A year on from the introduction of IR35 reforms in the private sector, two new studies have highlighted the impact that the rules have had, not just on UK freelancers, but on the businesses looking to employ them.
New research from the Association of Independent Professionals and the Self-Employed (IPSE) has shown that, despite 49 per cent of UK firms stating that they could not attain their growth levels without contractors, 28 per cent have decreased their hiring of contractors since the rules were introduced in April 2021.
IPSE’s research was conducted by YouGov and polled 501 businesses, with 42 per cent of respondents saying that IR35 has had negative implications for their finances. 47 per cent said that IR35 determinations had proven a “significant administrative burden”, with 20 per cent making blanket “inside-IR35” assessments.
IPSE CEO Derek Cribb said: “While the media, over the past year, has mainly analysed the significant and damaging impact of the reforms on self-employed workers, today’s research shows that the changes to off-payroll working has also hindered their clients.”
“Businesses have long relied on freelancers to provide additional expertise and support. The changes to IR35 in the private sector in April 2021 have made it harder for them to hire contractors and has therefore made it even more difficult for them to grow during these turbulent economic times.”
Cribb continued that the government should rethink IR35 in order to help businesses recover from the pandemic, adding: “without a governmental review or further reform, companies will find they aren’t able to hire the necessary skills and talent that freelancers provide and that they are recovering at a slower pace compared to international competitors.”
In a separate survey, Kingsbridge Contractor Insurance found that 50 per cent of businesses in the UK IT industry said that IR35 had been the main obstacle to them hiring freelancers over the past year. More than 70 per cent of the businesses and recruiters polled said that they had seen a decline in limited company PSC contractors since the rules came in.
With the IT industry heavily reliant on freelance workers, Kingsbridge has warned that restricted access to the UK’s highly-skilled IT contractor workforce could threaten the industry’s wider growth prospects.
Paul Havenhand, Kingsbridge Contractor CEO, commented: “The UK economy is being hampered by a severe recruitment crisis, with many IT businesses struggling to fill vital roles. Contractors, as a highly skilled, flexible resource, could be providing a much-needed interim solution to keep things working and avoid major disruption to UK businesses. Yet the complexities of IR35 and perceived risks are putting businesses off.”
