If you are a recruiter that engages with contractors, the upcoming changes to IR35 in the private sector present one of the biggest challenges in recent years. Whilst these changes have been looming for several years, following a trial run in the public sector, recruiters must start readying themselves for the new rules coming into effect in April 2021.
The proposed changes require businesses that engage the services of contractors operating through their own limited company to consider the employment status of that contract. This is done by assessing the contract that is in place, as well as the contractor’s working practices, in order to conclude whether the individual is acting as a “disguised employee” and is therefore deemed inside of IR35.
In order to satisfy HMRC guidelines, “reasonable care” must be taken to ensure that the employment status decision is accurate. Once a decision has been made as to whether the individual is inside or outside of IR35, this outcome then needs to be presented to the worker, and any intermediary supplying the worker, prior to 5th April 2021.
You may be reading this and thinking that all the preparation for the legislation change sits with end hirers and not recruitment agencies. And whilst this is correct that the responsibility will sit with them moving forward, there are still steps you can take to educate yourself and most importantly, the contractors you work with.
So, what can you as a recruitment agency be doing to prepare yourself and your contractors?
- Understand the ins and out of IR35 – Educate yourself on IR35. Make sure you understand the legislative changes and the effect this will have on contractors post-April 2021. The majority of contractors will have only read about the IR35 Legislation change online or heard about it from other contractors, so being able to support and advise them will put you in good stead and help you gain an advantage over your competitors.
- Communication – Most contractors are unsure about the steps they need to take for them to be reassessed. Even though this is down to the end hirer to progress, it is good to communicate this to them and reiterate that it’s ok for them to get in touch with their end hirer and ask for further clarity and updates on how this is going. The sooner they have been assessed, the sooner you as a recruiter can advise them how they can operate going forward.
- Supportive process – The effect IR35 will have will be different for each contractor, but the actions they take prior to being assessed will be the same. Make sure your agency scopes an IR35 process, explaining how IR35 is going to affect contracts after April 2021 and how contractors should approach IR35 with their hirer. Ensure this process is rolled out to all other recruiters at your agency so the advice you offer is consistent.
- Contractor working options – If captured inside IR35, contractors are going to need to understand the working options available to them if they are no longer able to operate via their limited company. You need to make sure your business can explain the other way for them to work/be paid and provide an overview of the service and how this differs from working through a limited company.
- Specialist advice – There is a lot to consider when it comes to IR35, which is why partnering with a specialist can be of benefit. Brookson can support with all aspects of IR35, not only as a specialist contract accountant, who offers multiple working options for contractors, but as an SRA regulated law firm and specialist in IR35. Brookson are able to ensure your agency and contractors understand IR35 and get support both prior and post April 2021.
With the above steps in mind, it is critical that recruiters understand IR35 and how they can continue supporting their flexible workforce.
Speak to the experts for a FREE IR35 education session.