Financial settlement - Earnings

[Oneofmany]

All, Am currently about to start negotiations around the Form E and financial settlement. My question/situation is..... I'm currently out of work. I have the oppourtunity to get a contract job on very good money but only for a short period of time (3 months) which is unlikely to be extended and I will undoubtably only be able to get a much lower paying job following it. So, if the short term high pay is whats shown on my updated Form E will It mean the settlement my ex gets is more? I know it would if it was a permenant role, but am really worried a short term spike in earnings is going to end up in my being seriously impacted down the line with a more biased outcome for her and leacing me with less than I need in the long run......

Would really appreciate some help/advice on this!! TIA

 

[Unknown01]

I think it depends on whether you have ever managed to earn this amount before. If this contract is the highest you've ever been paid, I'd not take it because it might inflate your earning capacity in the eyes of the court. It might also lead to your mortgage capacity being exaggerated. No one in court including your own solicitor will believe you can't get another similar contract either; why would that be the case when you've done it before?

What does your ex do for work and how would their income compare?

 

[Oneofmany]

I think it depends on whether you have ever managed to earn this amount before. If this contract is the highest you've ever been paid, I'd not take it because it might inflate your earning capacity in the eyes of the court. It might also lead to your mortgage capacity being exaggerated. No one in court including your own solicitor will believe you can't get another similar contract either; why would that be the case when you've done it before?

What does your ex do for work and how would their income compare?

This is what my train of thought is. We're going to negotiate via solicitors rather than through court at this stage. She's part-time and getting UC.

Just to add. I've always been a full time employee and just been made redundant rather than ever bring a contractor (all new to me). This short term contract (3 months) is a much higher rate than my previous salary but only very short term and a very niche area. It would be approx x5 her income. I was contacted by an old colleague about this contracting job and no chance I'd get anything near it at the end of the contract,

Just to make it even more of a issue is that given the current job market I wont be able to get a permenant job at anywhere near my previous salary..... TIA

 

[Jumper85]

Hi @Oneofmany. I've just been through a final hearing and I'm a contractor, I've been a contractor for quite a while.

Agree with Unknown's comments but would add;

• The court did see that there is vulnerability in being a contractor (Most Judge's are contractors!) but equally they took my borrowing capacity and earnings from my tax returns. One point to note, I've not really had any gaps out of contractor for 4yrs but it does happen
• What sort of contracting is it? Inside or Outside IR35, how would you be paid?
• Is there an option to at least take the job but then either only draw a smaller salary or increase pension contributions? I put a significant amount of my salary away to pension, the ex challenged this however the judge didn't entertain it, I'm entitled to save for retirement and it's a cost effective way of doing so
• You're negotiating through solicitors, they can argue all they like on what your earning or borrowing capacity is, you have no obligation to agree to anything. If they don't like what you propose then take it through the courts. Your contract would have ended by then anyway
• Furthermore, a 3 month contract isn't going to get you mortgage borrowing. You've been made redundant, you have no job, you have a 3 month contract opportunity, you have nothing after this secured. In the nicest possible way, a bank isn't going to be too keen to lend you money for a mortgage

 

[Oneofmany]

Thank @Jumper85

• The court did see that there is vulnerability in being a contractor (Most Judge's are contractors!) but equally they took my borrowing capacity and earnings from my tax returns. One point to note, I've not really had any gaps out of contractor for 4yrs but it does happen
• What sort of contracting is it? Inside or Outside IR35, how would you be paid?
• Is there an option to at least take the job but then either only draw a smaller salary or increase pension contributions? I put a significant amount of my salary away to pension, the ex challenged this however the judge didn't entertain it, I'm entitled to save for retirement and it's a cost effective way of doing so
• You're negotiating through solicitors, they can argue all they like on what your earning or borrowing capacity is, you have no obligation to agree to anything. If they don't like what you propose then take it through the courts. Your contract would have ended by then anyway
• Furthermore, a 3 month contract isn't going to get you mortgage borrowing. You've been made redundant, you have no job, you have a 3 month contract opportunity, you have nothing after this secured. In the nicest possible way, a bank isn't going to be too keen to lend you money for a mortgage

Its outide IR35 but via an Umbrella (so paye and NIC taken at source) via an agency (These are clients terms) so no way to use the benefits of a Ltd company.

This is just another one thing thats really keeping me knocked down tbh, cant seem to move without something else getting added in to have to try and deal with. Damned if I do, damned if I dont. Just done with the constant head ****

 

[Jumper85]

Thank @Jumper85

• The court did see that there is vulnerability in being a contractor (Most Judge's are contractors!) but equally they took my borrowing capacity and earnings from my tax returns. One point to note, I've not really had any gaps out of contractor for 4yrs but it does happen
• What sort of contracting is it? Inside or Outside IR35, how would you be paid?
• Is there an option to at least take the job but then either only draw a smaller salary or increase pension contributions? I put a significant amount of my salary away to pension, the ex challenged this however the judge didn't entertain it, I'm entitled to save for retirement and it's a cost effective way of doing so
• You're negotiating through solicitors, they can argue all they like on what your earning or borrowing capacity is, you have no obligation to agree to anything. If they don't like what you propose then take it through the courts. Your contract would have ended by then anyway
• Furthermore, a 3 month contract isn't going to get you mortgage borrowing. You've been made redundant, you have no job, you have a 3 month contract opportunity, you have nothing after this secured. In the nicest possible way, a bank isn't going to be too keen to lend you money for a mortgage

Its outide IR35 but via an Umbrella (so paye and NIC taken at source) via an agency (These are clients terms) so no way to use the benefits of a Ltd company.

