rules,” is a set of tax regulations in the United Kingdom that aims to determine whether a person working through their own limited company or another intermediary should be classified as an employee for tax purposes. The term “IR35” comes from the name of the original press release (Inland Revenue press release number 35) that introduced these rules in 1999.

The primary purpose of IR35 is to prevent what’s commonly referred to as “disguised employment.” Disguised employment occurs when an individual works for a client or organization through their own limited company, but their work arrangement is essentially similar to that of a traditional employee. In such cases, the individual should be subject to similar tax and National Insurance Contribution (NICs) obligations as a regular employee.

Key points about IR35:

1. 1. Inside IR35: If a contractor or freelancer is deemed to be “inside IR35,” it means that, for tax purposes, their work arrangement is akin to that of an employee. As a result, they will be subject to income tax and NICs just like an employee. In this situation, the end client or hiring organization typically has responsibility for deducting these taxes at source.
   2. Outside IR35: If a contractor or freelancer is deemed to be “outside IR35,” it implies that their working relationship is genuinely self-employed or that they meet the criteria for being a legitimate contractor. In this case, the individual continues to enjoy the tax advantages of working through their own limited company.
   3. Responsibility for Determination: In the public sector, the responsibility for determining whether a worker falls inside or outside IR35 has shifted to the hiring organization or end client. In the private sector, similar rules have been introduced, shifting the responsibility from the contractor’s limited company to the end client or intermediary.
   4. Status Determination Statement (SDS): Under the IR35 rules, end clients must provide contractors with a written SDS that outlines whether their engagement falls inside or outside IR35. If the client determines that the engagement is inside IR35, it must also provide reasons for the determination.
   5. Impact on Tax Liability: Being inside IR35 can have a significant impact on an individual’s tax liability. They may lose some of the tax advantages associated with working through a limited company, such as claiming certain expenses as tax deductions.
   6. Legal Challenge: Individuals and businesses have the right to challenge IR35 determinations if they believe they have been incorrectly classified. HM Revenue and Customs (HMRC) provides guidance on how to dispute a determination.

IR35 is a complex area of tax law, and its application can vary based on individual circumstances. It’s crucial for contractors, freelancers, and businesses in the UK to seek professional advice and guidance to ensure compliance with these rules and avoid potential tax liabilities and penalties. HMRC provides extensive guidance and tools to help individuals and organizations determine their IR35 status.

What are the benefits of hiring a contractor?      

1. 1. Cost-Effective: Contractors are typically more cost-effective in the short term compared to hiring a permanent employee. You don’t have to provide benefits like health insurance, paid time off, or retirement contributions, which can lead to significant cost savings.
   2. Flexibility: Contractors provide flexibility in terms of project duration and workload. You can bring them on board for a specific project, and once it’s completed, you can terminate the contract without the long-term commitment associated with permanent hires.
   3. Specialized Expertise: Contractors often possess specialized skills and expertise that may not be readily available in your existing team. You can hire contractors with the precise skills needed for your project, ensuring a high level of proficiency.
   4. Reduced Onboarding Time: Contractors typically require less onboarding time than permanent employees. They are usually experienced professionals who can quickly integrate into your project and start contributing from day one.
   5. Scalability: Contractors allow you to scale your team up or down as project requirements change. This flexibility is especially valuable for businesses with fluctuating workloads or those looking to complete short-term projects.
   6. Risk Mitigation: When you hire a contractor, you often share less legal and financial risk than with a permanent hire. Contractors are responsible for their own taxes and may carry their liability insurance, reducing your legal obligations.
   7. Access to a Wider Talent Pool: You’re not limited by geographical boundaries when hiring contractors. You can access a global talent pool, potentially finding the best fit for your project regardless of location.
   8. No Long-Term Commitment: Unlike permanent employees, contractors typically work on a project basis with no long-term commitment. Once the project is completed, you can choose to renew the contract or discontinue the engagement.
   9. Objective Focus: Contractors may have a more objective focus on the project’s success since they’re not invested in the long-term future of the company. This can sometimes lead to a higher level of dedication to meeting project goals.
   10. Reduced HR Overhead: Hiring and managing permanent employees involves HR tasks such as recruiting, training, and performance management. With contractors, you can often reduce HR overhead, as the contracting agency or the contractor themselves handles these aspects.

However, it’s important to note that there are also some potential drawbacks to hiring contractors. They may have less loyalty to your company, may not be available for long-term strategic projects, and communication challenges can arise if not managed effectively. Ultimately, the decision to hire a contractor or a permanent employee should be based on your project’s specific needs and your organization’s long-term goals. It’s often beneficial to use a combination of both, depending on the circumstances.