With two thirds of contractors working inside IR35, the government has been urged to abolish ‘zero-rights employment’
The call comes as 65% of contractors have been placed inside IR35 by their client following the introduction of IR35 reform in the private sector on 6th April.
Research by Qdos found that around two-thirds of contractors are now working inside IR35 – a scenario where they are subject to employment tax but do not receive employment rights in exchange.
The study also showed that by working inside IR35, contractors can take home significantly less after tax – anywhere between 20 and 30 per cent.
Current rules are ‘illogical and unjust’
As a result, 8 in 10 (82%) contractors surveyed have called on the government to end what is known as zero-rights employment and offer them employment rights when working on inside IR35 contracts.
Seb Maley, CEO at Qdos, backed the call from contractors, adding that being taxed as employees but not receiving any rights is “illogical, unjust and must be eradicated.”
He said: “The government needs to put an end to zero rights employment once and for all. It was already an issue, but the introduction of IR35 reform has exacerbated the situation.
“Thousands of contractors are now working as zero rights employees – often as a result of needlessly risk-averse and sometimes non-compliant IR35 decisions carried out by businesses in response to the reform.”
Employment rights and tax status must be aligned
Maley suggested that employment rights should be aligned with tax status so that contractors who are taxed as employees also get holiday and sick pay as well as maternity and paternity privileges.
He added: “The government promised to look into this some time ago, but it should have been done before IR35 reform was enforced.
“It’s astonishing that Westminster still has its head buried in the sand, showing how unsupportive it is of the independent workforce, which is arguably one of the UK’s most valuable economic assets.”
The Qdos poll also revealed that around two-thirds of contractors are not confident that medium and large businesses – whose responsibility it now is to determine IR35 status – will be able to manage the changes.
Government must ‘reset’ its relationship with contractors
Commenting on the findings, Andy Chamberlain, Director of Policy at self-employment trade body, IPSE, said: “The changes to IR35 have piled disaster on disaster for the self-employed sector.
“They came into effect at the worst time for freelancers and the self-employed: compounding the financial damage of the pandemic by not only reducing the work available, but also ensuring that a large proportion of the sector have to effectively work in zero-rights employment.
“[…] The contracting sector used to be one of the most dynamic and innovative parts of the UK economy, but it has been undermined again and again by this government: from the devastating gaps in support to the havoc brought on by the changes to IR35.
“If this sector is ever to play its once crucial role again, government must reset its relationship with it and clear up the mess and confusion in the wake of IR35.”