Contractors’ Questions: How are agency contractors’ clients pre-empting IR35 reform?

Contractor’s Question: As we are now much closer to IR35 reform day of April 6th 2020 than when end-users last started putting arrangements in place for it, have their actions changed? Back in June, three clients were moving to halt PSC hires, and a fourth was rumoured. What are engagers tending to do now with their PSCs to pre-empt IR35 changing?

Expert’s Answer: So far, we have heard of large financial services firms partnering with consultancy businesses, which are rumoured to be taking a ‘body shop’ approach to their contractor population to keep the headcount intact. This will increase costs somewhat, but effectively pushes the IR35 conversation further down the table. And off their plate.

We have also seen an increase in management consultancies moving into spaces where limited company contractors did the work before. The substantial fees commanded by consultancy firms can support higher salaries and bonus payments, so this will put further pressure on the already candidate-short permanent jobs market.

At the same time, large firms are starting to show their colours and are viewing IR35 as a ‘single risk’ that needs to be mitigated. In some cases, this is resulting in the ‘catch-all’ decisions you too have heard about from the large financial services firms and their approach to contract workers.

Meanwhile, after a very noisy period following the announcement of IR35 changes in the public sector, we’re finding that many contractors are still engaged in work with that sector. And a large percentage remain outside IR35.

Provided there are robust contracts, clear expectations around deliverables, and stringent audit processes, organisations in the private sector shouldn’t have anything to worry about. Perhaps the private sector should seek some guidance from their public sector cousins, for whom IR35 reform has become a normal part of life.

The expert was Dean Durrant, managing consultant at HRC Recruitment.