COVID-19: Lloyds to put contractors on a three-day week, as IR35 grumbles grow

Lloyds Banking Group is to restrict its IT contractor workforce to a three-day billable week, as part of a plan to mitigate coronavirus’s impact on its profits, ContractorUK has learnt.

The bank was due to unveil the enforced contractor downtime before Easter but instead had to scale back, shelve or stop projects, says a source facing the covid-19-inspired furlough.

A business which supplies contractors to LBG’s London and Edinburgh sites said: “They [contractors] are all due to be asked to work three days a week for the foreseeable future.

“It raises the question -- how can Lloyds treat these ex-PSCs as employees for tax purposes, not give them the rights of employees and now reduce their chargeable hours at a whim?”

'IR35 reform delay was meant to help people amid covid-19'

The question comes after Lloyds decided to stick to its IR35 policy (which says PSCs must use umbrellas instead), despite the official delay to the reform being designed to aid PSCs.

Or, as the staffing unit of accountants UHY Hacker Young explains: “The government announced that [IR35] reform…will be delayed until 6th April 2021…[as] part of additional support for businesses and individuals to deal with the economic impacts of covid-19.”

Capita, and the financial firms Schroders and Standard Life Aberdeen have also retained their IR35 policies, thereby not extending the virus-support to those whom the state intends it for.

'Wider implications beyond IR35'

A Capita spokesperson said: “We’ve decided to press ahead with the [IR35] changes we’re making, given we are well underway with them already and given they have wider implications for our organisation beyond IR35.”

A contractor accountant says that initially, before the covid-19 lockdown, engagers’ refusal to reverse their IR35 decisions to reflect the government delay, wrongfooted many PSCs.

“We had a rush on contractors asking us to halt their limited company closures, but it turns out they had not checked with the end-client or agency,” the accountant says.

“Once they did, they still weren’t allowed to revert to PSC. All that said, many are now benched anyway due to the current health situation. And that situation has had a real effect.”

'As many now reversing as are sticking to their IR35 guns'

Orange Genie, another contractor tax specialist, confirmed that post-IR35 reform delay, the coronavirus has made many clients soften their stance on IR35 reform:

“We too are now seeing as many clients reverse the decisions as stick with them,” the firm’s operations director Helen Christopher said in a statement.

“But those who are sticking to their IR35 guns are still primarily your household names or financial institutions. It’s smaller, less well-known clients who are being a bit more flexible.”

'Relief for contractors'

First Point Group, a contractor jobs agency in the telecoms and technology sectors, indicates that for many contractors, relief on IR35 reform equates to relief from the pandemic.

In fact, asked if clients are offering contractors any support from covid-19 (such as Lloyds’ offer to pay contractors for two weeks), the agency’s London boss David Taylor replied:

“All our major clients are letting the contractors where possible work from home. So far then, we have seen clients supportive and not make major reductions in consultants.

“Clients have also been reversing the need to work via umbrellas only, and letting the PSC work continue until April next year. This has been a relief for those decided inside IR35.”

'Inclusive of contractors'

Contractors at Lloyds facing the three-day week have no such relief, however, as the bank ‘phased-out’ PSCs in February and phased in umbrellas from March, states an internal memo.

Yet the memo adds: “We understand that these are challenging times [due to covid-19]. We are considering a range of options to support colleagues inclusive of contractors.”

Sounding glad consideration turned into supportive action, an LBG contractor said last night: “The bank has not only given us the two weeks [at our contracted rates due to the lockdown].

“In fact, they went further and extended it, so now we have our full rates for three weeks. That means we contractors get paid for longer, albeit now until just tomorrow, as it stands.”

A Lloyds spokesperson is yet to respond to a request to say if the rate coverage might be increased further, now that the government looks set to extend the lockdown period.

'Totally unacceptable, irresponsible'

But another LBG contractor wants action in relation to IR35 reform; not rates of pay.

“I find this approach [of the bank not reversing their decision to ban PSCs to be] totally unacceptable and irresponsible. 

“The government has decided to postpone the implementation of the new IR35 legislation to help millions of self employed in these difficult times.

“But [Lloyds and other big] banks are nullifying the government concession only because someone in HR cannot be bothered to change again the plans made.” 

The contractor added: “Due to the situation with Covid-19, finding a new job in the next months will be incredibly difficult, and these [big] companies are using this dramatic situation to impose their will, openly going against the government”.

'We will not be furloughed'

Meanwhile, a third Lloyds contractor hinted the rate coverage being extended to three weeks was helpful, but only because newly enrolled umbrella workers like him may get little else.

“Given that we all switched to umbrella on March 1st, we will not be furloughed from the umbrella companies as it [the CJRS] applies only to work started on or before February 28.” 

The ContractorUK reader added: “My accountant says we can furlough [ourselves] as limited companies, but I’m waiting for more details. It's all still very much up in the air.”

'Tech contractors better-placed'

According to one veteran recruiter, any coronavirus-related cash or support that contractors can pin down during the UK-wide shutdown is a bonus to their already enviable situation.

Asked what his agency’s clients were doing to help candidates in response to covid-19, the agency boss said: “Out of all those we place, tech contractors are better placed than most.

“They are better placed than other types of workers, and better placed than those in other sectors, given their greater propensity and ease at seamlessly working from home.

'Lockdown is the sole reason reform got delayed'

But to accountant Carolyn Walsh, that almost sums up the government’s way of thinking.

“It now seems that IR35 reform was only delayed because it was known that the country was about to go into lockdown.

“It is expected – by officialdom at least, that contractors won’t need much support as they can use money built up in the company to fund themselves, even if sick or not working.”

'Barclays are rate tripling'

Despite the expectation (which Walsh believes is unfair), Barclays has quietly agreed to pay contractors who work on its frontline, customer-facing operations at three times their contracted rates.

But the bank declined to be drawn on reports that all Barclays staff reduction programmes are being paused; that no new contractor terminations will be made and that any recently terminated contractors can be furloughed with 80% pay reimbursements until June, other than to suggest that all the reports were inaccurate.

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Written by Simon Moore

Simon writes impartial news and engaging features for the contractor industry, covering, IR35, the loan charge and general tax and legislation.
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