Another IR35 implementation date has passed and (just like in the public sector) there were winners and losers; an inevitable erosion of the flexible, agile talent pool that has, hitherto, been immensely valuable to the IT Project Management industry; and a lot of disgruntlement about the way the CEST test questions are loaded to deliver a more, er, “tax revenue yield friendly” conclusion.
Thanks to IR35, Project Management as a Service (PMaaS) has never been more relevant, so as a PMaaS provider – I suppose Stoneseed can sit this side of IR35 day with a degree of gratitude for the way IR35 has disrupted the industry. Actually, as IT Project evangelists, we would also argue that it’s a good thing for companies to invest in permanent resources rather than rely just on temporary contract resources. IT doesn’t just support business these days, in many cases, IT is the business, so it’s right that those facilitating business change and driving business growth should feel as part of your company as directors, sales account managers, van drivers, and anyone else on your payroll.
Nice to start with a positive spin. It’s a minority view though like any change IR35 has been greeted with a fair bit of resistance and there have been inevitable challenging consequences for IT Project delivery – but, as I say these challenges made what we do even more valuable and the rest of this blog is about how Stoneseed can help you in these IT35 days!
Now we sit on the other side of implementation, post IR35, there are a number of key takeaways – observations we’re hearing from contractors and clients seem to fit five main patterns.
As we address each area for concern in depth, check out the italicised and bold paragraph at the end for a ready made solution! Spoiler Alert – it’s Project Management as a Service (PMaaS) – read on to find out why!
The 5 Biggest Effects of IR35.
- Increased resource costs: across the board contractors have put up their day rates.
- Quality Governance Challenges: Do you increase costs or lower the bar on quality?
- Resource Shortages: Project Managers, Business Analyst and all other Project Management resources are in demand.
- Post-Covid projects are at all time high plus Super Deduction tax breaks for infrastructure investment are further fuelling the spike.
- Post IR35 project morale is low in places.
The 5 Biggest Effects of IR35 and the One Solution to Them All
1 – Costs
At a time when predictable costs are even more essential than ever, project resource costs are increasing in ways that some organisations did not anticipate!
“The bean counters are banging their heads together,” one PM emailed me this week, “our parent company cleverly snook a clause into contracts ruling out an increase in daily rates post IR35 so project managers who used to swallow costs as self-employed contractors, like mileage, BYOD and use of home, are now claiming them back like employees – since they get taxed like employees. Who knew this would happen? Shock! People are acting in the way they are treated!”
Others have found their project talent have increased their prices. As one CEO tells me, “We’ve got one contracted Project Manager who put his daily rate up by £40.50 in April to cover the daily mileage allowance he can no longer claim back on his tax return. That doesn’t seem a lot but at £202.50 it quickly adds up and when there is no margin for an increase in costs, projects are soon in difficulty!”
Stoneseed’s Project Management as a Service (PMaaS) provides flexible access to project professionals, resources and tools at a predictable cost.
2 – Quality (Out of Your) Control
So, faced with increased costs – what do you do?
Increase your budget? Of course, post-Covid, most project sponsors are well up for opening their purses, wallets and cheque books, aren’t they? Since we all started working from home, it’s like magic money trees have grown in every parking lot in the spaces where we used to park our cars. Except, this isn’t the case. I’m spreading on the sarcasm with a trowel (You’re not kidding!! – ED).
Increased costs for most projects are as welcome as hearing your dentist say the words “root canal”. So … Plan B…
Shop around for a cheaper alternative? There’s always someone who’ll do any work you have for less money. Ask yourself why they’re cheaper! Remember, Lord Ridgemere got a bargain hiring Del, Rodney and Grandad to clean his Louis XIV chandeliers in Only Fools and Horses – don’t risk your IT Project crashing to the floor!
Stoneseed’s Project Management as a Service (PMaaS) gives you access to the quality talent you need with a flexible, fair and transparent costing model. You’re in control when it comes to quality with PMaaS.
