The introduction of updates to IR35 legislation in the public sector in April 2017 created challenges for many organisations when it came to their interim workforce. Driven by a lack of time to prepare for the changes, many organisations felt the full impact on costs and reduced access to skills.
In the Autumn 2018 budget, it was confirmed that changes to the IR35 legislation would be extended to the private sector in April 2020, for large and medium-sized organisations. Private sector employers should learn from the challenges faced by the public sector, and prepare accordingly.
Challenges faced by procurement employers in the public sector
The changes to IR35 transferred responsibility for determining whether those working under a personal services company (PSC) are inside or outside of IR35 from the employee to the hiring organisation, along with liability for associated taxes.
Transformation projects within procurement are commonplace across the public sector, to which temporary professionals with niche skillsets, experience and a different perspective are key to deliver change successfully. Interims at senior levels are particularly in demand to head up these strategic transformation projects. It is therefore unsurprising that procurement employers in the public sector keenly felt the impact of the updated legislation.
Pressure to find temporary skills
Recent research by Hays found that of the public sector employers who have been affected by the changes to IR35 legislation, over three-quarters (78%) found it harder to attract skilled temporary or contract workers since the changes came into effect. Of these, 25% found it much harder to attract the skills they need.
This was aggravated further by the decision of nearly a fifth (19%) of affected PSC workers who plan to, or have already made the move, to the private sector where the changes have yet to take effect. Skills shortages are already widespread in the profession, as evidenced by the CIPS/Hays Procurement Salary Guide and Insights 2017 which found that 51% faced challenges finding the right talent in the last 12 months. The introduction of IR35 changes therefore caused further hiring challenges for many procurement employers in the public sector.
How can the private sector prepare for change?
1. Don’t delay preparation: Taking the time to prepare sooner rather than later means your organisation need not necessarily change the way it utilises interim procurement workers. This will ensure your organisation is able to access and compete for the temporary skills you need to support and deliver successful projects.
2. Undertake a risk assessment: Audit your interim workforce to ascertain your level of risk. A recruitment expert who has supported the public sector through the original implementation date can undertake a healthcheck to determine how IR35 changes may affect your organisation, and help develop a solution if required.
3. Consider your long-term strategy: Think about how you will assess and arrive at a determination for each assignment, and maintain control and visibility over how contractors are on-boarded and utilised. If your contingent workforce spend is small, then a recruiting expert with experience supporting public sector organisations can help your organisation meet its obligations. If you rely more heavily on contingent workers, then a Managed Service Programme (MSP) may be more beneficial, where a recruiting partner fully manages the recruitment process of temporary workers.
For further information about the issues and opportunities raised by IR35, download our whitepaper.
Contact your local recruitment expert to discuss preparing your organisation for the onset of updated IR35 legislation.
About this author
Scott joined Hays in 2002 as a Trainee Consultant, and is now Director of Hays Procurement & Supply Chain. With over 15 years’ experience, Scott advises clients on workforce management solutions, works with the industry institute CIPS as a trusted knowledge partner, and provides strategic leadership to Hays’ procurement and supply chain recruitment experts.