It was recently reported that up to 86 senior executives in the NHS who are paid through off-payroll in limited companies face investigation by HM Revenue and Customs for failing to provide assurance they are paying the correct income tax and national insurance.
A closer look at the situation reveals that many are being taken on by the NHS in interim management roles, where it is usual practice to work through a limited company rather than be on the payroll and so pay the right amount of taxes.
Interims are not the same as long-term contractors. They operate through their own limited companies and pay fair taxes. On average they work for 166 days and deliver specific results immediately and effectively, which is often critical in the public sector.
They tend to be recruited for short term projects and can be highly cost-effective as they are a resource that can be turned on or off according to needs. They are paid a daily rate and as they are independent, don’t receive any employee benefits including holiday pay, sick pay or pensions.
The NHS is currently undergoing a period of intensive change – technological, social and economic and there is a real need for managers to facilitate this change within their organisations and the wider NHS environment.
Change management and transformation experts don’t tend to be permanent employees so these skills are scarce. For this reason, the NHS is increasing turning to interim managers who offer a high degree of expertise and knowledge and experience in leading major transformation programmes or restructure organisations.
Much has been made about how unfair it is that individuals can pay less tax and national insurance by invoicing from a limited company, rather than paying it at source. In truth, the savings are often small, but there is a much bigger picture. Interim managers are top level executives that have made a career choice to become independent consultants, and they accept the risks and rewards of doing such.
If departments bring anyone on to the payroll, they will also have to take into account the additional costs of offering holidays, pensions and other benefits associated with full-time employment. They will also lose the ability to turn on and off a flexible high level resource without liability.
Let’s not forget that interim managers are independent. As such, they bring fresh ideas and their own objective views to a situation. This enables them to make unemotional decisions that benefit the departments they work in. If interim managers become part of the workforce you take away that independence and make it more difficult for them to make tough, but necessary, decisions.
Furthermore, if departments turn to the more expensive alternative of using management consulting firms, the cost to the taxpayer will be even higher. Interim managers offer the NHS cost-effective access to high level performers with a track record of quantifiable achievement and this is a truly vital resource for helping to deliver the changes needed.