Recruiting contractors in 2020
2020 looks set to bring fresh challenges for recruiters, especially those working with contractors. With a variety of recommendations from the Taylor Review set to be enacted in the new tax year, recruitment professionals must take the time to understand these legislation changes and the potential disruption they could cause, as well as take the necessary steps to ensure compliance.
IR35 dominated the headlines in 2019 thanks to TV presenters such as Lorraine Kelly winning big against HMRC, and a number of major companies declaring that they will no longer work with contractors through limited companies.
Changes to the off-payroll working rules are likely still high on recruiters’ agenda, especially with the private sector roll-out expected in just three months’ time. As such, recruiters should already be aware of their responsibility when it comes to IR35, including the support they should be giving to clients. This is especially important when it comes to enforcement after April, as HMRC will look to recruitment agencies to ensure that the entire supply chain is meeting its obligations.
But it’s not just IR35 changes that recruiters need to be mindful of – there are three other key pieces of legislation that are likely come into effect in April 2020.
Key information document
While it has received less coverage than IR35, recruiters will also be responsible for producing a key information document for each contractor they work with, specifying information including pay, costs, benefits, deductions, and fees. It will be essential for businesses engaging with contractors to clearly establish the terms of engagement before the services are provided. This document will provide valuable transparency for contractors and assist recruiters in ensuring a more level playing field.
Abolition of Swedish derogation
Swedish derogation within the Agency Worker Regulations of 2010 enabled agencies to create an exemption to equal pay for contractors. Provided that the agency offers the worker a permanent contract of employment, pays the worker between jobs and complies with other conditions, the temporary agency worker is not required to earn the same basic pay or enjoy the same working conditions as permanent staff. As part of a crackdown on the mistreatment of low paid workers, Swedish derogation is due to be abolished on 6th April 2020. This could have financial implications for clients employing temporary workers, while agencies will also be required to inform agency workers that Swedish derogation provision no longer applies. The fall out of the IR35 changes, resulting in more contractors being found to be disguised employees could further compound issues for recruiters who have historically relied on this concession.
Regulation of umbrella companies
The Taylor Review recommended extending the remit of the Employment Agencies Standard Inspectorate to cover the regulation of umbrella companies. The currently unregulated market is booming in the wake of IR35 but with the spotlight turned onto unscrupulous companies promising tax relief schemes such as the Loan Charge, it is highly likely that the recommendation will be taken forward in 2020. Recruiters should therefore conduct due diligence on the umbrella firms they choose to partner with, looking for accreditation by a reputable entity such as The Freelancer and Contractor Services Association (FCSA).
With the right preparation and continued engagement with key stakeholders, recruiters should be able to ensure compliance with these key regulation changes coming into force in 2020.
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