With ‘outside IR35’ contracts now in high demand by contractors, due to the introduction of the April 2020 ‘off-payroll’ rules, how have the legislative changes affected the contract jobs market, and how are agency recruiters reacting?
We asked Brian Stalley, Co-Founder at Outside Spy, how online contract role adverts have changed in recent months, and if he has any tips for contractors seeking to maximise their chances of finding quality assignments post-April 2020.
What changes have you noticed in advertised contracts to date, as a result of the Off-Payroll implementation?
The most obvious thing has been that advertisers, especially agency recruiters, have recently recognised the advantages of including information about the IR35 status of the assignment in their adverts. So adverts are starting to appear describing roles as “inside IR35”, “PAYE only” and “umbrella only” on the one hand, and “outside IR35” on the other. It’s these latter roles that Outside Spy discovers for its members.
It’s important to remember that the assessment is likely to be an initial or indicative one, although some contracts have just started to appear which contain a reference to a Status Determination Statement which is already available for the role. It’s important for the contractor to carry out their own due diligence on the status of the assignment before signing anything.
What proportion of new contract postings are listed as ‘outside IR35’?
Although its difficult to come up with accurate figures, due to the fact that multiple agencies will advertise the same role across multiple job boards, the figures we have suggest that on large generic job boards such as Totaljobs the figure is as low as 1.5% of contracts, whilst for IT sector-specific job boards such as on CWjobs and Jobserve, the figures are much higher at around 8% or 9% of total contracts at the moment and increasing.
The likely proportion of contracts that fall outside is likely to be even higher than this, we feel, once you add in small and medium-sized companies who are not responsible for determining the IR35 status of contracts.
Which parts of the market appear to be well prepared/less prepared for the changes?
The larger agency recruiters seem to have cottoned onto the advantages of advertising contract outside IR35, smaller agencies and companies less so. Companies themselves are often taking a “risk-averse” approach and determining that all contracts are Inside IR35, or are leaving their determinations to the last possible minute.
Clearly it’s the larger companies themselves who have the most difficult and onerous job, as they need to carry out IR35 assessments which they have never done before. If they get this exercise wrong, on the one hand, they could be confronted by a contractor skills exodus, and on the other hand, they could find themselves liable for payroll taxes that they hadn’t budgeted for.
Under these circumstances, both companies and contractors themselves may be starting to opt-out of the market at the moment, until some of the dust settles and everyone can see the post-April landscape a bit more clearly.
What changes are you anticipating to see once the new rules come into effect?
It’s always difficult to predict how the market will respond to legislative changes, as there are usually some “unintended consequences” that legislators and others haven’t predicted. Larger companies that are insisting on PAYE or umbrella arrangements may well find themselves having to adapt to having a smaller flexible workforce in key skill areas, as higher-skilled contractors migrate to where the best assignments are on offer.
We believe that, at least in the short term, small and medium enterprises, especially smaller consultancies, will do well out of the new arrangements, as they should be able to dip into the contractor pool to find the skills to meet client requirements, with the benefit of offering contractors suitably-drafted arrangements that should fall outside IR35. Likewise, well-funded start-up companies will be able to continue to offer contractors interesting and potentially lucrative assignments.
Of course, it’s always possible that the legislation may be extended to include small and medium enterprises at some future date, so these advantages may themselves be short-lived.
What can contractors do now to maximise their chances of continuing to work outside IR35?
Contractors on assignment should be asking their client companies to provide an IR35 Status Determination Statement so that they know where they will stand after April 2020. The earlier they can obtain this the better. Contractors currently seeking a new role should seek to ascertain if a Status Determination has been carried out for the role they are applying for, and what that determination is, so that they can set their rate accordingly.
Contractors who specifically want to maintain the advantages of contracting via their own limited companies should follow us on twitter @Outside_Spy to get a feel for some of the Outside IR35 contracts currently being advertised, or subscribe for the full service at outsidespy.co.uk where they can search through all the Outside IR35 IT Contracts we discover, and they can be alerted via email to those contracts matching their skill, location, and rate requirements. This will maximise their chances of finding an Outside IR35 contract.
Do you have a view on the health of the contract market in terms of demand for contractors in general?
There is no doubt in our view that a change to contracting arrangements such as the one planned for April 2020 has an unsettling effect which depresses overall levels of activity in the market. Companies may defer hiring decisions, choose not to renew all the contractors on their books, and contractors themselves may choose to sit out the market rather than take a contract deemed to be inside IR35. We would, however, expect that the market bounces back quickly after a short period of correction, as the irrepressible demand for flexible labour reasserts itself.