Don’t bury your head in the sand over IR35, recruiters warned

Despite nearly half of recruitment agency bosses being unclear of the new IR35 private sector rules, Recruiter spoke to some who are ahead of the game.

Research, compiled by freelancer platform YunoJuno, shows that around four in 10 agency bosses who routinely hire freelancers and contractors are unaware of how the extension of IR35 rules into the private sector from next April will affect their business.

The startling statistics also shows 42% are unaware of the fines for non-compliance with the rules. Four in 10 said the changes would have a moderate to severe effect on business when introduced next April, while a quarter (24%) said they would put projects on hold as a result of the change. 

But it is clear some recruiters are putting plans in place ahead of next April.

Jeni Sykes, chief financial officer at E1EW, told Recruiter the agency has conducted research into how the new rules will affect its business and has a plan in place to work with clients to minimise the impact and risk associated with the new rules. 

“We plan to work with our customers to ensure individual reviews are carried out for each worker operating through a PSC [personal services company]. We will then document the outcome of this review and share it with our customers so they are aware. If changes to how the workers are paid are needed, we will work with them to ensure a cost-effective compliant solution is used.”

Sykes added the agency believes the key to correct and efficient implementation of the new rules is to ensure individual checks are carried out and to avoid blanket decisions being imposed on the workers. 

“I know that HMRC views the implementation in the public sector as a success because a large amount of additional revenue has been collected, but from what I’ve read, this has often been at the expense of the workers and often due to blanket decisions being applied in the view of protecting the end customer.”

Meanwhile David Taylor, managing director at First Point Group, said his agency is also well ahead with planning with our customers, engaging with them as to what the IR35 changes will mean and providing advice as to how to prepare for the changes.

“The final HMRC guidance will come out on 11 July, so at that point we will have a clearer picture on the practicalities – to then take the next steps.

“As ‘in’ or ‘out’ will ultimately be determined by the end client, once they/we are further down the road with these determinations (and actions the client may or may not take to mitigate/make up for these) – we will then more engage with the contractors to give them clarity and options… This will be a shake up to the UK contractor market.”

Mary Cox, MD at gotpeople, told Recruiter that as an associate company of the TRVG Group the agency has had extensive information and training from the central services finance and administration team in Norfolk about the new rules.

“Our planning with clients and workers started 1 April this year. We realise that to minimise the impact that action has to be taken in advance and we are pretty much on the ball already.”

Sophie Milliken, director at Smart Resourcing Solutions, told Recruiter: “We have a large pool of freelancers at Smart Resourcing Solutions. When IR35 first came in, we took the opportunity to ensure we were compliant by updating our associate handbook and contracts. This meant we had a record stating that our freelancers are true freelancers which makes us compliant with the planned extension.”

Albert Ellis, CEO at Harvey Nash Group, told Recruiter: “As a business you have to be a credible solutions provider. You can’t be faking it. An agency who was doing temporary recruitment is now trying to … neutralise some of the effects of IR35. We just do not believe that that’s possible and that’s desirable.

“We are sensing clients are quite nervous about this. We’ve been through it with the public sector and we know it’s a well-worn path. First of all, you’ve got to understand what true self-employment’s like – the key drivers for that test. And then you’ve got to look at your base of contractors and your temporary labour, and decide which of them fall into the scope of legislation, which is of course under advisory – then advise your clients in line with that.”

Julian Thompson, MD at 24-7 Staffing, whose agency has mitigated against the changes by going 100% PAYE since April 2015, told Recruiter while his agency has lost out on business and candidates since that date, some clients have approached him and asked him to confirm the agency is 100% PAYE.

“We are 100% PAYE anyway so we have no contractors, no umbrella workers, no PSCs so there’s little preparation for us to do. 

“But what we are doing is we are visiting clients and explaining to them the consequences to them if they continue to use agencies that are providing contractors… This relates more to the driving sector because obviously the driving sector that often uses a lot of contractors that are clearly inside the scope of IR35 that are being used in false employment.”

Greg Wood, director at Your World Recruitment, told Recruiter agencies shouldn’t try and ignore the changes as they are going to happen.

“Burying your head in the sand is not a way forward… Your responsibility as a recruitment agency is to educate your candidates, contractors, freelancers on the implications of it and what it means for them.

“There is enough information in the market that is readily available. You need to put together a comprehensive plan and recruitment organisations and companies should be doing this.

“We’ve had this in the public sector for quite a while now and the education part of it is probably the most important thing that we did… because a lot of the candidates don’t understand it.”

The YunoJuno research also shows more than two thirds (67%) of freelancers are unaware of the impending changes, while more than a quarter (26%) of freelancers said the changes would definitely affect the contracts they accept next year, and 25% said they would reconsider working for a sole client to try and avoid being caught out by the regulations. Meanwhile, 18% expect that they will raise their fees to counter the additional taxes. 

And separate research from the Freelancer & Contractor Services Association (FCSA) released today shows one in eight limited company workers are planning to stop freelancing and contracting when the off-payroll reforms come into effect.

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