IR35- a concern for companies as well as candidates.


If you operate in the interim market, you have probably heard talk of IR35 and the impending changes in the new financial year- I wrote a blog on it a year ago, which you can read here.  Judging by the amount of queries I am getting, there is still an overriding feeling of confusion.

Different organisations seem to be taking varying stances on their views as to the extent of the impact on the changes.  The fact of the matter that its not actually IR35 that is changing, but the liability and decision making that has.  But, as with many government policies, there seems to be some grey areas that is creating conflicting opinion.

And that helps no-one.

I am not going to add to that here, by giving a blanket assessment on who it will affect and how it will do so.  My advice is to look at each and every case on an individual basis, go through the “test” (when it is published), answer it honestly, and make the judgement as to whether you fall inside or outside of IR35 from there.  And after that, if you are still unsure, then you probably fall inside.

The main question I have is why is this discussion mainly happening between Service Providers (i.e. agencies) and candidates only.  Most (not all, but a significant majority) of the queries we are receiving are from candidates, but the truth is, it will impact organisations just as much, and actually the onus lies moreso with them than the candidates.  So why aren’t they talking about it?

We are going to be sitting down with all of our client base to make sure they are prepared and understand the implications.

To illustrate the potential impact it could have, last week we met with a large Housing Provider in London who currently have 70 temporary members of staff in various departments throughout the organisation, 40 of which are working through their own limited company.  Of these 40, the client felt that only 3 of those could truly be classed as working outside IR35.

In this example it left them with 37 individuals who were quite possibly paying themselves as if they were working outside of the IR35 regulations, when their working practice would actually suggest that they are caught by IR35. Therefore all 37 are at risk of either needing to change to a PAYE contract, ask for a Fixed Term Contract, change to working through an umbrella arrangement or switch to an inside IR35 contract and be 20% – 30% worse off. This is going to trigger a number of outcomes:

  1. Current temps looking to renegotiate their contracts to take into account the 20-30% drop in take home pay.  Even if the organisation meets them half way, that is still a sizeable increase in the staffing bill.
  2. Candidates will look for roles closer to home where they won’t have to incur additional expenses, leading to significant holes in staffing levels.
  3. Significant time will be spent on last minute negotiating or changing contract terms with current temp base, or taking on the additional burden of responsibility if taking staff on to Fixed Term Contracts.

If not dealt with in a timely manner, this could have a disastrous effect on the organisations’ ability to function- who could lose 37 staff in one go?

So, if you use temporary staff (and it doesn’t have to be significant numbers), I would advise doing some research, or I’m happy to come out and help you assess the impact that it will have on you.  We are lucky in that our Compliance Officer is also a trained solicitor so she has been studying the minutia of the legislation to ensure we aren’t exposing any of our clients or candidates to any risk.  Putting your head in the sand on this one, will only have a detrimental effect on your service delivery (and/or your bank balance!!)

Equally, candidates should start to bring this to their employers attention- last minute negotiations are never great- you may end up getting what YOU want, but the client may resent being forced into a corner and that is never good for future business.  Communication is key and every successful negotiation should result in a win-win for both parties.  As ever, we’ll also be liaising with you to make sure you have the “correct” information, as soon as we have it.