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Will public sector clients ban Personal Service Companies (PSCs)?



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Will public sector clients ban Personal Service Companies (PSCs)?

With just 18 working days to April 6 and no stay on execution to IR35 in sight, public sector bodies and recruitment agencies need to work extra hard to put a plan in place. The IR35 reforms are likely to make it more difficult to attract contractors – a sizeable number of current PSCs are considering a move to the private sector.  On top of this, several organisations in the public sector may choose the seemingly easy way out and simply ban PSCs.  For instance, TFL has already taken this step, although it looks like they may have to reconsider.

This creates a doubly difficult situation for recruitment agencies. Not only will they have to compete to recruit from a much-curtailed pool of workers, but also be ready for stringent compliance requirements from their clients. And in some cases, a recruitment agency will simply not be able to serve the client in the same capacity – when the client chooses to outright ban PSCs.  The only option that remains open to the contractors in this situation is to operate within an umbrella, go PAYE or take deemed payroll. 

Owing to these reasons, it is essential for recruiters to get clarity on what their clients are planning to do.  However, this is easier said than done.  Many of the public sector bodies are also trying to work out a proper response to the IR35 reforms. They are struggling to find answers to the questions:  1) Should we allow PSCs at all? 2) If we do not allow PSCs, what will be the impact on sourcing, 3) What system can we set up to ensure the compliance, 4) How can we get the information regarding the assignments to the recruitment agencies in time, 5) How do we make sure that none of the liability arising from possible breach of the IR35 reforms falls on us?

In this scenario, it is essential for recruitment agencies to have a detailed strategy around payroll and compliance for PSCs that fall inside and outside IR35. The easier a recruitment company makes it for the public sector client to fulfil the internal check and documentations, the greater is the possibility of the organisation continuing with PSC assignments. 

Need help?
We work for some of the leading staffing agencies in the UK and have been preparing for the IR35 reforms for months. Our experts have been visiting recruitment agencies in the UK, offering specific advice tailored to the specific scenarios faced by the company. Please get in touch with us for a free, no-commitment chat around the challenges raises by IR35 reforms and possible solutions

Pom Chakravarti

Call 07870 678 557 or email pom.chakravarti@qxltd.com.  

Kunal Shah

Call 0758 4651087 or email kunal.shah@qxltd.com.

Other important IR35 related questions recruitment agencies must ask:

  1. How will the Apprenticeship Levy impact your recruitment agency? 
  2. Are your clients and contractors aware of all the changes that are happening? 
  3. How many public sector agency workers will be lost as a result of IR35?
  4. Is umbrella really the best option for your contractors and clients?
  5. Will contractors ask for higher pay rates to offset the Employer’s NI?
  6. Do you have a plan in place for paying the invoices for work done before April 6?
  7. Have you checked out the public beta version of the ESS digital tool by HMRC?
  8. What is the best IR35 solution for recruitment agencies and contractors?


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