This is just another one thing thats really keeping me knocked down tbh, cant seem to move without something else getting added in to have to try and deal with. Damned if I do, damned if I dont. Just done with the constant head ****

I'm inside IR35 using agency/payroll too. I'd take the contract and increase your pension contributions to reduce your gross income.

 

[Oneofmany]

I'm inside IR35 using agency/payroll too. I'd take the contract and increase your pension contributions to reduce your gross income.

Thanks @Jumper85 it just really worries me that she's going to jump on the higher pay rate in my Form E as gospel and get difficult when its explained and basically temporary. She'll also not believe the long term prospects of a lower income than my previous steady salary when the contract finishs. Its also a worry that if this all goes the way of everything else, I'll end up with far less in the settlement simply due to a short lived spike in income. Mix that in with worrying about what she'll do when/if I report zero income to the CMS and the quite healthy CMS payment is greatly reduced. Then add in worrying about making my redundancy money last etc etc. AM just torn tbh...

Really appreciate the responses am in a pretty low place and so confused about what to do for the best. I just want to be able to support the children but also safeguard myself.

 

[Jumper85]

I get that mate but believe me, whilst it's a tough road, you'll get through it. What is due, is due for the kids, no way of escaping that but just remember, you're solicitor will look out for your best interests, her solicitor will look out for hers. You're going to be miles apart to begin with, you need to meet somewhere in the middle!

Just a thought - you're under no pressure to settle now, you could continue through the process and then if your salary, large pension payments are questioned, then wait to see what happens after the 3 months have lapsed. To Unknowns point, if you're extended (happens frequently!) you should personally be less worried but equally it demonstrates you potentially good make a good living out of contracting.

Just out of interest, why are you using a solicitor for settlement? Surely that's quite an expensive route to take? What have you been quoted? Mediation would be a far cheaper and, in my opinion, fairer process given your respective solicitors approach.

 

[Oneofmany]

@Jumper85 Giving the children the best is at the heart of this who conundrum. I need to wrestle with the best way forward to doing that.

The additional pension I can make via the Umbrella is minimal, do you mean into a private pension??

Using my Solicitor advocate for Child arrangements and financials. When the CAO was brought up then came the usual allegations and undertakings so officially no mediation.

@Jumper85 Can I IM you? might be able to provide more perspective on numbers and my situation??

 

[Unknown01]

Depending on the ages of the children, she should be working full time. So her earning capacity will be imputed to what she would earn full time at the very least (e.g. if she works 20 hours a week then they will pretty much double her gross income to work out her earning capacity).

 

[Oneofmany]

Depending on the ages of the children, she should be working full time. So her earning capacity will be imputed to what she would earn full time at the very least (e.g. if she works 20 hours a week then they will pretty much double her gross income to work out her earning capacity).

thanks @Unknown01 even at that point she would at less than half the rate I would get on the contract. It just feels like the settlement risks an unfair bias due to a short term spike in earnings. I've even raised the question to my solicitor as simply dont know what to do where to turn and feel totally stuck as no can see the future and in the mental state im already in just cant wrap my head round it,,,,,

 

[Jumper85]

Feel free to direct message @Oneofmany

 

[Unknown01]

thanks @Unknown01 even at that point she would at less than half the rate I would get on the contract. It just feels like the settlement risks an unfair bias due to a short term spike in earnings. I've even raised the question to my solicitor as simply dont know what to do where to turn and feel totally stuck as no can see the future and in the mental state im already in just cant wrap my head round it,,,,,

Well, it's done on net salary, not gross and I doubt she'd be on less than half your rate net. Also, you can deduct commuting (she can do the same, but typically where I live in the south east low earners tend to work closer to home because commuting wouldn't be worthwhile). Plus potentially you're paying her child maintenance which further erodes the difference.

For example, gross I earn nearly 7 times what my STBXW does. However:

1) She should be working full time, which means I should only be earning 4 times what she does;

2) Then after taxes, I am taking home about 3 times more than she does;

3) After commuting, I'm taking home about 2.5 times what she does;

4) Then after child maintenance, my income is only about 1.1 times what hers is.

Factoring in her much lower mortgage capacity and need for a greater share of the assets too, and that tiny advantage I have in earnings is more than offset by her bigger share of assets. However, to avoid that conversation, I would recommend not taking this contract at all and waiting for the divorce to be finalised.

 

[Oneofmany]

Well, it's done on net salary, not gross and I doubt she'd be on less than half your rate net. Also, you can deduct commuting (she can do the same, but typically where I live in the south east low earners tend to work closer to home because commuting wouldn't be worthwhile). Plus potentially you're paying her child maintenance which further erodes the difference.

