Just 14% of contractors would accept an inside IR35 determination
We’re finally seeing temperatures creeping above zero and the first buds are coming out. Spring is on its way. For contractors though, that can only mean one thing: IR35 is coming. As we head closer to the April deadline, we’re more and more confident that reforms will go ahead this time, rather than being postponed as they were in 2020. As part of our preparations here at Kingsbridge, we sent out an in-depth survey to our contractor base to find out their thoughts about IR35 and lockdown. We had a whopping 2,727 responses, which give us detailed insight into how contractors feel about the reforms and their likely course of action in the various scenarios that we put to them. One of the most significant findings of the survey, for end clients and recruiters especially, was that only 14% of contractors said that they would accept an inside IR35 determination. Read on to find out how contractors would react if end clients try to place them inside IR35.
10% of contractors anticipate an IR35-induced blanket ban
When the IR35 reforms were first announced, one relatively common reaction of end clients was to try to create blanket determinations, banning the use of personal services companies or forcing contractors to work inside IR35. One survey respondent told us, “My client is not going to assess status. They are allowing contractors to continue if they are only willing to work inside IR35.” Thankfully, this is something we are hearing less and less from end clients, as they realise the risks of blanket determinations, but some companies are still set on this course of action. However, as the survey shows, this is not a smart move if you want to keep your best contracting talent - an overwhelming majority of contractors would not accept this. This means you either get into a messy situation where your contractors are challenging your determinations, or they move on to another client. Read on to find out how contractors would respond to being placed inside IR35.
Almost a third of contractors would leave if placed inside IR35
If asked to move inside IR35, 29% of contractors said they would leave to seek alternative work. That could be your procurement specialist, your IT security manager, or your risk management analyst walking out the door, and you are left with the headache of finding someone equally talented to replace them - and someone who is willing to work inside IR35. For the most in-demand people and those with the most specialised skills in contracting, walking away into another job is a more attractive option to them than sticking around and getting a raw deal from an incorrect IR35 determination. While the pandemic has temporarily decreased work for some contractors, for others the shift to remote working has opened up new opportunities. As one contractor commented in our survey, “it allowed me to take on more work, as I was working remotely, I was able to work multiple contracts at the same time.” Don’t assume, then, that your contractors will stick around because they need the work even if they are placed inside IR35 - because nearly a third of them won’t.
40% of contractors would increase day rates if placed inside IR35
To recoup some of the losses for being placed inside IR35, 40% of contractors said that they would increase their day rate for their work. In particular, contractors working in the IT and telecommunications industry said they are more likely to increase their rates if placed inside. So, you may be able to keep top talent if you place them inside IR35, but you’ll have to pay an extra premium to secure their services. Our survey also found that 70% of contractors did not claim any government financial support throughout the coronavirus crisis, most likely because they were ineligible. Some contractors will be in debt and be looking to earn as much as they can to pay off their borrowing and to compensate for lost income. It’s in your business’s best interest to have a clear IR35 review process so you don’t lose talent or have to pay more to keep them.
Flexible working will boost UK economy
The positive news is that some contractors mentioned that work is gradually picking up again after the slump of the COVID lockdowns. With millions of adults having already received the vaccine, we’re hopeful that normality is not a million miles away. However, the economy could well take years to recover from the effects of lockdown, and businesses may find that short-term contractors are more cost-effective and flexible than recruiting full-time employees. Demand for contractors is likely to rise again as we head into spring and summer and things begin to open up again. Businesses that are well-prepared for IR35, with thought-out plans for how they engage contractors and assess status fairly, will be the most attractive clients for our contractors.
Recruiters and end clients must prepare for IR35 now
End clients and recruiters who use and supply contracting talent must get prepared now for the IR35 reforms in April. As the results above show, contractors will not accept an unfair inside or blanket determination, and over half of contractors (55%) told us that they did not believe their agency or end client were prepared for IR35. To keep your best contractors on-board, they need to see that you are using a fair, transparent and accurate system for producing status determinations. And being prepared early helps. Currently, 25% of contractors do not expect to be assessed until after April. Opening up the conversation around status now will allow both parties to prepare, make any necessary changes to contracts or working practices, and ensure a positive working relationship going forward.
Leaving it until the last minute risks rushed decisions, hiked contractor rates, or your contractors leaving for another job. Kingsbridge is always here to help end clients and recruiters with all things IR35. The Kingsbridge Status Tool is a unique hybrid IR35 solution, combining the best technology with expert support. Using it, you can produce informed, expert-led decisions on status for all your contractor engagements. To see how the Kingsbridge Status Tool can support your preparations for IR35, sign up now for a free, no-obligation demo.