The combination of COVID-19 and next year’s reform to the IR35 rules threaten a “contractor exodus”, contracting authority Contractor Calculator has warned.
Following a survey completed by over 1000 contractors, independent workers said they have experienced a significant downturn in business due to the pandemic, with 41% of respondents reporting that work has slowed down during the lockdown. 40% of contractors, meanwhile, said their clients have frozen work activity altogether.
The impact COVID-19 is having on contractors combined with the arrival of IR35 reform in the private sector next April could see as many as 24% of independent professionals stop working this way, the data also reveals. Of this group, 88% have cited changes to IR35 as a key factor, while 76% stressed concerns about being able to find freelance work.
Fears held about the lack of freelance opportunities – which has resulted in 33% of contractors having not worked since the easing of the lockdown – are having a negative impact on contractors’ mental health and well being. Nearly one in three (30%) say anxiety or stress has impaired their ability to work, with 58% of contractors finding it difficult to remain productive while homeschooling children under the age of 18.
However, it was the Government’s “short of the mark” response to COVID-19 that has been contractors’ greatest source of stress, when focusing on the ongoing crisis. 77% of independent workers do not think the support available to the UK’s self-employed is adequate, no doubt largely due to the fact that limited company contractors are ineligible for the Self-employment Income Support Scheme (SEISS) and cannot count dividends towards the Coronavirus Job Retention Scheme (CJRS) – something the Government recently ruled out for ‘practical reasons’. When asked about various business loans available to contractors, 62% said this is an “unhelpful form of relief.”
Contractor Calculator’s CEO, Dave Chaplin, elaborated on this point: “Contractors have been heavily affected by COVID-19 and many have grave concerns about their future. Government support for the self-employed has fallen short of the mark so it is little wonder that our survey sees 70% of contractors feeling stressed. Confidence amongst the flexible workforce appears to be at an all-time low, at a time when the economy will be looking to those crucial contingent workers to underpin its recovery.”
The various challenges created by the pandemic have added to contractors’ worries, following confirmation that IR35 reform will certainly be rolled out, explained Chaplin: “The off-payroll tax combined with COVID-19 has hit freelancers hard.”
As a result, 68% of independent professionals said they are less trustful of the Government following its handling of the crisis. In addition to this, 69% strongly disagree that the current administration has the best interests of the self-employed at heart. This distrust in the Conservative Party extends to the point where 22% of contractors said they would vote Labour in the event of a General Election, with just 17% favouring the Tories.