It’s been a strange few years for businesses that rely on the contract workforce. On the one hand, Covid-19 has amplified the demand. On the other, IR35 has left many contractors and employers unsure of their footing. Some employers have called a complete halt to their usual outsourcing, uncertain of how to avoid falling foul of the legislation. Others have reduced the amount of work they outsource and are finding new ways to balance their workload. This has created a time of turbulence for both businesses and contractors they work with. And many fear that there is worse to come.
What is the problem with IR35?
If your company utilises the skills of contractors, you’re probably already aware of what the IR35 legislation has meant for business. There has been the need for independent advice and a restructuring of your standard workload. And the same has applied for the people you have been working with. According to research conducted by Cool Company, following the announcement of the IR35 legislation, 86% of contractors sought specialist advice to prepare for the changes. Each spending an average of £764 on this advice – no small sum for an independent worker. And with many (74%) contractors concerned that the IR35 legislation is likely to change again in the near future, some have decided this is no longer the path for them. The disruption businesses are experiencing can’t be overstated. And this is a point that has been underscored by the UK HGV driver shortage. So, with more disruption likely to come, what can you do to protect your business?
Is there a way to protect your business from the continuing effects of IR35?
IR35 throws up two main threats for businesses. The risk of a fine or other sanctions, should you be found to be incorrectly determining statuses and managing your contract workforce. And the inability to access the talent you need to successfully run your business.
The Government recommends the use of the HMRC CEST tool as the safest way of guaranteeing that you’re working to the letter of the law. However, with well-publicised stories of penalties being levied despite the use of this tool, there is a growing reluctance to rely upon it.
Another option that both contractors and businesses have embraced is to employ the services of an umbrella company. Umbrella companies have not always had the best reputations, but a new generation has emerged, which are an HMRC-recognised solution and seeking to close this new gap between businesses and the contract workforce. Taking care of the admin while ensuring that all regulatory boxes are ticked, umbrella companies are beginning to cement their position as a compliant intermediary. take on the role of middlemen. Connecting contractors and end-clients, while allowing businesses to forget about the complex legalities of outsourcing. And giving skilled contractors the freedom to continue to pick and choose their clients.
There is also the further option of continued advice, and the monitoring of your HR, accounting, and payroll processes. Train your teams in the in-depth intricacies of IR35. Review any potential changes intensively as they are announced. And ensure that every contract – and contractor – is managed on an individual level. That way, any mistakes that are made can be managed and rectified.
Right now, only 43% of people agree that they understand the current IR35 legislation. It’s not a good scenario for UK business. And heavily implies that further changes are likely to be afoot. Individual businesses and contractors will deal with any future changes in their own ways. But the one guaranteed outcome if the predicted changes do take place, is deeper confusion. And it makes sense for businesses to take steps to protect themselves from that now.