The CEO of a prominent online guide for contractors and freelancers has advised public sector hirers to temporarily transfer all their personal service company (PSC) contractors to Umbrella Companies ahead of April’s IR35 changes if they are to avoid a calamitous exodus of vital skills.
Dave Chaplin, an experienced IT contractor and CEO of online resource ContractorCalculator, warned that the consequences of the new IR35 rules could prove disastrous for public sector organisations unless they act now with an emergency plan to “get their ducks in a row” so that harmful fallout can be averted.
He told Recruitment International: “The reforms represent a potential car crash for all public sector bodies that hire contractors. A poll we conducted last year told us that 80% of contractors plan on abandoning the public sector rather than accept a contract inside IR35, so it is important that hirers work closely together with their contractors now to establish a contractor’s employment status or else risk losing them altogether.”
The urgent action plan that he advocates for public sector hirers entails:
- placing PSC contractors in a PAYE Umbrella Company temporarily to allow adequate time to properly assess their IR35 status under the new rules.
- ensuring that assessments are completed within 12 weeks, or else the contractors will become eligible for certain employment rights under the Agency Workers Regulations, which will result in extra costs.
- Using ContractorCalculator’s free online tool to instantly test IR35 status. It displays an individual contractor’s IR35 risk along a spectrum, enabling employers to arrive at a properly informed decision and minimise their risk.
By adopting this plan, Mr Chaplin said, public sector employers will be in a much better position to know which contractors are safely outside the scope of the new IR35 rules and can therefore resume trading through their PSCs under the previous terms. Those caught by the new rules will require an outside-IR35 contract (including the option to remain working via Umbrella Companies).
Mr Chaplin stated that the timing of the changes is causing “utter chaos” and threatens a devastating exodus of vitally needed talent, which will have a severe impact on an already-stretched public sector.
The whole point of engaging talent via PSCs, he explained, is that public sector organisations need contracting professionals, not employees, for invaluable short-term expertise. Many Government projects, he said, are heavily dependent on the supply of this expertise on an as-and-when-needed basis.
To avoid irreconcilable damage in the wake of the reforms, Mr Chaplin advised any insufficiently prepared public sector organisations to adopt the action plan with the utmost urgency.