As contractors, recruiters and employers focus on 2018 – a year in which many expect an announcement on private sector IR35 reform – The Recruitment & Employment Confederation (REC) has revealed its plans to champion IR35 compliance among UK recruitment professionals.
A recent REC poll revealed that 85% of recruiters found it increasingly difficult to source relevant candidates in 2017, highlighting the need for the introduction of employment legislation that works in favour of recruitment agencies and the contractors they place, not against them.
IR35 reform last year impacted contractor hiring across the board (despite HMRC’s insistence otherwise), as leading public sector bodies such as The NHS struggled to cope with newly enforced and highly controversial changes.
To protect their liability in the event of an IR35 investigation, The NHS was among a number of end engagers to set its entire contractor workforce inside IR35.
The NHS has since changed its stance, and has started making IR35 assessments on a case-by-case basis. In the Prime Minister’s New Year Message, Theresa May alluded to The NHS and its workers, promising to celebrate and support its staff in 2018.
Following these comments, REC has also outlined its commitment to The NHS, pledging to promote compliance, the sustainable supply of talent and flexible working arrangements for the year ahead. There’s no doubt that keeping a close eye on how IR35 determinations are made by the recruitment agencies engaged by The NHS will factor strongly in REC’s plans.
In addition to this, REC will monitor any policy changes which might come as a result of last year’s Taylor Review of Modern Working Practices.
The long-awaited report called for the simplification of employment status rules in order to make the difference between contractors and employees clearer. And refreshingly, the Government has listened. In last year’s Budget, The Chancellor revealed plans to consult on the issue which creates further confusion around whether a contractor belongs inside or outside IR35.
In theory, the greater pressure applied from leading voices will emphasise just how important it is that the Government approaches each consultation with an open mind. Whether such resistance will amount to the ruling out of further IR35 changes seems unlikely though. And despite ongoing calls not to introduce it, further reform does look to be on the cards in due course
This is an opinion also held by REC’s Chief Executive, Kevin Green. In his New Year’s blog, he spoke realistically about the chances of further IR35 reform, stating that he ‘doubts’ the Government will stop meddling in the jobs market this year.
The recently updated tax timeline does however suggest that no announcement will be made on IR35 until this year’s Autumn Budget at the earliest. While this has been widely welcomed, it does mean that speculation surrounding the future of the IR35 legislation will continue well into 2018.
But amid this unwelcome uncertainty, REC is confident that employers will continue their recent upward trend in hiring, albeit at a slower rate than previous years. The recruitment body estimates a 3.8% growth in 2017/18, 3.6% in 2018/19 and 2.7% in 2019/20.
REC’s Recruitment Industry Trends 2016/17 Report also indicates that temporary recruitment remains strong – accounting for £28.2billion of the industry’s £32.2billion turnover last year. This equates to a staggering 87% of the entire UK recruitment industry revenue.
There is no questioning the importance of the independent workforce – not just to the recruitment industry – but to the entire UK economy. And you would hope contractors’ economic contribution alone (£119bn in 2016) would be enough to convince the Government to seriously evaluate its IR35 position in 2018.
Whether this happens however remains to be seen. In the meantime, it’s essential that recruitment agencies and private sector businesses start preparing for further IR35 reform.
Should recruitment agencies and employers act now, private sector IR35 reform can be managed. By taking the right steps the recruitment industry – which relies so heavily on contractors for the majority of its annual revenue – can continue to place temporary workers compliantly and help clients make well-informed IR35 decisions that protect their liability and the contractors they engage.