By: Ed Dalton
There is a recent change in the law affecting temporary staff and intermediaries which may be relevant to you. This is a tightening of the current IR35 legislation and it applies now!
Up until April 2017, public sector organisations have been able to recruit temporary staff who operate as a Limited Company. These contractors, consultants and interims have provided flexibility and access to much needed skills for many organisations; unfortunately, this will no longer be the case.
The precise definition of which organisations are affected by this change is, “where the client is a public authority for the purposes of the Freedom of Information Act 2000.”
The onus is on the organisation to determine whether or not the worker is inside or outside IR35. If you make the wrong determination you could be liable. This involves an assessment of the workers IR35 status to decide how payments should be taxed. We expect many public sector organisations to err on the side of caution and only engage temporary staff on a PAYE basis.
Also note there is no amnesty for contracts taken out before April 2017, so if you haven’t already it is imperative that you identify any Limited Company workers currently working for the organisation and review their contracts.
You can read the full legislation here.
Could the private sector gain?
The flipside of changes to legislation could be that the private sector gains as Limited Company workers move out of public sector organisations and take their skills into the corporate world. While these candidates may not have commercial experience, they could be the answer to the current skills shortages faced by many private organisations.
It can be challenging for those who are used to the mind-set of working in the public sector to make the transition to private sector organisations. Workplace culture is often the most significant difference and while temporary staff may welcome a less bureaucratic environment, the focus on financial performance and productivity may be a very different way of working.
That’s why, alongside skills and relevant qualifications, it’s important to assess cultural fit when shortlisting candidates from the public sector for private sector jobs.
Changes could be coming to the private sector too
Private sector organisations should also be aware that although the new legislation is currently only impacting on the public sector, it is expected these new restrictions will be rolled out across other industries too over the next few years.
The Government’s intention is to ensure that all contractors and temporary staff are paying ‘the right tax’ – by making organisations responsible for collecting their tax and National Insurance contributions. This does present a significant recruitment challenge for HR professionals in affected sectors.
Many staff who operate as a Limited Company have no interest in becoming employees and going on the payroll, and it would mean a significant reduction in earnings or an increase in costs for the organisation.
Public sector HR departments will need to consider strategies including changes in remuneration or upskilling workers to ensure positions are filled and current contractors are not lost to the private sector. These are strategies that should be watched closely by the private sector to enable them to be ahead of the game when these changes hit them.
If you would like any help recruiting contract and temporary staff – both public and private sector organisations – contact our team to discuss your requirements. Call 01252 718 777 or email info@howett-thorpe.co.uk