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IR35 reforms for businesses: everything you need to know
With less than six months to go until the reforms come into play, it’s time for many businesses to put IR35 back on the agenda. Whilst some businesses were fully prepared for the original April 2020 deadline (pushed back as a result of COVID-19), many were not. With this in mind, the three webinars in our recent IR35 event mini-series were designed to help businesses no matter where they were on their journey to IR35 compliance. Access the on-demand webinars below or continue reading for a summary of each event.
Part 1: What is IR35 and how will it impact you?
Helping businesses understand the background of the IR35 Private Sector reforms, how it could impact their business and the steps they will need to take to get ready.
Part 2: What have we learnt since April 2020?
Exploring how the COVID-19 pandemic may have affected perspectives, positions and preparations for the reforms in April 2021.
Part 3: Get ready in less than 6 months
Detailing the various solutions available for businesses to get compliant by April 2021 and remain compliant in the months and years to come.
For further information, support, resources and advice, visit our IR35 Hub for businesses. If you’re a contractor, click here to access support.
Part 1: What is IR35 and how will it impact businesses?
In the first of our three-part series, we explored the most obvious question associated to IR35: what is it and how will it impact organisations?
In a prompt 30 minutes, we answered the following questions:
- What is IR35 and what’s changing?
- What are the risks and opportunities presented by IR35?
- What do the reforms mean for contractors?
- What are the key determining factors of an IR35 assessment?
- What are the options for my business?
- How will contractors react to the changes?
- What do I need to do to get ready?
- How do I get started?
- What does the suggested timeline for getting ready look like?
To explore this topic in more detail, including a quick 5-minute video explaining the reforms, check out our IR35 Hub for businesses.
During the live webinar we conducted a poll with our audience, asking them the question: “How prepared were you for the reforms in April?”. Only 5% said they were “Fully prepared”, and the remainder said they were only “Somewhat prepared” (82%) or “Not at all prepared” (13%). Considering there was less than one month to go when the reforms were delayed, this suggests that many companies experienced a ‘near miss’.
So with less than six months until the reforms go live in April 2021, there is a lot for businesses to do to get ready, avoid the risks, and embrace the opportunities IR35 might present.
Part 2: What have we learnt since April 2020?
In the second instalment of our IR35 webinar series, we wanted to bring companies up to speed on what had happened since April 2020, and discuss how the COVID-19 pandemic may have affected perspectives, positions and preparations for the reforms in April 2021.
We delivered a short 20 minute presentation, covering the following topics, before launching a series of polls and conducting a Q&A session:
- The timeline of events since the Government announced the delay to the reforms as a result of COVID-19 on 17 March 2020
- What stances were organisations taking in the run up to April 2020?
- How prepared did businesses get?
- How did contractors feel about companies’ response to IR35?
- What likely action will contractors take?
- How has COVID-19 impacted demand for contingent working?
We ended the presentation by considering the key perspectives that may have changed since the national lockdown, and the most important questions that organisations now need to ask themselves:
- Will the near miss mean that all parties will be better informed and prepared?
- Is there a new perspective on the value of contractors for businesses?
- How will the market dynamics shift per market? I.e. Candidate-led vs. job-led?
- Will contractors be less open to contracting due to the instability it entails?
- Will clients adopt a different view on working practices and ability to change them?
The answers to these questions will be different for every organisation. And with the country still very much in the midst of the disruption caused by coronavirus, only time will tell if organisations are able to answer them in enough time to prepare for April 2021.
To kick off some debate within the open forum section of our event, we then asked our audience the following three questions:
- Has the experience of COVID-19 altered your business’ approach to/perspective on the upcoming IR35 reforms? Interestingly 62% of respondents said ‘no’, with 17% saying they were ‘unsure’ and 21% confirming that the experience had altered their perspective.
- Is your business more or less open to contractors post COVID? Three-quarters of respondents said their business’ position on contractors was ‘unchanged’ (75%), with the remaining respondents saying they were now less open to contractors.
- Will your organisation now have a different view on outside determinations due to changing working practices? The biggest proportion agreed that they would have a different view on determinations due to the changing working practices (50%), with 21% saying ‘no’ and 29% saying they were unsure.
Whether or not the experience of COVID-19 has changed the IR35 status quo, the most important consideration for organisations is how they are going to get ready in time. With less than six months (at time of writing) to finalise these preparations, it is crucial that organisations are acting now to find solutions.
Part 3: Get ready in less than 6 months
The third and final of our IR35 webinar series was designed to answer the practical question: how do I make sure my business is ready for the reforms in April 2021?
We explored the first question that organisations should ask themselves: “are we even going to continue to engage ‘outside’ IR35 contractors?” Some businesses, most notably some of the ‘big four’ banks, had taken the position that they would no longer engage Limited Company/Personal Services Company contractors after the reforms. Whilst on the face of it this would enable companies to ‘side-step’ the risks of IR35, there is much more to consider, including:
- Impact on access to key skills and talent
- Employment market trends and demographics
- Disruption to projects and services
- Competitive differentiation, should your competitors take a more progressive stance
It is important this question is tackled with the involvement of all departments within an organisation; the finance and legal departments may have a very different view to that of the front-line operational teams, for example.
We then delved into the solutions for getting ready for IR35. We believe this falls into three categories: becoming compliant for April, being compliant beyond April and managing the change process.
Firstly, companies need to consider the various ‘component readiness’ solutions which are designed to get them ready for April 2021, including solutions for:
- Identifying your contingent workforce (and how easy this will be dependent on how centralised your data/supply chain is)
- Completing your IR35 assessments and capturing the Status Determination Statement (SDS) for each assignment
- Individual engagement models for workers depending on the SDS outcome
But, crucially, organisations must also remember that it is not just about getting ready for April 2021: the biggest point of risk actually comes much later when they could be liable for years’ worth of unpaid tax payments, as well as fines and interest, in the event they do not remain compliant on an ongoing basis.
The key solutions to help companies remain compliant post-April 2021 include:
- Tools & processes for assessments: including regular re-auditing of the incumbent contingent workforce and conducting assessments for new assignments
- Insurance products: including assignment/contractor specific policies, as well as the Professional Indemnity cover that some third party providers offer
- Workforce management solutions: including Payroll Services, Contingent Workforce Solutions and Total Workforce solutions
Our final consideration to solutions that companies can employ to get ready was the various ‘Change Management’ solutions that are available. This includes considerations around in-house management, versus third party change management services and the change management offered through a workforce solution.
As highlighted above, one of the following three workforce solutions from a trusted partner can serve as an effective way to manage the change, get ready for April and maintain compliance on an ongoing basis (as well as access a whole range of additional benefits and cost savings):
If you’re interested in exploring these solutions further, find out the benefits of a Contingent Workforce Solution (MSP) or take a look at our Total Workforce Solutions. Or, to hear our experts talk about the solutions in more detail, register to watch the webinar on-demand:
Whatever solutions organisations choose in order to get ready for IR35, the time to act is now. To help demonstrate what needs to be done and when, we’ve shown our suggested timeline below:
If you want help getting ready, or just want to find out more about the legislation, here are some useful resources:
- Visit our IR35 Hub for businesses to find out what it is, what impact it will have and how to get ready
- Arrange a chat with one of our experts about IR35
- Take our IR35 Impact assessment to get a quick view on how much impact IR35 may have on your business
- Check out our IR35 FAQs
- Explore Gattaca’s IR35 solutions
If you enjoyed reading this article, why not check out more of our workforce insights and resources.