Return to self employment to keep firms in business

Cash-starved contractors are desperately trying to get directly employed workers off their books in a bid to cut labour costs by up to 25%.

Contract services companies have seen a surge in inquiries since the construction downturn started to bite.

Companies like Hudson employ workers and allow contractors to take them on a self-employed basis in the eyes of HM Revenue & Customs.

The service costs £15 per operative per week but can save contractors up to 25% compared to employing workers directly on PAYE.

Hudson director Richard Crisp said the company has been inundated with calls from interested contractors since the downturn hit.

He said: "A lot of contractors are dying out there and need all the help they can get. Small and medium-sized firms in the provinces are being hardest hit and they just can't afford to shoulder the cost of direct employment at the moment."

The boss of a Midland electrical contractor talking with Hudson is typical of the firms in trouble.

The director said: "We have 30 lads on our books and we've had to tell them it's either back to self employment or we'll have to close. We've haemorrhaged money as a result of placing everyone on PAYE - returning to self employment will save us more than £100,000 a year."

Hudson managing director David Jackson said: "Last year we had 35,293 operatives in the industry, all on terms that are backed up by case law and cannot be disputed by the revenue. Contractors must cut costs in the current climate and the switch is popular with workers."