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The Low Pay Commission has recommended an increase to the minimum wage of 7p, taking the hourly rate from £5.73 to £5.80. This has been accepted by the government and will be applicable from October 2009.

The rates for 18-21 year olds will also increase from £4.77 per hour to £4.83 and 16 to 17 year olds will see an increase to £3.57 from £3.53. The government have also declared that from October 2010, the adult minimum wage rate will include 21 year olds.

The Low Pay Commission was given extra time to make their recommendations, which were originally due in May, to allow them to take the recent economic circumstances into account.

Another recommendation of the LPC was that information about employers who flout the minimum wage laws should be made readily available. The government will examine the practicalities of such a scheme.

Chairman of the LPC, George Bain, commented, “These are very challenging times for the UK and unprecedented economic circumstances for the minimum wage. We believe that Low Pay Commission’s recommendations are appropriate for this economic climate. They reflect the need to protect low paid workers’ jobs as well as their earnings.”

Business Secretary, Lord Mandelson agreed, “The Low Pay Commission has carefully examined the latest economic data before making their recommendations on the minimum wage rate, balancing the needs of workers and businesses in the current economic climate.” He added, “The government agrees with this assessment and has accepted the recommendations for these new rates to take effect in October.”

Through data gained from the Freedom of Information Act, the Professional Contractors Group (PCG) this week announced that the controversial IR35 rule has only gained HMRC around £1.5 million per year. HMRC had expected IR35 to gain them £220m per annum in National Insurance Contributions alone. However, it seems this is not the full story.

When HMRC measures the income that is directly attributed to IR35 it will not take into account the umbrella companies which were formed as a result of IR35 and the tens of thousands of contractors employed by them. In actual fact PAYE income tax and NIC bills from the umbrella company giants are amongst the largest in the UK.

It is impossible to draw conclusions on the benefits of IR35 to the exchequer as it is unclear how the IR35 revenues have been calculated. Many contractors using an umbrella company are not doing so because their contracts are believed to be within IR35. Many newer contractors prefer not to run a limited company, instead opting for the convenience and simplicity of using an umbrella company.

The likelihood is that IR35 is here to stay as its abolition could result in a major increase in limited company registrations and offshore solutions, which would definitely not suit HMRC or the Treasury.

PCG still believes that there is more to be gained from following up with further Freedom of Information requests to HMRC. They commented, “In doing so, we will find out the true costs of IR35, and expose the wildly inaccurate premise on which it is based. PCG now has an even stronger case to make for IR35’s abolition, which politicians of all parties cannot fail to ignore.”

It is clear, however, that sweeping changes to tax legislation are unlikely to be made by the government or the opposition, especially if they will only make a small contribution to the reduction of the budget deficit or the reparation of UK PLC’s finances.

Action for Children is seeking 700 ‘techies’ to sleep on the streets for a night in order to experience “what it would feel like to be homeless”. Byte Night is an annual fundraiser involving IT staff and IT contractors. Senior executives from HP, BT and Dell have already asked their staff to join them on the outdoor sleep alongside IT recruiters and politicians. All IT companies, large and small, are requested to become involved. The sponsored sleep-outs will take place on October 2^nd in London, Manchester and Edinburgh.

The aim is to tackle the issue of homelessness among young people and the event has grown considerably since it was launched by 30 technical workers back in 1998. £470,000 was raised by the event last year and it is hoped that this year they can beat the recession and raise £500,000. Suggested sponsorship is £500-£2000 for an individual and £2,500-£5,000 for a team. This is a charity event but it is also likely to be a great networking opportunity for IT contractors and permanent staff alike.

Founder of the event, Ken Deeks, had this to say, “With the country engulfed in a recession, many have predicted this year will be a tough one for fundraising. However, when it comes to the tech industry, the appetite for charitable giving is higher than ever.”

Action for Children Director, Polly Neate added, “The event has allowed us to continue to provide safe and secure accommodation to vulnerable youngsters at risk of homelessness. The continued support from the tech industry is second to none.”

Accountants have warned that HM Revenue and Customs (HMRC) are leaving taxpayers struggling for up to twelve weeks or sometimes even longer for tax repayments due to their newly introduced random security checks.

