Locum Doctors Pay Increases
The NHS has had to give Locum Doctors pay increases to partially compensate for the extra tax that the locums now have to pay after the Government’s IR35 policy change.
Figures show that locum doctors have forced up rates by 6.3% since the Government brought in its new policy for freelancers in the public sector in April 2017 till October 2017. There are likely to have been further raises since.
That’s way above the rate of inflation and it is just in 6 months. There are likely to be further locum doctors pay increases.
Locum Rates Likely To Increase More
Rates are likely to keep increasing above the rate of inflation to compensate for the extra IR35 tax imposed on locums in the NHS.
Locum doctors and agency nurses were effectively given a massive wage decrease from early April last year.
The Government decided that more difficult for freelancers in the public sector to be able to operate through personal service companies.
Previously freelancers, including locums, would decide themselves if they are inside IR35 or outside it. If they got it wrong they could be chased for back tax, penalties and interest.
Government Departments Decide a Contractor’s IR35 Status
The Government changed the decision maker on a contractors’ IR35 status from the contractors themselves to the Government departments. If the department got it wrong they would be responsible for the tax that was not collected properly.
Of course, Government departments are risk averse.
Why should they take a risk just to allow well paid freelancers to keep more of their money? Why would they care how much the contractor pays in tax?
HMRC’s New Online IR35 Test
They got HMRC to devise a new test purportedly to show employers whether a freelancer is inside or outside of IR35.
Of course this new online IR35 test has no basis in law whatsoever. The law hasn’t changed – only who the Government makes responsible when taking on contractors in their own departments.
These are ‘house rules’ if you like.
Of course, many of the contractrors failed these tests.
Even worse, some Government departments asked the big consultancies what they should do.
The big consultancies have never liked freelancers. They would rather Government departments, especially the IT department, would spend a grand a day to them for people just 6 months out of university than half of that for a contractor with 10 years experience.
They should have told the Government departments that they had an interest and recused themselves from giving advice.
Of course, they didn’t.
Advised Government Departments
They advised Government departments not to take risks. Even if someone passes the test now, they said, the test kept changing and they may fail it in the future. The department would then be liable for the tax.
So, many Government departments and Trusts said that they would no longer use freelancers and locums who operated through limited companies.
Any freelancers currently using limited companies would have to abandon them.
So, most of them did.
Locums in Umbrella Comapnies
There was an umbrella company feeding frenzy last year as contractors dumped their limited companies in droves and got into contractor umbrella companies.
Prior to the Government change, 88% of locums operated via limited companies or personal service companies.
Now 80% of them are paid via PAYE mostly through Umbrella Companies.
This reduced their take home pay massively.
Now, it looks as if they are forcing increases on the NHS and other Government departments to comensate for this.
This will force up the costs of the NHS to the Government. There will be further Locum Doctors pay increases.
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