Moving from "Permanent Freelancer" to full-time employment

Question

My girlfriend is a junior graphic designer working for a small company of three people: herself, her boss, and a senior designer.

When she got the job, her boss told her that she'd be "freelancing" for the first three months, and if it worked out then she'd be full-time employed after that. However, the three months are now up and her boss has changed his mind and told her that she'd have to stay on as a "permanent freelancer", so that he wouldn't have to pay as much tax.

What this means is that she has all of the downsides of freelancing:

• No contract of employment
• No job security or notice period
• No sick pay or holiday pay

With all of the downsides of full-time employment:

• Inflexible working hours
• Office environment with commute
• No choice of what she will work on

The job market for junior designers is completely saturated here in London - employers can basically do what they want in the knowledge that there will always be someone else begging for a job.

What can she do to protect herself and move to full-time employment without damaging her career?

Answer 1

If your girlfriend has her working hours defined (i.e. start time/end time not per week total) it'll be likely she'll fall into IR35 in the eyes of the taxman (i.e. a disguised employee which is what she seems to be).

Have a look at this:

IR35: find out if it applies

In this case the employer will need to take PAYE tax & national insurance etc from her and there will be no benefit for either from her being a contractor (apart from being easy to let go).

Working set hours is one of the big things the Taxman hooks onto, so this will be quickly noticed. I'd assume she is also supplied via an agency, or else this is another sure way to look like a disguised employee.

Look for the section "The Contract Review Service", she can anonymously give them details and they will tell her if she is going to be caught. If not they give her a reference number she can later quote if the year end thinks she may be caught up.

Usually the taxman takes a view you need to prove you are not an employee. I am a contractor (and a senior manager), and as such the following applies:

• I have no authority to act on behalf of the client (in my contract)
• I am contracted a certain number of hours a week (but not daily working hours)
• I can work for other clients (i.e. not exclusively for one)
• I can supply a suitable substitute
• All mentions of me in org charts, email signatures etc have my job as well as "Interim"
• I must have professional indemnity insurance cover, which I pay for, for work I do (and if the work went to external clients professional liability insurance)

I do though have:

• A contract
• A notice period (4 weeks either side)
• my own company (who invoices the agency each month, not the employer, and is registered for VAT etc)

If this isn't the case for your girlfriend you may find the taxman just sees her as a disguised employee and everyone loses. If the employer is unaware of this then it's a sign they're either inept or dodgy.

And as an actual answer, if she is truly a contractor/freelancer, she should take on additional customers as she can to build up a portfolio and client base, then edge the current one out as she gets better opportunities.

Answer 2

She can request a contract spelling out the terms of being a permanent freelancer. Even freelancers work on contracts. As a developer working with companies on long-term projects, I never work without a contract spelling out the expectations, duties, objectives, time, and compensation. Being a permanent freelancer so to speak is not a death sentence. Additionally, its not unreasonable to request pay be placed in an escrow account and that you are to be paid for work done up to that point. That will offer some protection against the company who may try to snowball work and compensation with infinite change orders and deadline adjustments. Simply do the due diligence to protect yourself and you work by adding some security and stability with a clear, concise contract. You have to look at it like a business/client relationship and less like an employee/employer relationship.

Ultimately if she can't get the company to work within some kind of context like that, then the best bet may simply be to either 1.) Accept it for the short term and find something else quickly, or 2.) Simply decline the opportunity if she can afford to. There are times it may simply be best to walk away from an opportunity that is obviously soon to be wrought with problems that will require damage control later.