The Cabinet Office has issued guidance notes on how contingent workers in the public sector, such as those working under PAYE, Umbrella Companies and Personal Service Companies, should be paid 80% of their pay up to the £2,500 per month maximum if they are unable to work because of COVID-19. Any support is welcome and but it is likely that freelance workers in the public sector will receive more beneficial treatment than many in the private sector.
For example, a typical Personal Service Company owner, not acting like an employee of their client and therefore outside IR35, will be paid a nominal salary of around £8,500 from their limited company business and the balance as dividends. The public sector worker could benefit from nearly five times the support from the Government under the Cabinet Offices guidance notes, the only difference is who their client is. The private sector worker who is unable to work will receive 80% of their salary but no contribution for dividends, so around £566 per month under the Coronavirus Job Retention Scheme. However, the public sector worker’s limited company will receive up to £2,500 per month.
The only difference between having a public and private sector client is who decides the tax status of the worker, but the considerations are the same. Same commercial risk, same business model. It is therefore difficult to understand the logic of providing greater support to public sector workers compared to their private sector cousins.
I really hope the Government are listening to our concerns because plenty of limited company owners whether they be freelancers, chip shop owners or builders, are being left to fend for themselves just because they chose to operate as a limited company. It is highly likely that many will not be in a position to survive unless they receive similar support to those that are self-employed, employed or have a public sector client.
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