As a business that delivers change projects and consultancy, but sits as part of the Reed Recruitment Group, the changes in the application of IR35 legislation are a big deal for us and our clients. Whether it is making sure we are managing it effectively, or helping our clients ensure they are managing it effectively, it has an impact on what we do. I have purposely used the phrase “managing it effectively” there, not “managing it correctly”, as managing it correctly is a legal must, managing it effectively is an operational must. And over the past weeks and months I have had several conversations with senior stakeholders in large companies that have said “IR35 shouldn’t be a problem for us” (or versions of it). And it’s a real concern.
Firstly, let’s clear up what these changes actually mean. At Autumn Statement 2016, the government confirmed that it would introduce new rules from April 2017 for public sector engagements, making public authorities responsible for determining whether the worker would be regarded as employed for income tax purposes. The purpose of these changes was to ensure the IR35 rules were applied more effectively, by placing the requirement to determine the employment status (for tax) on the public authority. And it looks likely that it is coming in to the private sector, possibly as soon as April 2019.
So, what this means is that an organisation is responsible for making the determination and then acting accordingly. Regardless of where the resource is coming from.
Take this, pretty common, example. You have a contract with a consultancy partner who is delivering a number of outsourced projects using a blend of in-house experts and interims – pretty standard stuff. However, you need some resource quickly to drop in to your IT team and help on a project as you are short on resource. You speak to the consultancy partner and they are fine to pick this up by supplying some of their interims under the existing contract. Are you responsible for undertaking the IR35 determination in this case? Probably. Could this land you with a significant fine if you don’t fulfil your responsibilities? Yes. And how about tomorrow, when that same consultancy partner is then engaged by your CEO to do some work on the HR Transformation project. Are you responsible then?
The long and the short of this is that it is irrelevant where the resource is being supplied to you from, it is about the requirement. If these changes impact your organisation and you are engaging interim workers, then it doesn’t matter whether the resource is engaged directly by you, supplied through an agency, supplied through a Consultancy or supplied by your year 5 maths teacher who lives down the road – your organisation will likely be responsible for determining whether or not IR35 applies.
And that is why we are offering a range of services to clients to help support them in the management of these changes. Offering a triaging function that help ensure clients are managing the determinations correctly and then supporting them by delivering the resources in the right way. Whether this is supporting remote and flexible working. A process that supports substitution. Engaging services providers. Or helping to manage resources against fixed outcomes and milestones. The key is having a process that makes sure the upfront decision is correct and the management of the process after that is both correct and effective.
To help support our clients Consultancy+ have teamed up with Reed Talent Solutions to offer a series of free round-tables focused on the likely upcoming changes in the application of IR35. If you are interested in attending then sign-up here https://consultancyplus.org/ir35/