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IR35 delay: what this means for HR professionals

26th Mar 2020
APSCo
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Earlier this month, the government announced that it will be delaying the controversial private sector IR35 reform by 12 months due to the global coronavirus pandemic. The off-payroll changes were due to be enforced in April 2020, however, employers the UK will now have until 2021 to get ready.

Steve Barclay, Chief Secretary to the Treasury, said: “This is a deferral in response to the ongoing spread of Covid-19 to help businesses and individuals. This is a deferral and not a cancellation, and the government remains committed to reintroducing this policy to ensure people working like employees but through their own limited company pay broadly the same amount of tax as those employed directly.”

While the circumstances surrounding the decision to delay are certainly unfortunate, this announcement will still be welcomed by many HR professionals. After five years of lobbying government for a proper review of IR35, we welcome the extra breathing space being granted as a result for any businesses engaging with contractors. Despite some HR teams across the country having already spent an enormous amount of time and resource getting ready for this change, the postponement of IR35 will provide others with much needed extra time for preparation.  And given the on-going economic struggles and heightened stress on global economies and talent management teams, now is certainly not the time to make flexible labour more expensive or the hiring of contingent labour more difficult.

Benefits of the delay to IR35

This delay will allow HR professionals to plan better and be more prepared. Although the changes were due to be implemented next month, evidence suggests that many businesses were already ill-prepared to manage the planned IR35 reforms.

In addition to having more time, there may also be other benefits to the delay, including a possible uptick in the hiring of remote workers who operate through a PSC– particularly given the current Coronavirus pandemic. Unfortunately, a number of high-profile companies put a blanket ban on contractors working through this model in the last few months as a response to the off-payroll legislation. This could certainly be good news some contractors, albeit disappointing that it is taking a crisis of this magnitude to make businesses potentially reassess.

How Coronavirus is impacting HR professionals

There has been a massive increase in enquiries by HR professionals to our legal helpline about SSP and contractor rights on top of the usual high number of queries around the implementation of IR35. Understandably, this is a difficult and worrying time for those in the profession. While larger businesses may have the financial resilience to ride the storm, many SMEs across the country will be facing tough times. The global pandemic will undoubtedly alter the way firms operate, and talent management will certainly have to change to accommodate remote working, client demand and financial pressure. Hiring in many industries is also likely to be temporarily put on hold or reduced for the foreseeable future and we at APSCo will continue to lobby government to protect the UK’s employment market.

The government’s response

In addition to delaying the off-payroll changes in the private sector, it’s reassuring to see that the Chancellor has moved so quickly with a £330 billion stimulus package including expansion of the business interruption scheme introduced in the budget, cash grants to smaller firms and a commitment to consult with both business and trade unions to determine what else may be needed. Furthermore, the announcement that government will cover 80% of furloughed employee’s salaries, and provide the same amount for self-employed professionals will give HR professionals some much needed relief.

What’s also needed from the government is further clarity. There needs to be an explanation on how this will define SMEs in terms of the proposed SSP refund in the emergency legislation. If it is the Companies Act definition, then agency workers will not count in the assessment of 250 employees. However, if it is the Equality Act definition then agency workers will count, meaning that small companies with large numbers of agency workers won't be entitled to SSP refund - which could potentially put them out of business.

However, it’s important to add that while HR teams have an additional 12 months to get ready for IR35 changes, and may have more pressing matters to deal with, preparations shouldn’t halt completely. This is a delay, not a cancellation, and HR teams, employers and recruiters need to use this added time wisely.

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