IR35 and Private Sector IT. You Are Here!
The Private Sector IR35 countdown clock is ticking louder and louder. Before you can say "non-compliant off-payroll Project Manager", it will be time for private firms to follow the Public Sector pioneers into this new world.
It's come around quick, hasn't it? One of my accountant friends drily commented the other day, "It doesn't seem like two minutes since we took down the IR35 decorations!"
The use of contractors in IT Project Management has greatly increased over recent years. With good reason, many businesses see contractors as a way to quickly hire the specialist IT skills that they need, without having to commit to a permanent hire. It can be justifiably argued, that operating in this way has given businesses greater agility to respond to the market needs of the present, and innovate to meet the market needs of the future.
This has not escaped the attention of the HMRC though.
After, in the view of the taxman, a highly effective rinse of the practice in the Public Sector, eyes turned to the Private Sector where the cost of a disguised employment to the treasury was projected to increase from £700 million in 2017/18 to £1.2 billion in 2022/23.
Which is how we find ourselves where we are - however many days, weeks or months away form IR35 day we are when you read this.
Those three words are key - "where we are".
I think acknowledging where you are is the most important thing that you can do right now.
I have spoken with employers who are 100% ready and I have spoken with those are 100% not. I have talked with those that know they have to do something and those that have buried their head in the sand. Some have a clear road map; others have a roughly sketched plan. Some could go on Mastermind and answer questions on IR35 as their "Specialist Chosen Subject" and at the opposite end of the scale we have heard one "what's IR35?"
It is a very broad spectrum. Everyone is on their own journey (and working at their own pace), but the inevitability is that we must all arrive together. The important bit is accepting where you are on the map and then taking the next step.
You'll have seen those maps at the shopping mall or the theme park or the zoo. There's always this huge, confusing expanse of stores, rides or animals and a very big arrow with a very simple message - YOU ARE HERE. If you want to get to the handbag shop, the big dipper or the elephants, knowing where you are in relation to them is key to planning your journey. So, it is with IR35, knowing and accepting where you are is vital to plotting your journey to April 2020.
Knowing where you are, allows you to calmly assess your options. Do you bring your contractors in-house and add them to your payroll? Do you absorb costs associated with IR35, or have an awkward conversation with your clients? Or do you completely re-frame your thinking on project resourcing and consider way to eliminate 'disguised' employment altogether, resourcing through Stoneseed's Project Management as a Service (PMaaS), for example, where our people are on our payroll and where IR35 is essentially de-scoped.
I'm writing this in April 2019, but you could be reading it in July, December or even closer to the deadline in 2020! And it almost doesn't matter - as long as you accept that YOU ARE HERE and work from there.
We have put together a calendar which will help you with resource planning for IR35. This is based on our experience helping organisations transition their resourcing models and feedback received by both Stoneseed and our sister company, Access Talent (the IT Project Management Recruitment Specialists). You can find the calendar here
Summer 2019 will be remembered, as much for the heatwaves, barbecues and paddling pools as for gauging current work forces, resourcing chains and tax liabilities. By the end of July 2019, I'd say that you need to have a robust understanding of your current work force, crucial contract roles and also have a strong sense for how rate increases may affect you. You should have started planning new processes or investigated alternative resourcing channels like PMaaS, where IR35 becomes irrelevant. Summer would be a good time to have started stakeholder conversations too, so that there are no unexpected surprises.
By November, hopefully, the only fireworks will be the ones marking Guy Fawkes night as you advise contractors of your plans. Remember, that this is a worrying time for contractors whose livelihoods are potentially about to change. Prevent undue worry by engaging and informing your workforce throughout.
By Christmas and New Year, reflections on "another year over and a new one just begun" should be complemented with reflections on your current contractual arrangements and amending them to fall in line with April's changes.
The first quarter of 2020 should then be a time to prepare to hit the ground running: training your people on any new processes, engaging stakeholders, assessing new job roles and adverts for compliance.
Then, my favourite: by April 2020, you should have a bottle of champagne in the fridge ready to toast all your hard work and your organisation's compliance.
Glancing at these, you may feel your heartbeat start to race and your blood pressure begin to rise. What if you're late? Don't panic! We've been through this with the Public Sector and we are here to help your business, wherever you are in the journey. You Are Not Late.
One of the most common lines we hear from clients is "we are so late" and, looking at the calendar, this may be your reaction too.
In truth, you're not late. You are where you are!
Remember those three words: YOU ARE HERE!
It's the quality of your response to this that will matter in April 2020.
I had this exact "we are late" argument with a HR Director friend who said that having embarked on a compliance mission after the Public Sector changes, his firm was now six months late. Then two months passed, not much progress was made, and he told me they were now eight months late. It took me a further month of telling him "You are here" for him to accept this and take positive action - (thank goodness, otherwise by this point he'd have been nine months late!!!)
The point of this is that you will be late if you are not compliant by IR35 day, until then YOU ARE HERE.
So, accepting that, what's your next step?