A forward thinking approach for use of flexible resource
Meet the team… Vicky Roythorne Head of Compliance and Communication T: +44 (0) 1793 430 021 E: vroythorne@outsource-uk.co.uk
There are approximately 2 million • self-employed professionals working in the UK. Some of the key projects and opportunities for UK contractors and Out of which, approximately 1.77 million freelancers: • work as full-time contractors • IT Contracting • Oil & Gas • • Renewable Energy Number of self-employed professionals in the UK has • Construction increased by 43% approximately. • Media and Design • HS2 • Automotive • The overall contribution to the UK economy by freelancing • Nuclear professionals is around £119 billion . • 15% of the UK workforce is self-employed (office of National statistics)
Flexibility! Talent shortages Niche skill sets Why hire flexible resource? Enable completion of projects Trend towards working in this way
Contractor Umbrella Not a one size fits all PAYE Fixed Term solution! Bench Consultant Interim
9 out of 10 Recruiters who responded to a recent REC survey (91%) said their clients have little or no awareness of the changes coming into effect which will impact on their ability to hire flexible resource.
IR35 – contract hires Current status: Off-payroll Rules Introduced in 2000 Implemented to ensure that someone working like an employee (but through a limited company) pays similar taxes to other employees. Currently, it is up to each contractor to decide if the IR35 rules apply to each assignment their business undertakes 1.2 BILLION The Government estimate of the cost of non-compliance
Autumn Budget – October 29 th 2018 Reformed IR35 rules for the Private Sector from April 2020
Working arrangements Substitution Does the contractor have to work specific Control & Supervision Can the contractor hours, or request send a replacement if ‘holiday’ dates? Is they can’t attend? Is the contractor training provided? ‘managed’ or are they using their own skills and experience to deliver a set of objectives? What are some of the key elements which make an assignment ‘inside’ or Mutuality of Obligation ‘outside’ IR35? Equipment Is either party obliged to give or receive Part & Parcel work? Does the contractors’ Risk business provide its own How much is the equipment? contractor ‘part and parcel’ of the client’s Can the contractor business? demonstrate there is financial risk?
IR35 Inside CONTRACTS WORKING Outside PRACTICES
What will IR35 reform mean for your flexible hires? Customer Worker IF ASSIGNMENT IS INSIDE CLIENT MUST MAKE IF INSIDE IR35, OF IR35, AGENCY MUST ASSESSMENT OF IR35 WORKER COULD BE COLLECT TAX & NIC AT STATUS (based on PAYE/UMBRELLA SOURCE, AND PAY contract and working OR DEEMED EMPLOYERS NI practices) EMPLOYMENT MODEL
Why is this important for you? Work required to understand the rules 51% of public sector bodies Risk & Financial penalties for getting it wrong 1 found IR35 rules changes Increased costs in 2017 hard to implement Legal challenges? 2 Resource availability – risk of losing resource to 28% Of public sector clients have had to increase day rates to contractors competitors, or not being able to attract quality 3 ‘inside’ of IR35 flexible resource 32% 4 Of clients have had difficulty filling roles within the Public Sector (HMRC Survey, conducted by the IFF)
Where is the Risk? Post April 2020, the hirer will need to make an IR35 status assessment. If this is not done within 30 days of an agency requesting this information, the hirer will be liable for unpaid tax and NIC Hirer liabilities. Hirers should take “reasonable care” in assessing roles for an outside of IR35 status Post April 2020, if the above has been completed, Outsource it is the fee-payer who is liable for unpaid tax and NIC liabilities if the status is incorrect. Pre April 2020, all risk for Worker IR35 assessment sits with the worker
Who in your business is responsible for this project? HR 1 Procurement Legal 2 Tax 3 Project Manager 4
1 year to go … Countdown is on!
How to prepare?
PSC Contractors: Assessing your existing contingent workforce Determining IR35 status Build a map of your existing pools of contingent resource Analysis of current resource against IR35 key criteria Split contractor population into groups – made up of different levels of IR35 risk Include contractors in this process, to ensure a true 360 analysis of current status
Engaging Limited Company Contractors post April 2020 • Build best practice frameworks for your flexible hires • Educate your stakeholders; Differences between contract and permanent resource Business to business contracts supply chains Measuring performance on a deliverables basis Practical do’s and don’ts Check points to ensure process is followed
PSC Contractors: Future hires – making IR35 assessments & resource planning Implement a process for future hires Implement control mechanisms to check that “reasonable care” has been taken – make sure you fulfil your obligations Roles can then be recruited based on applicable IR35 status (or alternative contractual models utilised)
Alternative Contract Models for future hires Statement of Work True Statement of Work contracts remove IR35 consideration and risk Hirer SOW contracts offer an from the hirer, because alternative way of Outsource become the client for any PSC structuring services resource utilised, and which, if operated therefore assume all properly, will be outside IR35 responsibility. If the the scope of IR35. SOW’s are correctly set Outsource They can be structured up and managed, the for groups of resource, PSC should be ‘outside’ or individual role of IR35 requirements There is a SOW between Outsource and the hirer Worker which is based around deliverables, and risks for non delivery
Alternative solutions – ‘inside’ hires Where you determine that roles should be assessed as being ‘inside’ the scope of IR35, there are a number of alternative solutions – in addition to Statement of Work Contracts - that are available to allow you to continue to engage the flexible resource that you need. Bench Umbrella PAYE Consultants
Contractor Umbrella Workforce PAYE Fixed Term planning! Bench Consultant Interim
5. Consider alternative solutions when a requirement IR35 Preparation does fall inside the scope of IR35 Audit Programme 4. Resource plan for future hires 3. Consider how to correctly engage workers who are genuinely operating outside of Take part in IR35 our mini-audit! 2. Assess risks within your existing workforce 1. Understand the rules around IR35
Thank you! For more information visit: https://cipd.outsource-uk.co.uk/ir35 Or email me at vroythorne@outsource-uk.co.uk Birmingham • London Manchester • Stoke-on-Trent • Swindon •
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