Is IR35 affecting contractor hiring?

Is IR35 affecting contractor hiring?

With permanent hires up by nine per cent and contractor hires down 15%, it is undeniable the employment landscape is changing.

Advertised vacancies show much the same pattern. According to data by the Association of Professional Staffing Companies (APSCo), vacancies for permanent positions are up one per cent whilst contract vacancies have dropped by eight per cent.

Ann Swain, Chief Executive of APSCo, explained that these figures show that companies are increasingly minded to bring talent in house.

She said: “The robust growth in permanent placements witnessed in December has been accompanied by a weakening in contractor markets as hiring companies opt for security of talent, against a backdrop of growing skills shortages in professional markets.

“This is particularly true within financial services, where demand for permanent staff has skyrocketed over the past year. This can most likely be attributed to enhanced confidence in the sector following fresh predictions that Brexit will not impact demand for talent within the square mile to the extent that many previously feared.”

However, there has to be a question over whether changes to IR35 regulation have impacted contractor hiring.

With queries over the utility and accuracy of the government’s self-assessment ‘CEST’ tool, not to mention blanket decisions on whether contractors fall inside or outside changes to tax legislation, there are unavoidable obstacles that might put off a contractor from taking on a project.

Or, an employer taking on a contractor – with so much uncertainty regarding liability, tax and pay.

Anecdotally, there are reports of swathes of public-sector IT contractors downing tools from projects. The government admits that some of it’s long-term digitisation targets will be missed as a result of it being unable to hire for roles that would have previously been filled by contractors.

However, IR35 is only one part of the story. John Nurthen, Executive Director, Global Research at Staffing Industry Analysts lays out two factors that will unavoidably affect hiring norms in 2018.

He said: “During 2018, we can be certain that the two factors that influenced the market so much in 2017 will continue to dominate: business uncertainty due to Brexit and a severe shortage of skilled candidates."

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