By now, contractors and public sector establishments alike should be well aware of the IR35 legislation which affects all contracting staff that are engaged by public sector bodies.
As of 1st April 2017, the IR35 status of a contractor needs to be determined by the public sector body or agency, not the contractor and if they are deemed to be of IR35 status (which is not entirely straightforward to establish) the contractor’s NI and tax should be paid at source, as if they were a full time employee.
Now, this change in responsibility is causing a few problems not just for the contractor, but for the public sector in general. As it’s now the establishment’s responsibility to determine IR35 status, the rules need to be fully understood which, by all accounts, is no mean feat.
- One of the main issues is cost. And more of it. One option is to take on full time staff rather than contractors which avoids the question of IR35 completely. However, finding, hiring, training and retaining full time staff costs money which we all know is hard to come by within the public sector.
- Using an intermediary such as an agency to find contractor staff doesn’t remove the issue – the decision for IR35 status will rest with the agency however it’s possible that if deemed to be of IR35 status, the contractor will increase their rates in order to compensate for the potential financial shortcomings of this status and this cost will naturally be passed onto the end client – the public sector establishment.
- This legislation is only applicable (for now) to Public Sector establishments. Consequently, these new measures could see a drain of experienced contractors from the public sector to the commercial sector leaving the public sector with a serious skills gap problem and critical projects in jeopardy.
- This is an industry challenge that is not going away and could someday include the commercial sector.
Right now, for public sector organisation who need skilled IT staff to help them deliver the digital transformational services they need, one option open to them is to engage with a technology company with a range of business analysis and software development skills on an outsource basis. This option removes the IR35 question completely as the technology company, such as Pulsion, employs the resource full time and charges the establishment on a day rate basis.
Pulsion has provided experience staff on this basis for public sector and commercial clients alike over our 20 year history. If you have a requirement for technical skills on a long or short term basis, then don’t hesitate to contact us for a chat.