The public sector stands to lose more than half of its contracting professionals should controversial reforms to IR35 regulations come into force, a new study by the Association of Independent Professionals and the Self-Employed (IPSE) has found.

IPSE’s study also found that 40 per cent of public sector contractors would demand significantly higher pay rates if they were to remain.

The IR35 reforms are part of a Government crack-down on “false self-employment” in the public sector. At present, individual contractors, who are in closest proximity to the work that they undertake and the ways in which they do so, determine their own IR35 status. The revamped rules will transfer this responsibility onto the engager, either a recruitment company or an end-client, both of whom are considerably further removed from the work than the contractor.

Numerous industry experts have condemned the reforms as unfair and unworkable, including Umbrella Company trade associations PRISM and the Freelancer and Contractor Services Association (FCSA), recruitment bodies the Association of Professional Staffing Companies (APSCo) and the Recruitment and Employment Confederation (REC) and IPSE itself.

Their objections hinge on the fact that engagers will be made liable for tax and NIC payments but will be reliant on information that may be inaccurate and impossible to verify. The result will be a new risk-averse culture, which will inevitably force contractors to pay tax and NICs as employees even though they will receive none of the statutory benefits of employment, such as paid holiday and sick leave, maternity leave and employer pension contributions.

HMRC has now been warned by numerous business organisations that the reforms, should they come into effect, will be potentially disastrous for public sector service delivery.

IPSE is deeply concerned that the labyrinthine negotiations that the UK is engaged in over leaving the EU will be imperilled by the loss of so many freelance contractors from the public sector. This coincides with Deloitte’s revelation that the Government is already struggling with a 30,000-storng shortfall in civil service staff to handle Brexit.

Noting that Government departments are engaged in more than 500 Brexit-related projects, IPSE CEO Chris Bryce said that the vital skills brought flexibly by freelance contractors have never been more needed in the public sector.

Calling for the reforms to be urgently stopped, he said: “We have sent our research, along with a comprehensive response to the consultation, to the Chancellor. We urge him to consider this and use Autumn Statement to assure public sector bodies and the self-employed that the Government will abandon this deeply concerning proposal, especially in light of the clear requirement for more resources to handle our exit from the EU.”

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