IR35: An employer’s worst nightmare?
In short, it needn’t be. And here at HarknessKennett we’re getting ready to support our clients through the transition in April 2021.
This time last year, like most people who either work as a contractor, hire contractors or place contractors, my world revolved around IR35 and trying to get to grips with it. Then the world shifted, the pandemic got hold, and at the eleventh hour IR35 was put on ice for 12 months.
To be honest, I’m not sure the delay has helped much. It has been a tricky year for employers and contractors alike and IR35 has just felt like another ticking time bomb coming our way. At a time when casual, experienced resource in communications could have been supporting organisations through some of the biggest organisational challenges we’ve seen in decades, there has been a reticence amongst employers to go down that route for fear of IR35. Instead, they have preferred to look at FTCs or wrestle with the uncertain finances of their organisation to try and secure permanent headcount.
So, what does the future look like for employers? Will you be able to continue to enjoy the many benefits of bolstering your comms teams with contractors, who bring specialist knowledge and experience and an extra bit of oomph just when you need it?
The simple answer is ‘Yes’. With a bit of planning, educating and preparing there is no reason to shy away from this kind of resource. As an agency, we’ve been continuing to prepare for IR35, under the assumption that it will go ahead in April, although only time will tell. Here are our top tips to help you get your organisation IR35 ready, so you can continue to enjoy the benefits of a skilled contingent workforce:
1. Get your head around it. IR35 is complex, but there’s lots of material available. You need to become an informed hirer. Even if you don’t understand the ins and outs of the calculations, you need to understand: what the changes mean, the factors that would place a worker inside or outside of IR35, what your responsibilities as a hirer are, and what the cost implications are – both of getting it right and getting it wrong. Check out Dave Chaplin’s book ‘IR35 & off-payroll explained’ as a good starting point.
2. CEST – does it offer a complete picture? The HMRC online ‘Check Employment Status for Tax’ (CEST) tool has been a little controversial. It was designed by HMRC to ease the compliance burden on hirers and help determine the IR35 status of contractors. In reality the accuracy of its assessments are questionable; it appears to provide a lot of ‘undetermined’ outcomes and will err towards placing contractors inside IR35. In particular, it does not seem to take into account ‘mutuality of obligation’ – a key sticking point for many contractors and hirers.
3. No blanket assessments. As the end hirer, you are required by the legislation to demonstrate ‘reasonable care’ in conducting your status assessment. Only offering contracts inside IR35 will cause contractors to increase their rates, may result in employment rights claims from contractors deemed ‘employed for tax purposes’ and will increase your struggle to attract talent as contractors look elsewhere for work.
4. Accept the admin. Whichever way you look at this, you need to acknowledge that Off-Payroll compliance will create an ongoing admin overhead which you need to plan for.
5. Outsourced or in-house assessments? Every existing and prospective contractor will need a Status Determination Statement. There are organisations that offer this service, some manual and some using a mix of technology and human input allowing faster turn-around. Look for a supplier that is insurance backed and has demonstrable expertise in IR35 and employment status case law. You’ll need a provider that can offer real-time tax calculations enabling yourself and your agency to understand the impact in every individual case.
6. Contracts and working arrangements. Once you’ve established that a worker can legitimately sit outside of IR35, make sure your contracts and working arrangements reflect that. Working arrangements outlined in a contract must reflect reality, otherwise they will not stand up to scrutiny.
7. Insurance. Even though you’re doing everything right, make sure you have insurance. It’s best practice to have your own insurance, as well as working with a provider who guarantees their assessments with insurance protection.
Without doubt IR35 will have an impact on our ways of working. But with a bit of time invested in understanding the law and processes involved, you can still attract the best talent and use contract workers when you need to. At HarknessKennett we’re committed to working with our clients to find the best solution for you, and we’re looking forward to helping you navigate your way through this and find your ideal hire.
Do get in touch if you think we can help.
Published by Nicky
