Any recruitment agency supplying limited company contractors will be impacted by the imminent changes to IR35 legislation. The legislation is being introduced to tackle the problem of “disguised employment” and will shift responsibility for determining employment status from the contractor to the client.
The changes have come under criticism and recent court cases involving contractors in the public sector and HMRC have highlighted some of the issues surrounding the legislation. Despite this the change is still expected to come into force from April 2020.
Recruitment agencies and individual recruiters will need to develop an understanding of the legislation (if they haven’t already) and will need to consider their responsibilities within the context of the changes.
Here is an overview of some of the ways in which recruiters could be impacted by the changes.
- Supplying private sector clients
Many private sector organisations have already declared that they will minimise their use of self-employed contractors and are looking to take contractors directly onto their books. This of course could have an impact for agencies resulting in a reduction in the number of contractors on their books and ultimately impacting the bottom line. Recruiters should be talking to significant clients and making contingency plans where this might be the case.
- Placing contractors with their own limited company
Some contractors will have been aware of the changes and preparing for them for some time. Others will be burying their heads in the sand and hoping it goes away. Both approaches will have an impact on recruiters. Those who are already aware and have concerns will be looking for advice and reassurance from their recruitment agency regarding their contracts. However, those ignoring or putting off considering the legislation will need even more support. Recruiters may find themselves needing to raise awareness and having to educate workers and clients on the changes to ensure everyone remains compliant.
- Increased admin
Analysing contracts, dealing with queries from clients and contractors and ensuring relevant paperwork is up to date, will all contribute to an increase in administration for many recruiters. This will cause frustration and could be time consuming. Preparing now and ensuring you are ready may help to minimise the impact the legislation will have on your day to day work. Working with a reputable and professional umbrella company or contractor accountancy service will help as they will be in a position to deal with enquiries to relieve some of the pressure.
- The requirement to fully understand complex tax legislation
Nobody enters the world of recruitment because they are interested in tax legislation but the reality is that recruiters now need to have a good understanding of IR35 and other tax legislation. It will be important to be clear on where responsibility lies and the key factors in determining IR35 status and how to correctly assess the employment status of each individual contract.
- The challenge of managing contractor expectations
As we have seen with previous changes to tax legislation, contractors will be disappointed, frustrated and looking for someone to blame if the change leaves them feeling financially worse off. For recruiters looking to build long term relationships with limited company contractors managing their expectations will be crucial.
The changes are expected to come into force in April 2020. If you have any question or need advice or support with preparing for IR35 for the private sector then get in touch.