3 – Talent Gap – The IR35 Echo Is Getting Louder
I wrote a blog recently about the widening project talent gap and shortly afterwards received an email from a friend coining the phrase ‘the IR35 echo’. She believes that the talent and resource gap is now so cavernous that, rather than a ‘holler back’ from suitable candidates, increasingly you just hear your own voice metaphorically bouncing off the walls.
The perfect storm of Brexit, Covid and IR35 is contributing to shortages – shortages that seem to differ from one part of the country to the next and, unhelpfully, the situation feels like it changes from week to week. All of which is making resource planning harder than ever.
Stoneseed’s Project Management as a Service (PMaaS) is a one stop shop for whatever resource your project needs, for however long you need it! Our services portfolio offers a true end to end service, from IT Advisory, Business Analysis Services through to Programme & Project Delivery.
4 – The Natives Are Restless
Added to this, I’m anecdotally hearing from IT Project talent of a growing discontent at the way IR35 was implemented. One told me, “I set my service company up as a genuine company with costs like office space, employees and other clients. The IR35 decision effectively leaves the company without sufficient revenue to operate like this so the upshot of the government’s push to get workers ‘on payroll’ is that I’ve had to lay four people off.”
A second told me, “It always grated with me to be ‘invited’ to company update meetings where I’d have to sit and listen to the People Manager talk about the perks enjoyed by ‘the staff’ and hear the same staff moan about losing holiday pay they don’t take within the year, etc. Now, taxed as a worker but with none of these employee rights and privileges it feels even worse. During May’s meeting on Teams, thank goodness I was on mute!”
Another told me, “I did the CEST thing over a year ago and was expecting this change. Actually, I was secretly looking forward to being taken on as a PAYE employee and the benefits that it would bring. That didn’t happen but worse, despite being taxed at source now they have unilaterally decided that it would be ‘cleaner’ for me to continue invoicing as the PSC. So, I still have the expense and inconvenience of running a company, the paperwork and the returns, without the revenue to support it. Who’s the mug? I’ve fired up my CV for the first time in years.”
The most irksome thing about the implementation of IR35 for many is that there is no real process for appeal. A friend who works for an employment law firm told me, “You can appeal an IR35 decision with your client but if (or probably when) they reject your appeal – your only recourse is to quit and move on to a new client. It’s the reality as a contractor falling within IR35.”
So, there you are. If your contractors disagreed with your IR35 decision, even if they eventually smiled and accepted, the consequence for you is that they’re now looking elsewhere.
Stoneseed’s Project Management as a Service (PMaaS) talent are employed by us! Their terms of engagement and working conditions are the same now as they were in March. No IR35 triggered drop in morale for our teams!
5 – The Government Incentivised Projects – Having Made It Harder to Resource Them
“Did you really just incentivise more projects, having poleaxed my team that delivers them?” This was the gut reaction of Steve, an IT Project leader following Rishi Sunak’s Budget launch of a “super-deduction” tax break for companies investing in IT, plant and machinery, etc.
“Straight away our board were talking warehouse tech, datacentre upgrades, further automation … anywhere they could see value in leveraging that 130% capital allowance seemed to be on the table. Which was great. It meant we could take project team members off furlough,” Steve told me.
“Except … three key members of my team had decided that post IR35 this was no longer for them. Without actually handing in their notice (they were enjoying getting paid for staying home and job seeking) they’d told me they didn’t see their future with us. We would not be ready to hit the ground running.”
This is an extreme example but factor in an incentivised ramping up of project demand to the already troublesome triumvirate of Brexit, Covid and IR35 and you can see how and why such talent vacuums have occurred.
Stoneseed’s Project Management as a Service (PMaaS) is scalable, flexible and instant. We flex to support your project needs. Stoneseed’s expertise is available on demand remotely, offering rapid response resources. You can align resources with your needs, on a cost effective, full-time or part-time basis.
In conclusion, if you haven’t already, there’s never been a better time to consider PMaaS for all your IT Project Delivery challenges, not least because you can control your cost and flex your resources to suit you and, above all, glory be – avoid any IR35 complications.
Now, shall we agree to never speak of IR35 again.
Inevitably – To Be Continued.