As new off-payroll working rules come into force this month, experts are urging people professionals to work out how to assess contractors ‘sooner rather than later’.
The reform to off-payroll working rules - also known as IR35 - is likely to have a major impact on the way businesses hire contractors.
Because of the coronavirus pandemic the new off-payroll working rules were pushed back by a year, finally coming into force in the private sector at the beginning of this month. The onus for who is caught by the tax rule has been changed, from the contractor to the organisation employing them. To avoid making this decision, many companies stated they would no longer be using contractors.
The new rules have been put into place to ensure that contractors are paying the same level of Income Tax and National Insurance Contributions that they would if they were hired directly by the client - and medium and large-sized private sector clients are now responsible for determining the employment status of the worker or contractor.
Seb Maley - CEO of Qdos - commented on the reform, stating:
“The introduction of IR35 reform is a historic moment. It marks the culmination of years of the government chipping away at contractors, who have shown tremendous resilience and a determination to continue working this way.”
Matt Fryer - Head of Legal Services at Brookson Legal - also stated that businesses must take a ‘new approach’. He said:
“As IR35 becomes the norm, businesses need to take a completely new approach to contingent workforce management. Processes need to be embedded throughout the company to ensure continuity, including undertaking a fair and accurate employment status test, managing the process of any challenges to status determinations, contract migration and recruitment. It is also vital to maintain visibility of the temporary workforce and control of risk throughout the supply chain. With the economy gearing up for recovery from the pandemic, not having an appropriate IR35 solution in place is a real risk in terms of attracting and retaining a highly talented flexible workforce.”
Charles Cotton - Research and Policy Adviser at the CIPD - said organisations had to work out the practicalities of assessment, including whether HR would be at the helm.
He said:
“If it’s another department, then it makes sense to check what help it will expect from HR. This will help to determine your respective roles and responsibilities, as well as setting expectations. For example, while another team might be responsible for making the assessments, it might still want HR’s help when it comes to communicating with contractors, or it might want HR to set up an appeals process in case some contractors are not happy with how their contracts have been determined.”
Simon Parsons - Director of UK Compliance Strategies at SD Worx - urged businesses to understand what the reform means to their business specifically and to plan around it.
He stated:
“Having a clear understanding of the requirements, evaluating what this means for the business, assessing current and future processes, and planning for the future will place HR teams in a strong position to adapt to the coming change. As the saying goes, it’s better late than never.”