Changes introduced in January mean that taxpayers will not receive any interest on the tax repayments owed to them. Compensation will not be paid for delays on refunds. Conversely, taxpayers who fail to pay tax to HMRC on time can still be charged interest at a rate above the base rate set by the Bank of England. This is in addition to late payment surcharges. HMRC have actually allocated £1bn to tackle tax evasion.

Tax manager, Rob Durrant-Walker from accountants UHY Hacker Young commented, “Delays in repaying tax to which taxpayers are fully entitled are causing enormous financial distress at a time when many people are teetering on the edge of survival. HMRC expects taxpayers to pay their tax on time or face interest and penalty charges.” He continued, “It seems unfair when the boot is on the other foot and HMRC takes months to issue refunds it does not have to compensate taxpayers.”

Durrant-Walker questions whether the £1bn to be spent on dealing with non payment of tax could have been better spent on improving the operation of their system. He also believes that the recession has worsened this problem, “HMRC is not repaying tax unless chased for several months.”

Redundancies have been announced by five of the largest employers in financial services. This contradicts predictions that the financial services industry is on the brink of recovery.

Powerchex, a technology staffing business, commented, “We have not seen the end of this recession yet, and the repercussions to the opportunities [for IT staff] may end up being much more severe than what we see now”. They are predicting that contracted IT workers will soon see a reduction in their pay, alongside a reduction in the work which is available to them. Managing Director of Parity resources, Alan Rommel commented, “Rates are being cut everywhere. This is especially true in financial services.” A top financial institution said that IT contractors had been asked to take a 10% pay cut which was not met with any opposition prompting them to wish they had suggested 20%. The marketplace is also now saturated with IT contractors looking for work with far fewer contracts to fill.

ABN Amro is merging with Fortis, and as a result of this 6,500 staff are to be made redundant as a cost cutting exercise. Credit card company, American Express have announced job cuts of 4,000 due to the “economic outlook”. Part-nationalised banking group Lloyds is planning to create 300 jobs to reduce their job cuts to 325 posts but this has not satisfied unions. They are accused of making decisions in the short term without taking account of future business needs. This is also the case with insurance company Legal & General who are cutting 560 jobs across their three processing centres. At Barclays 350 full-time IT workers are being made redundant.

According to Powerchex, the resulting effect on the market is that, “companies are looking to the market for better quality candidates to replace permanent senior IT posts. The reality is that [financial] firms are only taking on new people if they have a new project, and at the same time, they are [looking at] keeping their existing contractors [for] longer.”

The Professional Contractors’ Group (PCG) has been lobbying the government to get rid of the tax rule IR35 as the cost of enforcing the controversial rule has been proven to be greater than the tax income it creates.

Freedom of Information rules allowed PCG to access accounts which showed that IR35 had only raised £9.2m in tax for the tax years 2002/3 until 2007/8. Originally the government had predicted that the IR35 rule would bring in £220m per annum.

John Brazier, managing director of the PCG said, “IR35 makes very little money for the government, and given the cost of enforcing it, and the number of failed investigations for HM Revenue and Customs (HMRC), it may even cost more to implement than it actually brings in. IR35 restricts the flexibility of the labour market and is difficult to enforce. It should be abolished at the earliest opportunity”.

The introduction of IR35 was to counteract non-payment of tax by using personal service companies. The government said that freelance workers on long-term contracts should have the same tax responsibilities as permanent staff. Opposition to the rule has always stated that the rules penalised freelancers as they ended up paying higher levels of tax than permanent employees.

The Professional Contractors Group said that they had been involved in 1,468 IR35 investigations and only six resulted in tax being owed to HMRC.

It has emerged that HMRC is planning to employ debt collectors to chase late payers, an idea that has been branded as ‘dangerous’ by accountants. Certain people will be receiving letters over the next week from HMRC informing them that their details will be passed to a debt collection agency unless their bill is settled.

The debt collectors will be permitted to telephone and write to debtors but they will not be allowed to visit their homes or undertake any litigation. A spokesman for this proposal stated, “We have identified a number of potential debt packages to trial. These cover a range of types of tax, sizes and ages of debt, and include both individual and business debtors.”

Concerns have been raised about HMRC’s use of outsourcing to debt collection agencies. CreditAction, the debt charity commented, “We would urge HMRC and anybody thinking of using these organisations to make sure there is proper oversight of the system.”

