New insurance policy - will it unblock outside IR35 PSC gigs?

[jamesbrown]

Help me understand how this is different to PI and the situation contractors are in today? Does shonky work by a contractor not represent a reputational risk? Does it not represent a risk to regulatory compliance? Is it not managed via indemnity clauses to transfers liability to contractors? Is it not covered by 'tin-pot' PI insurance that is mostly mandated on contractors?

Scale.

A PSC with one director is not a multinational engaging hundreds or thousands of suppliers in the same way (many doing the same things). That changes everything, from regulation and compliance, risk management, perceptions of risk etc.

The blindingly obvious (and so far actual) response of big companies is to forget about IR35 and take a policy decision against that type of engagement.

Don't you think these big companies considered all of their options? Why do you think that tin-pot insurance wasn't their preferred answer?

[inniAccounts]

We might have heard of 1 or 2 claims (rumors not any details) of PI claims in 20 years on these boards and other boards - it’s just not a thing in PSC land as 95% of clients just see you as an employee anyway


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That's interesting, but a moot point. The point is a mechanism exists should it be required. The bit of information we're missing to compare would be how many actual mistakes have contractors made, and how much have these cost clients? Regardless of if they were pursued or not. I'd bet my house that contractors have been responsible for reputational damage and regulatory finger-pointing, regardless if the liability was passed down the supply chain.

[GhostofTarbera]

That's interesting, but a moot point. The point is a mechanism exists should it be required. The bit of information we're missing to compare would be how many actual mistakes have contractors made, and how much have these cost clients? Regardless of if they were pursued or not. I'd bet my house that contractors have been responsible for reputational damage and regulatory finger-pointing, regardless if the liability was passed down the supply chain.

Indeed, I once stopped all faster payments (billions of £ worth) for several hours at big bank as I went out for a boozy sex session - made 6 o’clock news as I had not increased the net sender cap

My bosses bosses boss got canned over it

I got renewed - the good old days


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[inniAccounts]

Don't you think these big companies considered all of their options? Why do you think that tin-pot insurance wasn't their preferred answer?

I think they've made the best decision for them at a point in time given how much they knew, the resources available to assess IR35 (internally and in the market), and the availability of (reputable) insurance products. If I were a permie PM I'd be drawing a time-cost-quality triangle and patronising everyone in the room.

Don't get me wrong: I'm very confident a large part of the market is going to become and stay payrolled-only, and I've always thought there's a lot of folks kidding themselves if they ever thought they are outside IR35.

BUT I'm also a great believer in the power of markets, and this is where smart agents are working right now. Agents like to see themselves as resource solution providers - or something along those lines. How can they deliver the best contractors and consultants, at the right price and risk level to clients? The answer is not PAYE / umbrella - there's very little competitive advantage there, the moat is too shallow. Being frank with a client and saying "these roles are always inside, so let's do FTC", but "for these key hires let's work hard to assess it correctly, minimise risk, and get the best people we can". An insurance policy here is going to grease the wheels.

Hays started advertising for IR35 assessment and client PM roles way back - and as a result, they seem to be winning in doing fair IR35 assessments in conjunction with clients.

(Plus, the policy is rich in benefits, the insurer has a good reputation, but the premiums are low - which suggests low risk of needing it. I trust Zurich's actuaries to evaluate this market better than us sideline commentators.)

[wattaj]

I trust Zurich's actuaries to evaluate this market better than us sideline commentators.

Then I'm bound to ask why you're bothering us?

[inniAccounts]

Then I'm bound to ask why you're bothering us?

I trust them more than us to assess the risk of outside IR35 determinations. Which they think is low.

My original question was it sounds like something that could unblock the market - and what are people's thoughts on that.

[jamesbrown]

You think that BigCos don't have a direct line to bespoke insurance? Hell, I can call Hiscox and get bespoke insurance for pretty much anything I want, at a price.

BigCos aren't waiting around for that fantastic new tin-pot insurance option to hit the market. They are nuking the site from orbit, and it makes perfect sense, from a BigCo risk/compliance perspective. These decisions aren't made by procurement or, heaven forbid, HR. There are bigger boys and girls and they are in charge.

Anyway, I trust the actual stuff that I'm seeing more than I trust the sideline commentary from accountants who have a vested interested in not going bust.

[eek]

I trust them more than us to assess the risk of outside IR35 determinations. Which they think is low.

My original question was it sounds like something that could unblock the market - and what are people's thoughts on that.

And as we've said it won't

HMRC are scaring large companies into blanket decisions
Agencies may purchase the scheme as it offers upsides to them with little downside - if they can find companies willing to take on contractor.
Contractors aren't in a position to be purchasing it.

[LondonManc]

I think it's as useful as a client is transparent about the actual answers input into the CEST tool.
While an agent may steer them towards an outside IR35 answer for RoS, for example, whether that is actually allowed or not when put under scrutiny by HMRC is another question.

I hope it works and I think it's most useful for agents to allow them to keep contractors onsite rather than being replaced by wipro, etc.
Utlimately, though, end client holds the key, again.

[Paralytic]

If you're working outside IR35, it's likely indemnity clauses from client to agent to you will put you on the hook, moreso in the new world.

Who is you here?

And why would anyone sign a contract (even if considered as unenforceable by some) which would put them at that risk when it would likely be something outside their control that might cause a future HMRC investigation. eg, someone at the client saying "yes, they did something not detailed in the contract once"

Yes, agree clients unlikely to buy, as in purchase, it. But the pivot here is an agent who can supply resource that's adequately assessed (passing duty of care) and protected (via insurance). Agent works hard to assess on clients' behalf, buys insurance policies, advertises outside IR35 PSC roles, get pick of contractors, becomes a competitive advantage. Compliant, insurance-backed, with access to best contractors.

It'll be interesting to see if the market goes that way but I have my doubts that agents will bother with that. They'll just advertise roles as inside.