Navigating IR35 - 4 weeks to go
With the IR35 Review published, we can clearly see IR35 is coming now and can assume all systems go. Despite all the furore surrounding the regulation, it also presents a positive opportunity for businesses, provided they take the necessary actions in a timely fashion.
In my experience, the biggest difficulty for most organisations has been identifying what those actions should be. Our stance is that organisations do not have to take a blanket approach. If you have the right people, process and systems in place you are able to make individual determinations across your contractor estate, which will result in being compliant, managing risk, ensuring business and service continuity and accessing the key skills and capabilities provided by the contractor workforce.
With just 4 weeks to go, I’ve set out the measures we would take to minimise exposure to IR35 and reap the fruits of greater compliance.
1. Identify your contractors – put them into ‘buckets’ to build a plan around each type of engagement to ensure you can assess appropriately. Considerations should include direct contractors, agency contractors, contractors provided through Consultancy arrangements who you may still be responsible for making determinations on.
2. Assign Ownership – these changes require input from all areas of the business - HR, Legal, Procurement, Operations – make sure you have the appropriate ownership and authority to make decisions.
3. Make a stance – are you going to manage this pragmatically or take a more risk approach view with a blanket inside verdict? It’s worth making the business case to ensure buy-in across the organisation.
4. Agree a methodology for determinations – there is clearly CEST available and a whole industry being created to provide alternative methods to make your IR35 determinations. Our stance, while we agree that CEST still needs improving, it is still the guidance provided by HMRC, therefore why wouldn’t we use it? But, let’s not rely on it completely. Make sure you have the right contracts to draw down on and have aligned your working practices.
5. Set Working Practices – providing guidelines and information for managers locally to understand how and why you need to engage with contractors in a specific manner will help to build compliance. Help them to understand what good looks like.
6. Design the processes – at this stage you need to make determinations across your entire contractor estate ASAP to protect project and service continuity, so a process to achieve this is required. But let’s not forget post-April 2020 and the need for contingent workers – you need a process for new contractors as well.
7. Engage stakeholders – work proactively with your contractors, managers and suppliers to educate and pull them in for support. With the introduction of 3rd party liability we are all at risk now, so let’s pull together to ensure we are all compliant.
8. Transition into BAU – like every legislation change, we need to be compliant for the go-live date, however there is also the future to consider. What evidence do we store? How do we continue to educate our managers to make sure we remain compliant? How do we ensure we can still engage with the contractor workforce for the additional capability and capacity they provide? All these questions need to be considered as you transition into BAU.
The contingent workforce helps organisation plug the capability gap or capacity shortfall and is here to stay. Growing is the popularity of the gig-economy, freelance markets, portfolio careers…Don’t lose your ability to engage with this. Be proactive and positive. Understand and learn. Manage effectively with the right process, policy and practice. IR35 can be managed effectively if you can understand the legislation and put the right processes in place.
We have developed an IR35 Management Framework to help navigate through these changes. Speak to Harvey Nash Workforce Solutions to find out more - firstname.lastname@example.org.
PS - A quick note on SOW
SOW is not the silver bullet – understanding and managing IR35 in the new IR35 world is the silver bullet and this can be done! SOW is designed to give you the ability to get "a better bang for your buck" a more mature option to procuring projects and services on an outcome basis. Part 2 of this series will discuss this further.