?The 6th April 2020 will be upon us in no time and therefore if you’ve not started to have conversations with your freelancers about IR35 then you definitely need to! During a number of conversations with our clients we’re seeing that the overall understanding of the changes around enforcement of the legislation is very mixed, mainly down to the over complicated and (some would argue) conflicting advice offered by the HMRC. It’s an interesting time ahead but the main message we have received and are passing on to our clients is to just communicate with the contractors in the business and start those communications now. Whilst they should all be aware of the impending changes, the best way to understand how to move forward, is to talk about it and explore the variety of options available to them rather than bury heads in sand and hope the whole thing goes away!


One of the main differences in the enforcement of the legislation is the change in who’s responsibility it is to deem whether the contractor falls inside or outside of IR35. In the past, it has been the responsibility of the PSC (Personal Service Company) to determine whether they fall inside or outside IR35 but when the changes come in on the 6th April 2020, the responsibility will then sit with the end client. Essentially, this now means the end client is the liable party for employment taxes and NI contributions if the worker is deemed to be operating under the wrong vehicle.  


This doesn’t mean that as the client, you use a blanket approach to assess your current contractors, but instead, you should treat each case individually to really understand where the contractor sits and where they are aligned to the legislation. It also doesn’t mean that the client needs to suddenly remove all contractors from site but instead, put in place a proper process where as a business, you can review each contractor to ensure they’re compliant to be onsite.


As well as putting effective processes together, the key message we are providing to clients is to work more closely with their recruitment agency partners. The reason this is so important is because they should (!) be totally clued up on the impending change and be able to assist you with assessing you current contractor base. Working with your trusted partners also means that any contractors you have onsite that are being managed by the agency pushes any liability away from you onto the recruitment business as they are the people paying the contractor. Recruitment partners should be ensuring that all contractors are fully compliant whether they’re working through their own limited company or via an approved umbrella company and therefore can offer you a payroll solution to any contractors that you have onsite that you’re paying directly currently. If you ask your agency to payroll your contractors/temporary workers, not only are you mitigating the risk, but it will also create a more efficient payment process because they’ll only be sending one complete invoice for all workers- something all finance teams will be thrilled to hear!!


Continuing the theme of what to do next, the need for contractors is always going to be there so it’s important to explore the options available when onboarding freelancers:

?Managed Serviced

By going down this route, all contractor recruitment, onboarding and payroll would be managed by a recruitment partner such as us. The benefit of this approach is that the recruitment partner is not only able to assist in the assessment of the contractor’s employment status, but all payroll is managed from one central place meaning a single invoice each month. It also means the partner will be responsible for regular audits and updates on all workers and reduces the amount of variables which could cause issues. 


Temp to perm

A large number of employers are looking at this option, however this isn’t necessarily the favourable approach for the candidate themselves. Whilst the legislation means that more attention needs to be taken in assessing employment status, as mentioned above, contractors will still be needed on a project basis and they know this! Contractors still want that flexible working lifestyle rather than a permanent role and so they’re less likely to be attracted to transferring into a permanent role- you might end up losing people altogether!


Transferring to PAYE

When asking candidates to transfer to a PAYE model, one of things that doesn’t get taken into consideration is the increased cost in doing so. Employer and employee national insurance, pension, holiday and payroll tax are all costs incurred for this model. 


After speaking to a number of candidates in the market, there is a general opinion that if they are deemed to be inside IR35, the day rate they command is likely to increase to compensate the increased tax burden they will face. From a client’s perspective, this will mean a large increase in their wage bill which obviously won’t go down too well with the finance department! Some clients may choose to stand fast and not accept higher rates but there is then the risk of missing out on the best talent as they start to command the rate they feel is justified.


To summarise, the time has come to start having conversations with both your contractors, and your recruitment partners and working together to assess your workforce on a case by case basis rather than a blanket approach. We’re hosting a number of workshops to provide further advice and guidance on how to approach these conversations so if you’re interested in attending, please reach out to us.

More articles:

Contractor Management: Value to Businesses

Enterprise RPO Overview

Retained Search for Engineering Recruitment

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