Less than half of recruiters believe private sector is ready for Off-Payroll

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Rustic wooden sign in an autumn park with the words Yes - No offering a choice of action in a payroll poll with arrows pointing in opposite directions in a conceptual image.

Business is largely unprepared for the rollout of IR35 reform into the private sector next April, new research by recruitment trade body, the Association of Professional Staffing Companies (APSCo), has shown.

A survey of APSCo members revealed that just under two-fifths (thirty-nine percent) of the professional recruitment agencies polled believe that most of the clients that they work with are even aware of the forthcoming extension of the rules to cover private sector businesses. Just twelve percent thought that the majority of their clients are actively preparing for Off-Payroll in the form of IR35 reform.

When asked if the companies that they place contractors into are expecting to pay more for contractors after the Off-Payroll changes take effect, only ten percent said “yes”, twenty-one percent said “no”, and the remaining sixty-nine percent said “not sure”, suggesting that many clients are still unaware of the implications of the reforms.

Previous APSCo research showed that, following the implementation of Off-Payroll in the public sector in 2017, forty-five percent of professional recruiters observed the cost of hiring contractors increase, with nearly half of those witnessing cost increases of more than fifteen percent.

The Off-Payroll rules will shift responsibility for making IR35 reform assessments from contractors to the clients that hire them, representing a significant increase in the compliance burden associated with engaging contractors.

Several large companies including HSBC and Morgan Stanley have indicated that they will dramatically reduce their contractor numbers to avoid the impact of the new rules. The Royal Bank of Scotland has committed to taking a more proactive approach, by setting terms and conditions that will place contractors outside of IR35 where possible.

In the case of “employed” IR35 determinations, the “fee-payer” (usually the recruitment agency) will become responsible for deducting PAYE employment taxes, so recruiters are naturally concerned that their clients will implement the rules correctly.

Samantha Hurley, APSCo operations director and co-chair of HMRC’s IR35 Forum, commented on the findings of the research:

“Businesses now have just months to get ready for incoming changes to IR35 legislation but, as this research suggests, it seems that many may be ill-prepared.

“Companies which haven’t already must urgently review their existing contingent workforces to determine what employment models individuals are working through to understand the extent of PSC contractor usage. They should then work with trusted recruitment partners to discuss which roles are likely to be in scope across different levels, and if individuals with these skills are thin on the ground or easily replaced, so that plans can be put in place to enable them to sustain and grow future workforces effectively.

“If we’ve learnt anything from the public sector roll out, it is that we are now entering a period of significant and arduous change. However, by working with expert recruitment partners, private sector organisations can ensure that they navigate the new landscape with ease.”  

24th July 2019.