9 months have passed since the changes to IR35 laws came into place in the private sector. Where are we now, and what impact have these changes had on hiring within the UK?
From our perspective as a specialist life science staffing consultancy, feedback has been very mixed across different groups. Now that the end client is responsible for determining IR35 status, we have seen most of our larger clients placing roles inside IR35 as the default, with little to no exceptions. The main reason given for this becoming the default is, as you would expect, to protect the end client from the risk of HMRC investigations and being found to have erroneously permitted contractors to work outside of IR35. There seems to be a general acceptance by hiring companies that they need to pay more now for contractors than they used to, because contractors now expect their NI contributions to be covered and are unwilling to accept a reduction in take-home pay.
In many (though not all) smaller companies, roles are being determined as outside IR35 even if they are “borderline” on the CEST tool. Companies know that their ability to attract contractors will be diminished if the roles are inside IR35; and until there are some test cases it seems that smaller companies are, on the whole, more willing to take potential risks.
In summary, it is too soon to tell exactly what the changes will do to the interim workforce in the UK, but initial observations are that there is a link between company size and openness to potential risk. Moving forward, will the default be that smaller companies can engage limited company contractors, whilst larger companies only engage umbrella contractors and therefore pay more? Will this create more or fewer contract opportunities overall? We are monitoring closely and are very happy to discuss our observations if you would like to get in touch.