Private sector companies that fail to offer contractors the opportunity to continue operating outside the IR35 legislation when reform is introduced next April will lose out on the skills and flexibility of these workers, exclusive research has emphasised.
Following reports that several well-known private sector companies are preparing to offer ultimatums in response to incoming IR35 reform, contractors have signalled the importance of not being forced into becoming employees or operating through umbrella companies.
The research, carried out by contractor accountancy, QAccounting, in collaboration with Contractor Weekly, suggests that the vast majority (72%) of the 1200 independent workers surveyed would stop working on a particular project should a client look to avoid the need to administer IR35 when they are handed this responsibility from April 2020.
It has been reported by Contractor UK that HSBC, M&G Investments and Morgan Stanley are preparing to stop engaging contractors outside IR35 or setting up alternative engagement models which would mean these businesses do not need to administer the rules.
At this stage, the specific details of these approaches aren’t clear, but according to this research, it could result in contractors opting to work on contracts where they can operate outside IR35.
This theory is supported given that just 18% said they would continue working on a specific project but through an umbrella company. Furthermore, only 10% of the contractors surveyed said they would accept any offer to go PAYE and become an employee of a client’s organisation.
Along with the fact that 91% of independent professionals said they take particular pride in working this way, that very few of these workers have the intention of entering employment is something that private sector firms must take into account, said QAccounting’s CEO, Mike Butchart.
“Contractors are proud to work independently and clearly plan on continuing to do so – but outside the scope of IR35. These statistics tell us that very few of these individuals want to become employees. As we approach next year’s reform, this is a message that we urge recruiters and end-clients to listen to.
“The fact that most contractors would stop working on a project if they were handed an ultimatum shows how incredibly important it is that agencies and private sector companies approach IR35 reform on the understanding that it can be managed.”
QAccounting’s CEO also offered a few words of advice to the medium and large private sector firms that are readying themselves for the arrival of IR35 reform next year.
“The businesses that prepare for incoming changes and present contractors with opportunities to have their IR35 status assessed fairly and accurately will be much better placed to continue engaging them.”