With just 22 working days to April 6, recruitment agencies have got to be prepared for the impact of the changes forced by IR35 legislation. As we have discussed earlier, contractors may ask for a higher pay to offset their losses. The country may also witness a mass exodus of contractors from the public sector to the private sector.
After April 6, it might get a lot harder to find contractors for many of the assignments shared by your public sector clients. This is especially true for engagements that the client or the agency automatically classify as being inside of IR35. The only solution that some of the contractors would be willing to accept is a steep 20% hike in their fees.
But is that a viable solution? For many sectors like the NHS where rate caps are operating, then as an agency you are stuck between a rock and a hard place. So, it is crucial that you speak with your clients where appropriate to assess whether there is any flexibility for rate rises. Or work out an arrangement wherein you and the client can share the extra cost.
Another temporary solution could be placing your workers in a PAYE umbrella solution. However, umbrella solutions may not be the best option for everyone. If you can set up a system that makes it easier for your contractors to work on both types of assignments – inside or outside IR35 – without too much of an administrative or cost impact, a level of balance can be achieved.
However, in addition to doing your utmost to retain existing contractors, it is also necessary that you build a pool of talent for the future. It may also pay in the long run to invest time in identifying the complete skill set of your existing contractors and using them smartly to fill more difficult vacancies. In addition to this, it could be a good idea to intensify your social media and online marketing activities to reach a wider range of potential contractors.
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Other important IR35 related questions recruitment agencies must ask:
- How will the Apprenticeship Levy impact your recruitment agency?
- Are your clients and contractors aware of all the changes that are happening?
- How many public sector agency workers will be lost as a result of falling within IR35?
- Will contractors ask for higher pay rates to offset the Employer’s NI?
- Do you have a plan in place for paying the invoices for work done before April 6?
- Have you checked out the public beta version of the ESS digital tool by HMRC?