Controversial reforms of IR35 legislation have caused significant delays in a critical London Underground project to repair trains running on the Bakerloo Line due to an exodus of skilled contracting/agency workers, Transport for London (TfL) said.
TfL acknowledged that public sector IR35 changes have resulted in “a significant number” of vital flexible workers deciding to leave the organisation rather than take a major cut in income by paying employee income tax and NICs. Contracting professionals enjoy none of the statutory employment benefits that these taxes finance for conventional employees, such as paid holiday leave, paid sick leave and maternity/paternity leave.
From April, the onus for figuring out a public sector contractor’s IR35 status transferred from the individual contractor to public sector bodies (PSBs) or recruitment agencies, neither of which are sufficiently close to the details of the work that the contractor undertakes to make a reliable decision.
Because of the reforms, TfL slashed the number of temporary workers that it employs by about half, prohibiting all who contracted via their own personal service companies.
TfL said that it aimed to save on costs by reducing its reliance on agency/contracting staff, but other industry experts warned that such a policy would result in talent shortages in key areas and cause setbacks to engineering programmes. This appears to be the case in the Bakerloo train repair programme.
The transport body admitted that work to renew London Underground rolling stock has delayed because of the scarcity of necessary workers, conceding that many critical weld contractors left TfL as a direct result of the IR35 reforms.
TfL said that it is working on a series of mitigations to “reduce the impact on the project” but admits that it has deferred the deadline for completing the repairs by several months.
The Bakerloo Line runs with some of the oldest trains on the entire London Underground network, some of which date back to 1972. In a major upgrade, new trains are due to replace old ones across the Bakerloo, Central, Piccadilly and Waterloo & City Lines.
Simon McVicker, Director of Policy at the Association of Independent Contractors and the Self-Employed (IPSE), said that since the new tax rules are “incredibly complex,” the TfL predicament is “not surprising.”
He added, “We warned that the delays caused by blanket approaches to determining IR35 status could end up costing organisations more money, not saving it.”
The issue, he said, is “widespread,” and IPSE is “well aware of many people across the public sector who have left contracts.”