How to prepare for IR35 in the private sector

Discover how to navigate the new legislation without compromising your talent pipeline.

With the rapid pace of technology advancement and the increasing pressure to deliver change, it’s not surprising that organisations don’t always have the capability to deliver in house. They need flexible resource. Organisations’ reliance on contractors is proof of this. And with self-employment having grown from 3.3m in 2001 to 4.8m in 2018, the UK economy relies on contractors too. Access to bright, flexible talent is a necessity for organisations to deliver their projects to schedule and within budget. But with IR35 on the horizon, the relationship between contractors and private sector organisations across the UK is under threat.

April 2020 is the IR35 roll out date that’s planted firmly in the minds of contractors and private sector companies alike. With just 10 months before the legislation goes live, IR35 is a daunting prospect for many. From issues of compliance and administration to compromising organisations’ capability and the contractor market as a whole, IR35 promises to make a significant impact to the way private sector businesses operate.

According to the legislation, organisations must determine whether contractors fall in or outside of IR35 and take the appropriate action on a case by case basis. That means putting their processes under the magnifying glass and facing the very real risk of losing the people they rely on. Understandably then, IR35 has caused concern that organisations’ day-to-day business operations may be heavily impacted, along with their plans for the future. Some businesses are now making radical changes to who and how they hire in preparation for the IR35 roll out. Even many of the UK’s largest organisations like the NHS and HSBC are taking blanket approaches to their contractor populations.

Much of the fear surrounding IR35 is due to the complex legislation organisations need to wade through. But as long as businesses act now, they can minimise the disruption that IR35 poses. Here are some practical steps your organisation can take to continue using your flexible resource with confidence…

Steps to IR35 success

Clear communication

With risks like losing their flexibility or taking a pay cut due to switching to PAYE, tensions between contractors and their clients are likely to be running high. So, frame IR35 as a chance to continue strong relationships with your contractors through open and honest conversations. Taking the initiative here will make clear to your contractors that they are valued and respected by you. One of the first things you should highlight is that IR35 won’t be the end of your flexible workforce, but another step in its evolution for you to tackle together.

Study the public sector's shortfalls

Take this opportunity to learn from the public sector’s mistakes when IR35 was first rolled out. Blanket bans and incorrect classifications meant loss of time, money and talent for some public sector organisations. Identify organisations of a similar model or scale to yours and find out what worked for them. This could offer an insight into what a flexible workforce under IR35 looks like for a company like yours.

Research & learn together

Delve deeper into what the IR35 legislation means for you and your business - but don’t do it alone. IR35 is to be faced head on by leadership teams across the business to implement changes to existing processes. Doing your research to understand the rules now will mean you avoid any unexpected bills for non-compliance in the future. Remember, whilst it’s important to follow the rules, your organisation still needs to remain competitive to attract the best contractor talent. Ensuring you have a thorough approach to IR35 will stand you in good stead for retaining top talent going forward.

Audit your contractors

You need to demonstrate that you’ve taken ‘reasonable care’ with your IR35 assessments. That means determining the nature of working practices you have with each of your existing contractors. Some may fall inside of IR35. Some may fall outside of IR35. Some may fall somewhere in the middle. Take extra care here to explore how you can adapt your current processes to keep your contractors onboard.

Talk to your supply chain

Once IR35 is in place, parties that don’t fulfil their obligations will be classed on non-compliant. As each party comply with the law, liability moves down the supply chain. So, pick up the phone to all the companies in your flexible resource supply chain. Find out how much they know about the coming changes and what their plans for reform are. Everyone in your supply chain is at greater risk from April 2020 onwards, so putting processes in place as soon as possible will ensure smooth sailing for yourself and your flexible resource.

The Grayce solution

Despite the daunting prospect of IR35, there are still ways for your organisation to have the best of both worlds - keeping flexible resource and your change programmes on track. One of the most challenging aspects of IR35 is determining how it impacts each contractor. When it comes to IR35, Grayce keep the focus on supporting your change projects. That’s why all Grayce Analysts are full-time employees with us, so there’s never any uncertainty about their IR35 status. We do the heavy-lifting for you by absorbing the costs of PAYE and NI for our Analysts. This gives you the time to make progress on your change projects with the support of the brightest, emerging talent from Grayce. We also provide statements of work that are outcome based, rather than focused on employee headcount. With Grayce, you benefit from flexible resource at an affordable price point, to support your projects now, whilst making plans for your permanent team.

We find the brightest talent and develop them over three years in our Development Programme. We equip Analysts with the skills and qualifications for a successful career in change whilst placing them in your change and transformation programmes. Analysts can be deployed as a flexible resource solution, outside IR35, or to help solve headcount challenges post April 2020, as you look to build long term capability. All performance is managed by our team of Delivery Managers - experts in people development and with considerable experience in change and transformation.