Barclays is ordering temporary workers to establish themselves as VAT-registered company contractors in a tactic that has been labelled an "extremely cynical ploy" to avoid paying national insurance contributions (NICs).
The change of policy, which was flagged up by staff at the bank's human resources department, follows a recent review of its "VAT efficiency model" for its "PAYE contract for services workers".
Critics of the bank's track record on ethics have described the move, for workers on more than £275 a day who joined this month, as a cynical ploy to enable Barclays to avoid a range of employment obligations and the need to pay NICs.
An email sent out from the bank's HR department on 28 January announced the results of the review, adding: "With effect from 1 February 2013 new hires being paid more than £275 per day need to [sic] VAT Registered LTD Company contractors."
Under the heading "important note" it said: "PAYE workers can only be submitted if the day rate is less than £275".
Richard Murphy of the Tax Justice Network said: "For a company that says it's getting its act together with regard to ethics and so on, this looks like an extremely cynical ploy."
He said that the change of policy appeared to be a tactic to force more workers into looking as if they were self-employed —– with VAT registration being taken as some confirmation of that fact — as a way of Barclays getting around various obligations.
Suggesting that the policy ran contrary to HMRC guidelines, Murphy said it was absurd to say that all new hires could effectively fall into the category of being self-employed contractors as each case would have to be tested on its own merits.
"What Barclays are doing is ignoring their obligations as an employer to properly apply PAYE when it is due and to appraise each situation in relation to an employee on its own merits."
"First of all, a policy like this reduces Barclays' obligation to pay national insurance, so there is a tax avoidance motive in it.
"Secondly, you can get rid of people at a moment's notice. So although you can employ people on zero hour contracts and say that you have no obligations to them, this is much worse than that.
"It is total flexibility, complete power. The person being taken on has no power at all and is being forced into a situation where they might be operating as a company when in fact they should not be."
A Barclays spokesman said: "A review of Barclays temporary worker arrangements identified around 40 workers that were currently paid through PAYE but where their charges were in excess of the VAT registration threshold. For new contracts we are seeking to bring our own threshold in line with HMRC guidelines on annual earnings for VAT registration. This is expected to impact less than 1% of contractors."
The Barclays spokesman added: "It is standard practice for Barclays that when a contract worker switches from PAYE to a Limited Company we agree to increase their day rate in order to compensate them for the increased liability of covering employers NI."
Antony Jenkins, who took over last year as Barclays boss when Bob Diamond was forced out as a result of the Libor-rigging scandal, has been struggling to reinvent Barclays' ethical values.
Jenkins is to close the bank's controversial tax avoidance unit in a bid to repair its battered reputation, although he still risks inflaming the row over City pay by paying out up to £2bn in bonuses.
He has also has asked 1,000 employees to become "values leaders", responsible for carrying a code of conduct to the lender's 139,000 employees.
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