IR35 legislation is finally here. Is your strategy in place?

After multiple delays IR35 is finally here, and whilst there have been many conflicting opinions on the legislation, now it is in effect it does, at least, provide a framework.

A recent survey of 1,600 contractors by IPSE (the Association of Independent Professionals and the Self Employed) found nearly one in four contractors (24 per cent) said their clients were either uncertain or had made no indication of how they would respond to the IR35 changes. Thankfully, many of our clients decided upon their IR35 strategy ready for April 2020, so in the last twelve months we haven't seen many radical changes. Indeed, had it not been for the pandemic we would already be one year into IR35. For contractors deemed to be inside IR35, most are opting to go down the fixed-term contract (FTC) route and it has been pleasing to see strong packages being offered to candidates to make the move from day-rate to FTC. A salary uplift of 25% has been fairly common to make the jump. For outside IR35 contracts, our clients are putting robust Statements of Work in place, identifying clear timelines, goals and deliverables. Coupled with independent assessments, this is providing a suitable and satisfactory framework for all parties concerned.

Through Qdos, we have been conducting a number of IR35 assessments recently and the results have been interesting, if not surprising. Developers tend to be deemed inside IR35 as do accountants, whilst project managers are, in the main, outside IR35. As we move into Q2 and beyond we anticipate a cautious approach to day-rate contracts with fewer outside IR35 ones being signed off, except in clear-cut circumstances. We further expect an increase in FTCs, with their lengths ranging from three to twelve months. Since mid-2020 we have been working closely with our candidates to prepare them for a changing landscape and whilst many were reluctant initially to consider FTCs and inside day-rates, the mood has somewhat changed in recent months. 

Therefore, I expect 2021 to be a year of caution with companies watching what their competitors are doing and to react accordingly. Looking further ahead, we expect demand for day-rates to increase in 2022 and beyond as we all get used to the new playing field.

James Pepe