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IR35 Reform is Going Ahead: What Does This Mean for Recruiters?

IR35

MPs have voted against an amendment that would have seen private-sector IR35 reform delayed for a further two years, and in so doing have confirmed beyond doubt that the reform will take place as planned in April 2021.

The reform is included in the Finance Bill 2019-20, which has now passed through to the report stage. Amendments to the bill were comfortably defeated, leaving the contracting industry with no hope of any further delay.

How to Help Your Clients Prepare for IR35 Reform: Download our FREE guide>>

What does this mean for recruiters?

In terms of the effects of IR35 reform, recruiters often find themselves stuck in the middle, with both clients and contractors looking to them for information and advice. In some circumstances, recruiters might also have additional responsibilities as the “fee payer” but this only comes up if contractors are working inside IR35 through a PSC. Hopefully, this situation will be quite rare, because it’s not usually the best way to do things.

What should recruiters do now?

Most of the action that must take place in the run up to April 2021 is in the hands of your end clients, as they will be responsible for assessing contractors’ IR35 status after the reform. The most important thing recruiters can do is advise them correctly, to allow them to make the right decisions and complete their preparations in time.

Clients who don’t start their preparations early enough could have serious problems after the reform, which will be bad news for them, for you and for your contractors. It’s important to engage with your clients on this issue as early as possible, to protect them from potential damage, and strengthen your position as their trusted advisor.

What is the best IR35 strategy for your end clients?

The details will differ from one client to the next, depending on the size and make up of their contingent workforce and how they currently engage with contractors. However, in general terms, the best strategy will include:

Don’t panic

It’s true that urgent action is required, but if they act now there is time for your clients to get it right. In the run-up to the expected deadline of April 2020 we saw a lot of knee-jerk policies, making blanket inside IR35 decisions, or even refusing to engage PSCs altogether. These policies are ultimately damaging, as they increase the cost of hiring contractors while encouraging those contractors who have a choice to go elsewhere.

After the reform, it will still be legitimate and preferable to engage contractors outside IR35, as long as sufficient care is taken to ensure the contract and working practices in place line up with this status. Clients who begin their preparations now have the best chance of being able to do this.

Act now

There is still time to prepare, but only if your clients act now. The longer they wait, the less time they will have to assess their situation and implement the necessary systems and processes, and the less likely they are to implement a sensible, measured response.

Get help

Engaging with IR35 compliance experts, like Orange Genie Compliance, is one of the best ways for your clients to protect themselves, you and your contractors. Not only will this help them ensure they are assessing IR35 status correctly, they will also have the best possible chance of safely engaging contractors outside IR35, with all the cost savings and strategic benefits that come along with that.

IR35 status is not set in stone

One important thing to remember is that IR35 status can change, if the details of the contract and working practices are changed. Even if most of your client’s contingent workforce should currently be inside IR35, there is still time to make changes, and they might be able to safely engage many of them outside IR35 after April 2021.

This will only be possible if your client is able to genuinely change the way their contractors are engaged; lip service is not enough. This will take time and specialist expertise, which is why it’s advisable to involve IR35 compliance experts as early as possible.

If you have any questions or if we can help in any way, please call our expert team on 01296 468 483 or email info@orangegenie.com.

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