While many of us may be looking forward to waving goodbye to 2020, the New Year will bring a number of other challenges to the world of recruitment. In particular, the roll out of IR35 into the private sector on 6th April looks set to create even more disruption. Despite the original roll out date being pushed back due to the pandemic, as the 2021 deadline gets closer, it’s crucial that recruiters and their end-clients are fully prepared.
In order to give staffing companies the information they need, we hosted a webinar with a number of leading experts in the world of IR35 where recruiters could ask their burning off-payroll questions – here’s what they had to say.
Will there be a delay again?
Obviously, this is the big question filling the off-payroll discussions at the moment. No one can really predict exactly how things will change over the coming months, but with news of the various vaccine testing successes, the chances are high that it will be rolled out on 6th April 2021 as planned. In fact, Andy Chamberlain, Director of Policy at IPSE said during the event that the “smart-money is on it coming in in April” and urged recruiters to prepare regardless: “There is the possibility that technical problems with determinations will result in calls for another delay, but it’s not a certainty so everyone should plan anyway.”
John Chaplin, Associate Partner of EY agrees that preparation is key, but other economic challenges are impacting plans: “It’s highly likely that the off-payroll changes will come in, but in many cases, people are less prepared this time around as they have other things to deal with. Covid-19 and the end of the Brexit transition period have pushed IR35 down the priority list.”
Handling contractor relationships
Of course, in amongst all of the debates, we can’t lose sight of the fact that it is the contractors themselves who will be facing the toughest challenges as we edge closer to April 2021. They are facing a real burden at the moment. While we were pleased to see that a significant number of end-clients had reversed blanket bans in light of the delay (over a third, in fact) contract professionals are still battling with the administrative nightmare of the determinations themselves and the potential to challenge the results should they disagree.
But we can’t ignore that this section of the workforce is going to play a critical role in aiding economic recovery in a post-Covid world and unfortunately, it is recruitment businesses themselves that face the unenviable task of being the go-between for contractors and end-clients. However, as Ann Swain, CEO of the Association of Professional Staffing Companies (APSCo), pointed out, employers need a fair approach to engaging contractors, or they could lose out on critical talent for the business: “Contractors expect to be treated as a business – that’s why they operate in the way they do. If you want the talent, you have to expect to pay them fairly and to engage them in a compliant way that works for both parties, not just the end-client.”
This is a particularly pertinent point at the moment. All of the panellists agreed that agility and flexibility of workforces is the future – Covid-19 has dictated that change. More people are likely to choose the contract route, and if unfair assessments are being made, the reputation of the employer and their recruitment company could be impacted in the longer term. We saw this in the public sector roll out several years ago. There was a notable drain of talent from the sector due to blanket approaches to status determinations that many employers have struggled to combat.
As Andy Robinson, Business Development Director at Kingsbridge, pointed out, “If people are being pushed into PAYE and being taxed as an employee, they will begin asking questions around being treated like one as well. They’ll want access to the same benefits and will question why they didn’t have this before under the same contract, and that’s where contractor relationships will be impacted.”
Education is still important
While the year-long delay to the roll out has extended us all some breathing space, there are still some slightly concerning gaps in knowledge that could expose everyone in the supply chain to some risks. As our own Andy Robinson explained: “Big strides have been made in how we assess a contractors IR35 status – however, there are still a large number of firms seeking guidance on how to assess contractors fairly. I think that’s the critical point that we’ve reached now. Ahead of the original roll out there were unfortunately multiple blanket ban approaches, but now the focus is much more on getting it right.”
According to Ann Swain, though, the uncertainty of the market is impacting how recruiters prepare, “There are still a lot of staffing companies and end clients that haven’t prepared and just aren’t sure what to expect, despite April being only a few months away.”
This issue of uncertainty is certainly a point to pick up on in light of the recent announcement that a technical change to the off-payroll working rules will be made in the next Finance Bill. According to a statement from Jesse Norman, Financial Secretary to the Treasury Conservative; “This will ensure the legislation operates as intended from 6th April 2021 for engagements where an intermediary is a company. The change will correct an unintended widening of the definition of an intermediary, which went beyond the intended scope of the policy.”
Preparing for challenges
While preparing status determinations themselves is understandably the focus at the moment, it’s also crucial that recruiters begin planning for the potential challenges to determinations – particularly if HMRC’s determination tool is being used. As James Poyser, Founder of offpayroll.org.uk commented, “The reputation of the CEST tool can’t be salvaged in my view and we expect to see contractors challenge the results and reason that they should fall outside of IR35 simply due to the tool’s flaws.”
Where challenges are being made to determinations, having a team ready to handle these swiftly and with due care is crucial, as Tania Bowers, Legal Counsel and Head of Public Policy at APSCo explained; “Contractors are well aware that the determinations are client-led and if employers aren’t proactively engaging with those that are deemed as borderline, they will face challenges that will need to be handled with due care. It’s important that there is a process in place to deal with any challenges or determinations that are on the line. This includes having a person or body in place to impartially review decisions or challenges and act accordingly. Recruiters and their clients do really need to take this seriously both in the lead up to the roll out and afterwards to avoid any disputes.”
Getting IR35 right this time around
The delay to the original roll out of IR35 certainly gave everyone some added breathing space, but the global pandemic has meant that this extra time hasn’t necessarily been utilised for off-payroll preparations (understandably, of course). But April 2021 is only a few months away, and those agencies that aren’t yet ready will face a tough time unless they begin preparations now.