We are now only a few months away from the proposed changes to IR35 coming into effect. Whilst there is likely to be a budget (predicted to take place in February) with many people asking Sajid Javid to either delay or at least review the changes as it stands the changes are due to go ahead as planned. We are already starting to see the impacts of the proposed changes with some of the big banks (Barclays, Lloyds & HSBC) saying they will not use day rate contractors either at all or only where they are in scope. Many other companies are yet to make a decision with their contractors waiting to understand if they will have their contract renewed, terminated or negotiated.

This is always a quiet time of year for new contract roles but even taking this into account there appears even fewer roles than normal as any contracts issued now are likely to pass April and therefore other than very short term gigs it makes the next few months and possibly longer a challenging time for contractors to secure their next engagement. I’m speaking to more and more contractors who are currently seeking work and face the decision of whether to ride out the storm, consider going perm, look to work with an intermediary such as a Consultancy or Umbrella company or even take roles advertised as inside IR35.

Lets have a quick look at each of these options:-

  1. Ride out the storm – How long will it be until things calm down? Will some companies currently stating they will not use contractors have to relent, after all they will still need to deliver change and will they be able to do that without using highly skilled contractors? Or will the proposed changes simply change the contractor market for good and this isn’t a storm but more a different landscape.
  2. Consider going perm – Well many contractors enjoy contracting (not just for the money) but because they enjoy working in a less political way, where they can focus on delivery without getting caught up in the corporate red tape. Therefore some may see this as a short term option with the hope they can return to contracting once the impacts subside (if they do). However this is likely to lead to either contractors going perm for a short period and then leaving, which will have an impact on companies who will have the cost of hiring multiple times and destabilising in flight change programmes or contractors taking and staying in perm roles but potentially not being a good cultural fit, which will impact both the company and the individual.
  3. Work with an Intermediary – Working with a Consultancy seems to be quite appealing to contractors as they are more likely to take a pragmatic view on roles being in/out of scope and therefore continue to use day rate contractors. Of course if you work for an SME (small to medium size enterprise) like Simplify Consulting then they are out of scope of the changes coming in April, meaning if part of a Consultancy Engagement/Statement of Work arrangement then you are likely to be able to work as a day rate contractor via a PSC with the risk sitting with the contractor to pay the correct tax/NI as it does today . Using an umbrella seems to be less appealing as this will have an impact on the take home a contractor receives much like working on roles inside IR35.
  4. Taking a role inside IR35 – Well this appears to be a last resort for most contractors I’ve spoken to, understandably as essentially you will be taxed as an employee but receive none of the benefits so this is a hard sell unless the rate is inflated to reduce the impact of the increase in tax/NI, which some companies may choose to pay in order to retain the talent they need to deliver their transformational change.

So perhaps its too early to say and maybe the newly formed Conservative Government will have a change of heart but everything I’m seeing and hearing so far points to the likelihood that we will have less roles for the huge contractor population and this will lead to a flooded contractor market who may be forced to make some decisions, all of which are likely to be less appealing than the way they have worked for many years.

If you are a contractor and have both wealth and transformation or similar experience and want to know how becoming an associate of Simplify Consulting can help or if you are a Wealth provider concerned about how you can deliver change post April then please get in touch to discuss how Simplify Consulting can help.

Written by Matt Short – Business Manager at Simplify Consulting