As the Leader, HR Director or Finance Director of an SME, it is hard to see any silver lining in the upcoming potential changes in IR35 legislation.
However, I’d suggest looking a bit closer at what is actually going on. There is a tangible opportunity for your business right now.
While you might not employ hundreds of external contractors, if Chancellor Rishi Sunak goes ahead with the legislation on March 11th, there is a hidden benefit to be found amongst the shifting sands of off-payroll employment for a medium-sized company.
As most SMEs are quietly preparing and waiting for decisions to be made, bigger businesses that employ thousands of contractors have been forced into action. Given the opaque nature of the process and the heavy financial penalties for getting it wrong at scale, many are making blanket judgements that limit their liability but punish those who have genuine claims to sit outside the legislation.
Such blatant disregard for the individual is shocking.
Therein lies the opportunity for the SME that trusts in their IR35 process.
When you are a corporate behemoth, navigating the minefield of Status Determination Statements (SDS) and expert assessments is not easy when you have thousands of “at risk” contractors working for you. When similar reforms happened in the public sector a couple of years ago, many organizations decided to “blanket” include all workers from personal service companies (and similar contractors) as caught within IR35. As a result, many genuine non-IR35 contractors left to work in the private sector, resulting in serious talent shortages.
The same may be about to happen to the bigger private sector employers.
And private sector SMEs will undoubtedly benefit (if you get your IR35 approach right).
We are already seeing a trickle of contractors who have been blanket banned by bigger employers and who want to work “with” (not “for”) a company who cares enough to take responsibility for getting the IR35 process right. If and when the legislation goes ahead, this trickle will become a flood.
SMEs will be able to access previously unavailable talent (who would be fine working for a smaller company rather than lose around 25% of their take home pay).
Now, of course, getting IR35 right is far from an easy undertaking. No one wants to be the “test case” in court because you haven’t paid attention to the details. Ensure that you engage a leading IR35 expert to carry out your SDS assessments, construct a watertight process for interactions with HMRC and definitively invest in IR35 insurance as no one really knows how things might eventually be interpreted.
If you are confident in your process, you open a new front in the war for talent.
Even if you do not currently work with many external people, we would argue that getting your IR35 preparation right is actually an opportunity to attract those whose status has been woefully “misdiagnosed.”
As an executive search firm, we are always looking for innovative ways to assist our clients. There is far more complexity to the IR35 situation (including choices around fixed term contracts) and we are always happy to share our views.
We hope that this blog might help to focus your thoughts on a positive aspect as well as the inevitable financial haircuts that employers, recruiters and “caught” contractors will inevitably have to accept.
No matter what the Chancellor decides on March 11th, IR35 reform is coming soon.
Will your SME realise the benefits? You can be sure that your competitors will be thinking about how to take advantage of the talent fallout.
By the way, would you like to reduce your recruitment fees by up to 2/3?
Why should SMEs have to pay the full 33% search fee if they can do 2/3 of the work themselves? Our “Phased Search” process gives clients the chance to choose where they really need the help. If you only need a longlist, you only pay a third of the search fee. If you need someone to run the interview process, you only pay a third of the search fee.. The time is here for being lean.