With the impending IR35 changes just around the corner, many public sector organisations have already seen their contractors leave for new private sector contracts, or request rate increases to cover their additional tax liabilities.
As a result, employers are looking for alternative workforce solutions that will mitigate the impact of IR35 on their organisation, and ensure ongoing business stability. Unsurprisingly, this is happening across the entirety of the public sector, but it’s also happening in the private sector too. After all, private sector companies who work on public sector contracts may potentially fall into the scope of the changes, and so are looking for the best way to respond.
How is IR35 changing?
The upcoming changes to IR35 will shift the responsibility of ensuring individuals are paying the right tax to the ‘engager’. The Government estimates that only 10% of public sector contractors currently comply with the legislation, so this change could be a significant upheaval.
Who will be affected?
Initially, these changes will only apply where the end-client is a public sector body. At this point, the changes won’t impact on private sector ‘engagers’, providing they don’t supply contractors to the public sector.
Public sector bodies that utilise contractors, and organisations that provide contractor support to the public sector, will need to pay close attention to these changes and understand exactly how their organisation will be affected. Alternatively, an organisation like Experis can support by steering them through the changes and reducing exposure to risk.
Rebalancing the workforce
Understandably, many people have focused on the negative side of these changes – in particular, the potential pitfalls and lack of clarity around the legislation. However, the changes present organisations with many positives too, and give them the opportunity to drive changes that may have otherwise been slow or difficult to make.
For those organisations that are still making a decision on the best way forward, this may be a good time to rebalance their workforce and enhance their permanent headcount. After all, while contractors can be hugely beneficial for organisations, they’re sometimes deployed into roles that would be better suited to a permanent team member.
Why does this happen? Often, businesses say they’re unable to recruit people permanently for certain roles because of the skills gap. However, in many cases, they simply haven’t looked in the right places, or aren’t thinking creatively enough. For example, instead of holding out for someone who is a 100% fit for the role, they could recruit someone who is 90% right for the role and upskill them on their weaker areas. Or, where someone is needed who can hit the ground running, they could use an experienced contractor to run the programme, who then trains the permanent workforce and ensures they can lead similar projects in the future.
With the right permanent employees, your organisation is likely to identify:
- Reduced risks
- Reduced costs
- Increased retention rates
- Improved in house capabilities
Preparing for the changes to IR35 isn’t a straightforward process. Nonetheless, it presents organisations with an ideal opportunity to shake up their hiring model, and enhance the efficiency of their workforce. Furthermore, for public sector organisations in particular, it’s an ideal opportunity to bring the Government’s industrial strategy to life, by developing their own in-house digital talent.
If you would like to look at rebalancing your future workforce, or if you need assistance understanding the impending IR35 changes, please don’t hesitate to contact Experis.