Public bodies raise rates to stop IR35 reforms hurting

Rate increases are being deployed to incentivise some PSC contractors caught by the new off-payroll rules to stay put at their client-organisation.

Typically reserved for PSCs agreeing to work through umbrella companies instead, the increases are designed to offset the extra tax that contractors face by switching to PAYE.

Individually, the increase is meant to ensure that the client retains the contractor’s skills, in exchange for the contractor retaining their earning power (or close to it), without the worry of IR35.

At Harvey Nash Recruitment Solutions, an agency supplying the public sector, approximately 16% of contractors have successfully upped their daily rates in such a way.

But more than twice as many want no truck with the tax-induced hikes, as 38% of PSCs say they will only seek contracts advertised as outside IR35, the agency added on the eve of the law being reformed.

“I was sceptical,” one contractor who quit her public sector client said this week. “But I do think that rates [at my former client -- a central government department] are now increasing.”

Writing on ContractorUK’s Forum, another ex-PSC said: “[I’ve now got] no IR35 to worry about. [My] rate [was] upped to accommodate [becoming PAYE], so I’m no worse off.”

Tax advisory Orange Genie isn’t surprised some clients are stumping up incentives: “The public sector is beginning to suffer the skills shortages predicted,” it said. “They will have to make decisions to either raise rates or do without.”

Editor’s Note: Related –

Contractors’ Questions: Will clients up rates to cover IR35 getting tougher?

Agencies slash PSCs’ pay rates, insist on umbrellas

Why 45,000 is the magic number for a PSC turned brolly

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