HMRC have defended this scheme as an attempt to boost taxpayer returns. They stated, “We retain a flexible approach [over] debts to ensure we get the best result for the taxpayer. Using private sector capacity has the potential to complement this approach and that is what we are now exploring”.

Further concerns centre around the security of sensitive information, as taxpayers’ details will be passed to the collection agencies. HMRC said that only limited information would be handed over and that customer security would be “paramount”.

These steps have been taken as HMRC is struggling to secure monies owed due to the economic downturn. Angela Beech, a tax partner from accountancy firm Blick Rothenberg, said, “HMRC is growing increasingly desperate to collect tax, which can often be a long process. They no doubt hope that using a specialised agency focusing on late payments will help them to collect more tax more quickly.”

In a bid to counteract the current economic downturn and consequent redundancies, it would appear that many IT contractors are choosing to widen their job searches and move around the market more often. In other words, they are refusing extensions to their contract, instead opting to look for contracts elsewhere. Also, many employers are waiting until the last minute before offering renewals to contracts thus leaving contractors in a precarious position.

IT contractors are anxious to secure new work opportunities as there is so much uncertainty within the market. It is also apparent that there are major pay cuts in this field. Difficult decisions are facing every contractor as they have to make a choice based on what is best for them. Some will choose the uncertainty of a couple of weeks work with premium pay while others would opt for the security of work for a number of months at a standard rate of pay.

It would appear that many organisations are now choosing to operate on extensions to contracts on a month to month basis, rather than offering permanent positions. However, contractors are responding by searching elsewhere.

If the economy picks up quickly, as is predicted by the Bank of England, the business community would need to respond fast. At this juncture, businesses would be crying out for contracted staff and, with a swelling market, contractors would have the luxury of picking and choosing where to work. They are likely to look most favourably on the businesses that treated them well during this down period.

A further 11 companies listed on the FTSE 100 have signed up to the Government’s Prompt Payment Code. Companies which pledge to abide by this Code must pay their contractors and suppliers on time in accordance with the terms of their contract and cannot attempt to change these payment terms after the fact.

Approved signatories of the Code are required to give comprehensible guidance to their contractors and suppliers, including guidance on payment procedures. If an invoice cannot be paid as per the contract, suppliers must be notified immediately. They should also have a complaints system in place to deal with any complaints or disputes which may arise.

Good practice is to be encouraged by lead suppliers adopting the code within their own chain of supply.

The Government states that the companies who have now signed up to the Prompt Payment Code are B&Q, AMEC, Centrica,plc, Motorola UK LTD, Barclays plc, British Airways plc , Sony UK, Standard Chartered and SKY. An agreement in principle has been obtained from Cisco, Alliance Boots, Cobham plc, RSA Insurance Group plc, WPP Group plc, Yahoo UK, British American Tobacco and HSBC.

Lord Mandelson will maintain pressure on remaining FTSE companies to abide by the Code. The Business Secretary commented, “Government has now taken the lead with nine out of ten central Government invoices now being paid within ten days – the challenge is now for businesses to step up and play fair. The promise by FTSE companies to pay on time is very welcome and will hopefully bring an end to the devastating impact which late payments can have on small businesses”.

It has been announced that within the next year, 20,000 agency and contract positions with BT will be lost as part of their £1 billion plan to cut costs. The number of external job losses is much higher than expected. This follows 10,000 external positions becoming obsolete last year. It is expected that a similar number of indirect roles will be lost in 2010.

The telecommunications giant has already cut 15,000 jobs during 2009, 5,000 of which were during the past couple of months alone. Global Services, BT’s IT unit, posted a quarterly loss on revenues of around £2 billion, contributing to a loss for BT of £134 million before tax this year. It is, therefore, expected that job cuts at this unit will account for one third of the overall cuts. BT Chief Executive, Ian Livingstone publicly commented that the performance of the unit was unacceptable. The Global Services Unit has been affected by clients searching for cheaper alternative IT provision. It has also misjudged the value of its efficiency savings. To add to its problems, it is also thought that BT has overestimated the value of its key contracts.

The difficulties at Global Services have eclipsed the departments that have been performing competently in this difficult market, such as the Openreach, Wholesale and Retail units.