IR35 - the end of a flexible workforce

[Rebel]

To get decent staff.

Agreed to get decent staff yes, but they can minimise that staff now and bring in temps and treat them like perms but without the hassle of pensions and holiday pay etc. Nothing stopping them to do that.

[oliverson]

This is not the end of a flexible workforce. It is not the end of IT consulting.

It is the end of individuals using limited companies to avoid paying national insurance and income tax.

You are still free to work for whomever you like and you are free to negotiate your rate.

You can no longer employ your wife as 'company secretary' or pay dividends to avoid national insurance.


"But what about expenses?" I hear you all cry. Why should a freelance IT worker be allowed to claim tax relief on hotels, equipment? Why can't ALL workers claim this relief? What makes a [I]contractor[I] more entitled to claim his train fare tax free vs an agency temp or a permie?

95% of contractors are not legitimate companies; they are agency temps.

Let's do a simple example

Bob is a casual and works in Zara on tuesday, H&M on thursday and Tesco at the weekend. It takes bob 2 hours to commute to tesco. If Bob is feeling unwell, he can send his brother Tim in his place.

Sally works full time in Zara.

Should Bob be entitled to claim his train fare tax free? Should Bob be able to employ his non-working wife and split his earnings? Should Bob be able to pay himself dividends and avoid paying national insurance?

You conveniently ended the comparison.

Sally can't be bothered getting out of bed this morning so the throws a sicky but still gets paid for it. When she returns, Sally books 2 weeks off paid leave, taking her paid holiday allowance down to 4 weeks plus statutory holidays. But before she takes that paid holiday, she is put on a weeks training course, one of many throughout the year. But even though Sally isn't delivering anything of any value, they just can't get rid of her. There's a downturn in business due to a new store opening up nearby. Customers are going there instead. There is no need for both Sally and Bob. Who do you think's going to be let go first? If they have to let both go, well at least Sally will get a nice payout.

[eek]

You conveniently ended the comparison.

Sally can't be bothered getting out of bed this morning so the throws a sicky but still gets paid for it. When she returns, Sally books 2 weeks off paid leave, taking her paid holiday allowance down to 4 weeks plus statutory holidays. But before she takes that paid holiday, she is put on a weeks training course, one of many throughout the year. But even though Sally isn't delivering anything of any value, they just can't get rid of her. There's a downturn in business due to a new store opening up nearby. Customers are going there instead. There is no need for both Sally and Bob. Who do you think's going to be let go first? If they have to let both go, well at least Sally will get a nice payout.

In the next few weeks I'm possibly going to start recruiting staff. Is there any reason why I should employ anyone on a permanent basis?

[cojak]

In the next few weeks I'm possibly going to start recruiting staff. Is there any reason why I should employ anyone on a permanent basis?

I'm going to be a bit geeky here, but I hope you've got a plan in place for knowledge management and IP protection.

I've recently heard of a big company stumble because their 95% of their permitractors upped and left with minimal handover.

(No-one to hand it over to - they've been reducing permie headcount over the years...)

[Rebel]

You conveniently ended the comparison.

Sally can't be bothered getting out of bed this morning so the throws a sicky but still gets paid for it. When she returns, Sally books 2 weeks off paid leave, taking her paid holiday allowance down to 4 weeks plus statutory holidays. But before she takes that paid holiday, she is put on a weeks training course, one of many throughout the year. But even though Sally isn't delivering anything of any value, they just can't get rid of her. There's a downturn in business due to a new store opening up nearby. Customers are going there instead. There is no need for both Sally and Bob. Who do you think's going to be let go first? If they have to let both go, well at least Sally will get a nice payout.

Good points and an example that explains more completely the issues with ir35.

[TwoWolves]

Hi

I think the opposite is true. It's the beginning of flexible work for all.

The implementation of the private sector ir35 changes mean that end clients can treat you as a permie resource. The implication then becomes why bother having permie staff? Just recruit thru umbrellas on fixed term and save on pension, sickness

This is it.

The genius' at HMRC are so hateful of freelancers that they have failed to realise what horror they are about to unleash on the British workforce. We have high employment at the moment but the moment that stalls...

[Batcher]

Totally agree. But it's even better for the company. One amount to pay that includes NI, Salary, PAYE and employers NI to the brolly and with the advantage of not having to worry about the job perks you mentioned like holiday pay etc. Everybody is on a short notice period and can be let go at the drop of a hat and with none of those annoying employee protections or redundancy to worry about. Why would any company employ permies when the umbrella route gives permie like control but contractor like flexibility. You can also trim down your HR needs also....all you need is an excel spreadsheet showing the day rates going forward

I think you've spotted one of the real reasons for Brexit

[Batcher]

You conveniently ended the comparison.

Sally can't be bothered getting out of bed this morning so the throws a sicky but still gets paid for it. When she returns, Sally books 2 weeks off paid leave, taking her paid holiday allowance down to 4 weeks plus statutory holidays. But before she takes that paid holiday, she is put on a weeks training course, one of many throughout the year. But even though Sally isn't delivering anything of any value, they just can't get rid of her. There's a downturn in business due to a new store opening up nearby. Customers are going there instead. There is no need for both Sally and Bob. Who do you think's going to be let go first? If they have to let both go, well at least Sally will get a nice payout.

Not forgetting Sally's company claims the cost of travel, hotel and meals. Like all companies do.

[psychocandy]

What I "hope" will happen:-

1. Client not really understanding how it works or how much it will cost contractors says "everyone is inside".
2. Contractors on important projects throughout client will take a look at it and say "30% pay cut, I'm off". Hopefully, there will be other gigs to go to which aren't Inside IR35. Or decent perm roles.
3. Client will say "Oh **** all the contractors are leaving, what are we going to do, we're screwed".
4. Client will up the rates by 30%. Some will still leave (real fear of retrospective IR35 action by HMRC), some will say "hmmm got to via umbrella now but take home is the same so hey ho". (Might not work out so well if you stay away from home).

Alternatively, if it goes badly:-
1. Client will say "no way are we upping rates we can't afford it, take it or leave it".
2. Some contractors will stay and moan.
3. Some will leave and client will moan but struggle on.

What I "hope" will happen here with these clients is that it all goes badly wrong, things fall to pieces etc, and companies start to realise how bad an idea this is.

[Amanensia]

What I "hope" will happen:-

1. Client not really understanding how it works or how much it will cost contractors says "everyone is inside".
2. Contractors on important projects throughout client will take a look at it and say "30% pay cut, I'm off". Hopefully, there will be other gigs to go to which aren't Inside IR35. Or decent perm roles.
3. Client will say "Oh **** all the contractors are leaving, what are we going to do, we're screwed".
4. Client will up the rates by 30%. Some will still leave (real fear of retrospective IR35 action by HMRC), some will say "hmmm got to via umbrella now but take home is the same so hey ho". (Might not work out so well if you stay away from home).

We're at (3) at the moment. Looks like the progression is gonna be:

4. Client doggedly refuses to up rates, loses 75% of resources, half to competitors offering "outside" roles, and the other half to consultancies.
5. Client tries to backfill using the said consultancies, who will charge through the nose for supplying a load of ex-contractors that the client could have kept for half the money if they hadn't been so dogmatic.