For example, gross I earn nearly 7 times what my STBXW does. However:

1) She should be working full time, which means I should only be earning 4 times what she does;

2) Then after taxes, I am taking home about 3 times more than she does;

3) After commuting, I'm taking home about 2.5 times what she does;

4) Then after child maintenance, my income is only about 1.1 times what hers is.

Factoring in her much lower mortgage capacity and need for a greater share of the assets too, and that tiny advantage I have in earnings is more than offset by her bigger share of assets. However, to avoid that conversation, I would recommend not taking this contract at all and waiting for the divorce to be finalised.

thanks @Unknown01 if you took my net (on contract rate) then her net working full time its approx 2.5x difference. This would cripple me for the future if the settlement was based on it without a doubt and I totally get the assumption being made that this earning potential be regarded as "the norm and achievable" if it goes to court. It just feels wrong to turn it down, like I'm doing the wrong thing

 

[Unknown01]

Hang on though, have you factored in her universal credit and the child maintenance you would be paying in that? I'll do mine with figures:

Me

Gross Salary: £100k
Taxes: (£31.5k)
Child Maintenance: (£14.4k)
Commuting: (£6.1k)

Net = £48k
Per Month = £4k

Her

Gross Salary (earning capacity): £25k
Taxes: (£3.5k)
Child Benefit: £2.7k
Universal Credit: £4.8k
Child Maintenance: £14.4k

Net = £43.4k
Per Month = £3.6k

So her net income is about 90% of what mine is. Use the same calculation and see what the actual difference is, it might be much smaller than you think.

 

[Oneofmany]

Hang on though, have you factored in her universal credit and the child maintenance you would be paying in that? I'll do mine with figures:

Me

Gross Salary: £100k
Taxes: (£31.5k)
Child Maintenance: (£14.4k)
Commuting: (£6.1k)

Net = £48k
Per Month = £4k

Her

Gross Salary (earning capacity): £25k
Taxes: (£3.5k)
Child Benefit: £2.7k
Universal Credit: £4.8k
Child Maintenance: £14.4k

Net = £43.4k
Per Month = £3.6k

So her net income is about 90% of what mine is. Use the same calculation and see what the actual difference is, it might be much smaller than you think.

Understood. Food for thought. So, and sorry if im missing something.... why would you advise not taking the contract???

 

[Oneofmany]

and sorry, another question. If I took the contract and it was just simply too much to have on my plate at the moment or when negotiations are in full swing, what are the options if you want to quit???

 

[Unknown01]

Well, quitting would be frowned upon. I would recommend avoiding the contract because ex-wives who work part time or not at all have a tendency to be greedy and workshy and this makes them much more motivated to get money out of an ex than to earn it themselves. You working and earning much more than them will also trigger envy and a sense that they might as well "have a go" so you'll waste time and money going through court whilst your ex tries to pursue a better settlement, no matter how small her chances are.

Go and have a look at MumsNet to see how these people think; they believe even if they are raising teenagers (known as spending all day sat in front of the TV to the rest of us) they believe they should still have "equality" with the paying parent. A court will have no truck with it these days but it won't necessarily stop them trying it on in the hope that you cave in to save money on legal fees.

It's much better to be unemployed and unable to find work whilst you're going through a divorce as you will have a greater need of assets and no ability to pay spousal maintenance. It makes it far more dangerous for your ex-wife for her to let things go to court; she will definitely lose in terms of legal fees and has nothing to gain.

There is plenty of time to rebuild your career after divorce.

 

[Oneofmany]

Well, quitting would be frowned upon. I would recommend avoiding the contract because ex-wives who work part time or not at all have a tendency to be greedy and workshy and this makes them much more motivated to get money out of an ex than to earn it themselves. You working and earning much more than them will also trigger envy and a sense that they might as well "have a go" so you'll waste time and money going through court whilst your ex tries to pursue a better settlement, no matter how small her chances are.

Go and have a look at MumsNet to see how these people think; they believe even if they are raising teenagers (known as spending all day sat in front of the TV to the rest of us) they believe they should still have "equality" with the paying parent. A court will have no truck with it these days but it won't necessarily stop them trying it on in the hope that you cave in to save money on legal fees.

It's much better to be unemployed and unable to find work whilst you're going through a divorce as you will have a greater need of assets and no ability to pay spousal maintenance. It makes it far more dangerous for your ex-wife for her to let things go to court; she will definitely lose in terms of legal fees and has nothing to gain.

There is plenty of time to rebuild your career after divorce.

thanks @Unknown01 makes total sense but at 50 its a worrying prospect......... but I think it may be more worrying if shes going to see big numbers on the Form E and go for gold or just get a biased settlement and I have the prospect of it not being a true reflection of my circumstance and leaving me right in the shit

 

[Unknown01]

thanks @Unknown01 makes total sense but at 50 its a worrying prospect......... but I think it may be more worrying if shes going to see big numbers on the Form E and go for gold or just get a biased settlement and I have the prospect of it not being a true reflection of my circumstance and leaving me right in the shit

It's best avoided. Make it more worth her while pursuing her career rather than you.