6 weeks into the new IR35 landscape and actually, things are ok.
This week I talked with four other business owners who are also seeing interesting opportunities albeit they tackle them in different ways.
Amit Kapoor of Mindful Contract
told me that his business has shifted from being a 100% outside-IR35 operation, to about 90% inside-IR35.
It’s not all bad news though. Most of our converted contractors benefited from a generous day rate bump to accommodate employer’s NI contribution and more.
On new recruitment campaigns which are predominantly inside-IR35, we see a healthy flow of suitable candidates. This suggests that the contractor market is warming up to the idea of working inside. Its probably mixed news for us in the capacity of an intermediary, that inside-IR35 contractor attrition is considerably higher, as quite a few contractors secure outside-IR35 roles elsewhere. I expect this trend to be broad, and therefore would advise clients to continue to explore if they can construct their contract requirements to sit outside-IR35.
Matthew Todd of Fluent Forward
told me that his business is seeing a lot of opportunity for contractors and their clients alike. With an increased awareness of IR35, it’s providing an opportunity for both parties to consider what an outcome based way of working would look like. Rather than merely hiring based on skills and day rate alone, with no real guarantee or expectation of results, the focus on outcomes means that contractors are able to provide a more value-led consulting service.
This model means that clients are coming to the conversation more aware of their needs and open to discussing better ways of working. This positive trend means that contractors can focus on the work that they do best, delivering great results for clients as efficiently and effectively as possible with a shared view on what a successful outcome looks like.
Companies who moved everyone inside IR35 don’t seem to be struggling to find the talent they need, but that’s not to say everyone is happy. It’s just in the times we’re living right now folks are just pleased to be in a contract.
We are finding in the data space that we work in most of the contractors are accepting of the change but in stark contrast, there are some role types (example; Java Rockstar’s and .Net Jedis) who will not accept a contact inside IR35 or who will do the work for an additional 150+ per day.
I think those who have their kids through school and mortgages paid off are happy to load their pension pots and get on with the job. We achieve good rates for our guys and provide a free umbrella service so we’re a bit of a halfway house.
There are lots of new consultancies appearing born out of recruitment agencies with a vested interest in the contract business wrapping up individuals in statements of work which is one solution. Interestingly a fair few of these operating in the public sector which surprises me. A friend our mine operating at a senior level in central government believes this is a House of Cards and only a matter of time until this spontaneously combusts. We’ll see.
Another negative I am hearing more about are the preferred list of umbrella companies that some blue-chips are using and directing their contracts to use. I’m hearing about it because of bad service and incompetence.
It’s early days and contractors can continue to run their PSC for 2 years and who knows what will happen over that time. Right now the government needs all the money they can get so I don’t see much change happening and certainly no reversal. I think over time the IR35 determination process will mature and if they can add some common sense around it, instead of just “computer says no”, then we will see a new normal.
With the shift of responsibility, Contractors will, in fact, be able to rest assured about their tax statuses and focus on the real work. Contractors will ultimately have the choice of taking on or rejecting a contract based on the net financial returns from their engagements, after all the taxes are deducted, PAYE or otherwise. Naturally the contracts that are treated as inside IR35 will be less attractive and are likely to be rejected by Contractors, and we don’t see this any different to the decision making process that Contractors currently go through when rejecting low paying contracts.
This “clean up” will naturally result in reduced supply of good Contractors, which in turn will rebalance the demand and supply equation. Over time Businesses will have to either change their working practices to engage Contractors and treat their PSCs as real businesses through true B2B engagements or cough up more money to get top talent. In both these scenarios, it will be Contractors who will stand to gain.
There is no doubt that there will be a period of uncertainty, however we would recommend that Contractors look for opportunities within this climate and use their Limited Companies to function as real businesses. When businesses open up their minds to real B2B engagements, the more cost effective services (compared to the expensive IT consulting businesses) from Contractors will no doubt remain attractive. The more entrepreneurial ones may even be able to use this as a leaping pad for their consulting businesses.
It has been great to take the temperature of the market in real time from these four business owners.