IR35 – Looking to the Future: What does the private sector need to know

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05 Nov 2019

IR35 – Looking to the Future: What does the private sector need to know

April will bring IR35 to the private sector. In the latest part of our series on the legislation, Charles Wilson - Practice Director, Executive Recruitment at Penna – predicts the impact of the legislation and gives his advice on what businesses should be doing to mitigate the impact.

On Thursday 14th of November we’re hosting a breakfast event to discuss the implications of IR35 for the private sector. Our expert panels will provide credible and reliable information on the legislation and how to prepare for April 2020. If you would like to attend, email events@penna.com.

You work extensively across the private sector. Tell us about the typical anxieties you’re seeing around IR35 in the market? 

Charles Wilson: “There’s been mixed levels of anxieties within different groups.

Large businesses with a big HR and legal compliance functions are likely relatively clued-up on IR35.

But if you are a smaller business, your exposure to information and understanding of what IR35 means for you could be limited. The information on the HMRC website does not, in my opinion, provide everything you need to understand this complex piece of legislation. 

On the candidate side, some interims jumped to private sector work when the legislation came into the public sector. From April, there will be nowhere else to go. Those with experience of the public sector know the implications. For those new to interim, they’ll need to understand contract negotiation, their price point and vehicles for selling their services, like umbrella companies or even fixed term contracts.

For interims working purely in the private sector many understand this is coming, but there’s a spectrum of reactions. I’ve heard various responses from ‘I’m interim, it doesn’t apply to me’, to ‘I need to change how I work’, to ‘I will adjust how I charge’. There’s a lot of misinformation informing viewpoints.”

So, who should be thinking about the implications of IR35 in an organisation?

Charles Wilson: “Anyone in a position to procure interim management services. This is not always HR. For instance, it may be the CFO or a programme director managing a large project portfolio with project manager and contractor needs.

In smaller businesses, it could be the Chief Executive or COO. Essentially, anyone with the responsibility of hiring off-payroll needs to have an understanding. If you get this wrong, it will impact and damage your business.”

What would you practically recommend doing to support an off payroll workforce?

Charles Wilson: “First of all, start thinking about IR35 now. Particularly for any contracts which will extend beyond April 2020.

In terms of support, communication is key. For all those this might affect address what IR35 is, when it comes into effect, help them identify whether it impacts them and if it will change the way that they work, give advice around what to do around changing contract. There’s no such thing as too much information.

If an organisation has procured someone working through a limited company, there is a duty of care to that partnership. Whether you can or can’t continue working together, this must be communicated in a timely manner.”

From conversations you’ve had, is HMRC doing enough to phase in and advise on these changes for the private sector?

Charles Wilson: “In my opinion, no.

They are appraising big firms of what’s taking place but – in terms of covering sectors, markets and smaller businesses – not enough is being done. HMRC are bound by their own team size and capacity to map the market. This does leave smaller businesses vulnerable. 

In September, HMRC previewed the beta CEST tool to a small group. While there was some enthusiasm for the progress made, there were points for amendment and clarification. The test group felt it doesn’t give companies enough time to understand the business implications and to get systems and processes right for April. When the legislative change was coming into the public sector, law was being changed within two weeks of the legislation going live. We need to avoid this with the private sector. 

There’s a view in the market that, as we haven’t completed Brexit, this change could have been postponed until 2021 to give HMRC time to fully focus and make changes with breathing space.”

How big a threat is this legislative change on an organisations ability to use and attract a flexible workforce like interim management?

Charles Wilson: “There are potential difficulties. The market could become volatile while it establishes what the changes mean for supply and demand. We may find that talent defaults to permanent positions, restricting the supply of flex talent. Accordingly, on critical programmes organisations will have to pay more for flex expertise or do without. We could see a two-tiered rate system could occur depending on whether a contractor is inside or outside IR35. Competitive edge may be impacted for some companies who can’t pay top dollar.   

Alternatively, clients and candidates alike could accept IR35 and, apart from a different way of procuring and contracting services, nothing much will change. That’s the optimistic view!”

Join us on Thursday the 14th of November for a breakfast event to discuss the implications of IR35 for the private sector. Our expert panels will provide credible and reliable information on the legislation and how to prepare for April 2020. If you would like to attend, email events@penna.com.

 

Charles Wilson, Executive Director

Charles.wilson@penna.com