2,000 public sector workers using own limited companies

Posted May 3, 2012

An investigative news site has leaked a letter from Danny Alexander to the Chancellor which reveals that thousands of public officials are being paid via their own limited companies rather than the payroll.

The letter from the chief secretary to the Treasury to George Osborne, was leaked by Exaro (you need to sign in for free to access the article), in association with Newsnight.

2,000 civil servants remunerated 'off payroll'

According to the leaked document, dated 25th April 2012, following a review into the way public servants are remunerated after the Ed Lester affair, there are over 2,000 individuals engaged 'off payroll' to the tune of £58,200 or more per year.

80% of these individuals are on assignments lasting 6 months or more, and three quarters earn over £380 per day.

The letter does note that there are many circumstances when someone may be engaged 'off payroll', for example "when they are an IT specialist carrying out a short term role for which civil service expertise is not available", however the author does appear shocked by the large number of company structures being used in the public sector.

As a result, the leaked letter shows that Danny Alexander plans to put in place new rules to ensure that the "tax arrangements of the most senior public sector appointees are not open to question", and therefore all senior employees should be on the payroll.

In addition, for all contract positions with a daily rate of £220 or more, new contractual provisions are to be drawn up to provide Government departments with assurances that the individual concerned is meeting their income tax and NIC obligations.

Not only are the new proposals to be applied to new contracts, but existing ones too - all within three months.

Don't harm the country's 'talent army'

Reacting to the publication of the letter, contractors' organisation, PCG. has urged the Government not to make a knee jerk reaction, and discourage the large number of enterprising contractors and freelancers in the UK:

John Brazier, MD of freelance group commented:

"We should ensure this latest scrutiny does not create a knee-jerk response which causes an anti-business public sector that would cost jobs and growth in the economy.

"Genuine contractors contribute greatly to the economy, providing value for money to the taxpayer, and essential skills and services to the public sector."