Businesses warned to take measures to prepare for change regardless of review promise.
Half of businesses not ready for IR35.
Research from the Association of Professional Staffing Companies (APSCo) has found around half of businesses are still unprepared for the changes to off-payroll working in the private sector, due to come into effect in April 2020. The new rules mean that changes to IR35 legislation, which were introduced in the public sector in April 2017, will be extended to medium and large private sector companies. From next year, businesses engaging independent workers will become responsible for setting the tax status of these individuals. As part of this reform, the tax liability will also transfer from the contractor to the fee-paying party in the supply chain, which is typically the recruiter or the company that directly engages the individual.
A survey of the trade association’s membership revealed that although more than three quarters (79 per cent) of the professional recruitment firms polled believe that most of the businesses they work with are aware of the incoming changes, just 51 per cent said the majority of their clients are actively preparing for the updated legislation.
While this represents a notable improvement since July 2019, when just 12 per cent of respondents said clients were putting plans in place to respond to the new rules, it also suggests that many are not doing enough to ensure they are ready for the changes.
When asked if the organisations they recruit into are expecting to pay more for contractors after the changes are implemented, 38 per cent said ‘yes’. In July 2019, this figure stood at just 10 per cent. In addition 70 per cent of recruitment firms surveyed said that they are not expecting the majority of their contractors to agree to working ‘inside’ IR35 once the changes come into effect – suggesting a disconnect between the contractor and employer communities.
“The countdown to the off-payroll working reform is now well and truly underway – but our latest data suggests that many employers are either unaware of the wider potential consequences of the changes, or simply burying their heads in the sand,” said Tania Bowers, General Counsel at APSCo. “Irrespective of any review into the roll-out, which may be announced in the Queens Speech, clients should not be complacent given scale of this challenge. Businesses now have a few short months to get ready for incoming changes to IR35 legislation but it seems that many may be ill-prepared. Companies which haven’t already must urgently review their existing contingent workforces to determine what employment models individuals are working through to understand the extent of PSC contractor usage. They should then work with trusted recruitment partners to discuss which roles are likely to be in scope across different levels, and if individuals with these skills are thin on the ground or easily replaced, so that plans can be put in place to enable them to sustain and grow future workforces effectively. If we’ve learnt anything from the public sector roll out, it is that we are now entering a period of significant change. However, by working with expert recruitment partners, businesses can ensure that they navigate the new landscape easily.”