Private Sector IR35 Reform: What healthcare recruiters need to know

IR35

If you’re recruiting for healthcare companies in the Private Sector, you’re probably already aware that the off-payroll rules are set to change in April 2020. In this article, we’ll look at what that means for your clients and workers, and how you can advise them in the coming, turbulent months.

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What is IR35?

IR35, otherwise known as the Intermediaries Legislation, is designed to stop so called “disguised employees” avoiding tax by using an intermediary, like their own limited company (PSC). Determining IR35 status can be complex but in basic terms, if a worker is engaged and behaving like an employee, they are “inside IR35” and they have to pay roughly the same tax as an employee would.

What’s changing in April 2020?

At the moment, if your healthcare workers are working for private-sector clients, they are responsible for determining their own IR35 status, and they are liable for any unpaid taxes if they get it wrong. From April 2020, the client will be responsible instead.

What happened in the Public Sector?

In April 2017 a similar reform was rolled out in the Public Sector, and while the government have tried extremely hard to paint it as a success, there were widespread unintended and negative consequences. Many public-sector clients made blanket decisions, forcing all their contractors inside IR35, rather than make individual assessments. The resulting drop in income led many contractors to seek alternative contracts, which led to skills shortages all over the Public Sector.

Your clients will need help to assess IR35 status correctly

To help your clients avoid these same negative consequences, it’s important that they assess IR35 status correctly, and to do that most clients are going to need help to assess their position and implement the new processes. They may well look to you, as their trusted recruitment expert, to advise them.

Our advice is that they should contact an IR35 compliance expert, like Orange Genie Compliance, as soon as possible to give them the best chance of being prepared for IR35 reform when it arrives in April.

What if your healthcare workers are found to be inside IR35?

Even if your clients are happy to continue working with PSCs and assess each worker’s status individually there’s still a good chance that some of them will be found to be inside IR35, and we’re expecting a significant number of end-clients to make internal policy decisions that they no-longer want to engage with PSCs. Agency healthcare workers who are affected will need a PAYE solution.

The two compliant options will be Agency PAYE, where you engage the worker directly and pay them through your own PAYE system, and Umbrella Employment, where they are employed by an umbrella company.

How does Agency PAYE Compare with using an Umbrella Company?

When you’re deciding which model to recommend to your healthcare workers, it’s important to realise that their take-home pay will be roughly the same, whichever model they use. However, umbrella employment has a number of important advantages:

For the Agency For the worker
  • The work, cost and risk of employing your healthcare workers is outsourced to specialist experts
  • Staff are freed up to concentrate on your core business
  • You have access to experienced experts in payroll and compliance

 

 

  • Continuous employment across all their assignments – this has a number of advantages, including improved access to credit and mortgages.
  • Sick pay (even when between assignments)
  • Holiday pay
  • Access to a workplace pension
  • Maternity/Paternity pay (Even when between assignments)
Additional employee Benefits (depending on the umbrella).

By contrast, healthcare workers engaged through Agency PAYE are usually only engaged while working for a client. These short-term engagements give them limited employment rights while they’re engaged, and they have no rights at all when they’re not working.

Healthcare workers may be targeted by tax avoidance schemes

When off-payroll reform hit the Public Sector, thousands of healthcare workers fell victim to tax avoidance schemes and we expect the same thing to happen in the Private Sector. Tax avoidance sells a false promise – that the worker can take home more money by paying less tax, often claiming that they’ll take home 80 or 90% of the invoice value.

Unfortunately, there is no legitimate way to achieve this, and many healthcare workers are now facing financial problems as a result of HMRC investigations. Still more are still being paid by tax-avoidance schemes and will suffer the same problems in the future.

For this reason, it’s very important to make sure you only work with FCSA accredited umbrella companies, as this is the easiest and most cost-effective way to ensure they’re compliant, competent and stable.

Employment with Orange Genie Healthcare

As well as receiving all the benefits of umbrella employment, and benefitting from our excellent service, all healthcare workers who opt to be employed by Orange Genie Healthcare get unlimited access to Orange Genie Edge, our amazing employee benefits platform:

  • Discounts and Cashback on thousands of products and services help make their money go further
  • Medical and support services help them look after themselves and their families
  • Free lifestyle tools help them improve their wellbeing and get more out or contracting

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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