IR35 in the private sector: Don’t get mad, get ready.

Adam Goulding

Many of us will be breathing a huge sigh of relief following Phillip Hammond’s decision to delay the introduction of IR35 in the private sector until April 2020. That is, if we’re not still mad at him for bringing them in at all.

Although purported to raise over £1bn a year, the changes have been challenged by many for being short-termist and doing long term damage to the economy. The chancellor’s claim that the move would be restricted to medium-sized and large organisations has also been met with frustration. A lack of clarity from the government on what these labels actually mean has left many companies expecting rising costs, shrinking talent pools, reduced flexibility and legal challenges to status assessments under IR35.

However, as Abraham Lincoln once said, ‘you cannot escape the responsibility of tomorrow by evading it today’. No matter how many wishes are made and fingers are crossed between now and 2020, these reforms are not going away. So, let’s take a deep breath and explore what they are, what they mean for businesses and most importantly, what you can do to be ready for them.

In short, the legislation states that businesses will soon be responsible for assessing an individual’s employment status and determining whether national insurance contributions and income tax apply to the self-employed contractors working for them.

In practical terms, this means you’ll definitely need to be more stringent with those employment checks. Come 2020, incorrectly identifying people as an employee, a worker, or self-employed could have serious financial implications and leave you open to legal challenge.

Secondly, don’t underestimate the amount of work it might take to make your business compliant: public sector organisations are still trying to get to grips with the reforms introduced in 2017.

Finally and most importantly; don’t panic. There are a number of steps you can take right now to help stay ahead of the curve:

  • Reflect: Do you have the skills and expertise in place to make the required changes quickly and efficiently, and make IR35 assessments on a case by case basis? If not, then find people who do.
  • Review: Review your existing contingent workforces to determine current employment models and identify any areas for potential change. Are your IT systems and internal processes currently able to cope with all the rule changes?
  • Engage: Engage with others in the recruitment supply chain to work out which roles are likely to be affected and which skills might be scarce and highly valued or easily replaced.
  • React: Brexit, as well as signalling the end of the world as we know it (or, so it seems at times...), could very well trigger a review of the government’s current position. Regardless, in the coming months the government will publish a further consultation on the nuts and bolts of the reform. With the responsibility now laid firmly at the door of businesses, it is up to you to keep on top of any shifts in stance.

At a time when people have enough to worry about without adding unwanted (and some would argue, unnecessary), government legislation into the mix, it’s easy to feel overwhelmed by what’s ahead. Don’t let that happen. The show will go on, people will adapt and the industry will endure. Remember: being ready for change will help you stay ahead of the opposition.

For more advice on what IR35 regulation means for you, or the private sector in general, get in touch with the team at KennedyPearce on london@kennedypearce.com