IR35: Opportunities, Not Just Threats
With the extension of IR35 coming in April, there’s been a lot of talk about the challenges it poses as we’ve previously covered. The big concerns for many are the threats around risk and compliance, cost increases, reduced agility and loss of access to top talent. Despite noises made by the Government to review the protocols, it looks like IR35 is inevitable so it is important to look for positives among the negatives too. IR35 could spell the end of the ‘accidental permalancer’ – while providing organisations with opportunities to use contractors more effectively.
Bob is a lovely bloke and a top-notch technical architect. Once upon a time, he took a contract assignment on Lisa’s team in a fintech business. Bob’s ‘job’ was a discrete 3-month data migration project that he had no problem completing. Good work Bob.
So efficient was Bob, that in his last few weeks he had time to help out on another contractor’s project. So, when that guy suddenly quit, Lisa offered to roll over Bob’s contract and switch him to the other job. 90 days later, Lisa was thinking Bob was a useful man to have a round. The contract got renewed again. And again. And again. Before Lisa knew it, Bob had been ‘permalancing’ for three years and was pretty much just a regular part of the team.
Thousands more Bobs
Across the land, Bob’s story is one that has been repeated many times, in many organisations and across many industries. Businesses have become accustomed to perpetual renewal and extension of contracts. And contractors like Bob have loved it, enjoying many of the advantages of permanent work, with none of the hassle or permanent employment, as well as better pay.
This is where organisations need to step back and think objectively. Did Lisa’s firm really need to keep renewing Bob’s contract for three whole years? Was it the right business decision? Should the role have been a permanent one? Or was it easy just to keep renewing, almost out of habit?
Renewing a contract may be beneficial in the short-term, but less so if repeated over time. Paying a contractor fee because they are ‘useful to have around’ is difficult to justify. They can end up being expensive, delivering little during some periods and may demotivate permanent employees who do the same or similar job - but effectively take home less pay due to tax regulations. Plus, a workforce filled with permalancers can become stale.
After all, one of the benefits of hiring contract staff is to get access to the best available talent at a particular time to meet your specific needs. Perhaps, in some ways, IR35 is a blessing in disguise? The days of habitual contract renewal may be over.
Seeing the opportunity
It will be a big change for many businesses to move on from the mindset of automatic contract renewal. The opportunity for organisations in 2020 and beyond is to embrace the change that IR35 demands, instead of fearing it.
Now is the perfect time to review, and potentially rethink, your whole approach to engaging contractors. You don’t want to risk non-compliance, but you do want to harness the benefits that an agile workforce presents.
You could pay more to contractors and have them inside IR35 – but that is going to cost, while putting a blanket ban on PSCs means you will lose access to skills, and the agility your business craves.
Perhaps the advent of the latest IR35 reforms will force the hand of both supply and demand to work in a smarter way: leveraging new engagement models whilst being IR35 compliant. A bold new approach could give you access to skills that your competitors are missing out on – putting you ahead of the game. At the same time, you will be working in a more efficient, agile way rather than the ‘old days’ of rolling contracts.
Apart from the well-discussed threats, do you see any benefits to the extension of IR35? We’d love to hear your thoughts. If you’d like advice on any aspect of IR35, please contact us on IR35@interimpartners.com to discuss your needs.