Introduced to the public sector in 2017, the Off-Payroll Working Reforms (OPW) significantly changed the IR35 legislation, which had been in place since April 2000. The change shifted the responsibility for IR35 status determination from the individual contractor to the hirer.
Unfortunately for recruitment agencies and contractors, the change prompted an extremely guarded reaction from public sector organisations. Contract roles, mainly those historically classified outside IR35, quickly disappeared from job boards.
In the years since the introduction of the Reforms, reports of huge fines and penalties for organisations such as the DWP and MoJ have only served to compound the issue and increase reluctance.
However, does an increasing talent shortage and potential changes to legislation mean attitudes to hiring contractors on an outside IR35 basis are changing in the public sector?
What's Changing with IR35 in the Public Sector?
The talent shortage, created by contractors migrating away from the public sector due to inside IR35 determinations, became an instant problem and has continued to challenge the public sector ever since.
Unfortunately, the risks associated with incorrectly determining a contractor's status have consistently proved too great for public sector organisations to change their stance. However, increasing requirements for flexible talent and proposed changes to IR35-related legislation could be changing attitudes.
So, what changes could influence hiring attitudes in the public sector?
- CEST - Check Employment Status for Tax, the government's status determination tool, recently received an update to assist hiring organisations in making more informed and accurate determinations when assessing for IR35.
- Double Taxation - Legislative changes to address the double-taxation problem that has haunted the Off-Payroll Working legislation since its introduction to the public sector in 2017 should give hirers more confidence and less risk when hiring PSC contractors outside IR35.
- Umbrella Company Sector Consultation Paper - A government consultation paper on the umbrella company sector looks likely to increase the responsibilities of hirers engaging contractors where umbrella companies form part of the supply chain. This could make engaging contractors via an umbrella company more complex and less appealing for hirers.
Are attitudes to hiring outside IR35 contractors already changing?
At Champion Contractors, we are in constant contact with our contractors and agency partners, and recent feedback would suggest that there does appear to be more “outside IR35” roles being advertised in the public sector.
With changes happening or proposed soon, could this be a sign that public sector organisations are now better prepared for assessing and engaging with contractors on an outside IR35 basis and, therefore, more confident in engaging PSC contractors?
It's possible that the public sector now finds itself in a position of “where there is a will, there is a way”.
For more information, contact the Champion Contractors team on 0161 703 2549 or email info@championcontractors.co.uk.
For further updates, why not follow us on LinkedIn or visit our website at https://www.champion-contractors.co.uk/