The PCG has moved swiftly to criticise new government rules aimed at massively curtailing off-payroll remuneration in the public sector. An exodus of skilled contractors working through limited companies is likely to ensue, as they head off for the private sector rather than take a hefty pay cut.

The rules, which are expected to come into effect within three months, follow the review of public sector pay arrangements ordered by Chief Secretary to the Treasury Danny Alexander, which found that 2,400 individuals fell into the off payroll category. Of these, 5% were self-employed, 10% worked through personal service companies and 85% were paid through recruitment agencies. 70% received pay rates in excess of £400 per day.

Mr Alexander’s new ‘get tough’ approach is aimed at ensuring that all public sector staff, except in “exceptional temporary circumstances”, will be on payroll. All contractors earning £220 or over per day, engaged on agreements lasting six months or more, must formally assure their departments that they are fulfilling tax and national insurance obligations. Departments who fail to comply will be subject to ‘financial sanctions’.

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