‘Off Payroll working in the Public Sector’
‘Off Payroll working in the Public Sector’ (IR35) draft legislation was published at the beginning of December 2016. HM Revenue & Customs (HMRC) recently admitted in a joint meeting with Penna and the REC (Recruitment and Employment Confederation) that they will not be publishing any advice about it until February at the earliest.
Given the impact on public service delivery, this is far too late. So what do you need to know and what can you be doing now to prepare?
From 6 April, public sector bodies will have responsibility for deciding whether an interim – paid through a personal service company (PSC) – is ‘inside’ or ‘outside’ of IR35, and then needs to inform their recruitment agency within 31 days. Otherwise the liability for the operation of PAYE will fall to the public sector body.
For those interims who fall ‘inside IR35’, the organisation paying the PSC will have to account for PAYE, NIC, pay employers NIC and Apprenticeship levy. Those deemed to fall ‘outside IR35’ will continue to be paid as before.
Understanding the new rules will be very important in order to attract the flexible workforce required to drive the changes needed for the next wave of budget cuts and transformation. Some public sector organisations have already indicated that they intend to state that ALL roles will fall inside IR35. And undoubtedly a number of them will – social workers for example, or a head of adult services. And any role deemed ‘an office holder’ will automatically fall inside IR35, so that’s all the statutory roles too.
However, a number of roles will fall outside of scope, so it’s advisable to be cautious in order to maintain access to the talent the sector needs. At least 45% of the interim managers Penna surveyed said that they would not consider working on roles that fall inside IR35.
Our research also found that some interims may opt to work in the private sector where the new rules aren’t being applied. Attracting interims for roles in demand across the sectors like digital, HR, communications and finance will get a whole lot harder. A workforce plan and attraction strategy to plug the gaps is critical when the public sector is equally as reliant on this expertise.
If you are unsure of IR35 status, you should speak to your recruitment partner for advice and use the HMRC online tool which has been designed to aid the decision making process. Which brings me to my next point – HMRC have stated the online tool won’t be ready for us all to use until the end of February at the earliest. Legislation is enforced just five weeks later.
I have seen the latest version of the HMRC tool and it is not fit for purpose. The questions are ambiguous and could be answered in a number of ways, depending on your interpretation of the question. In order to get a result you will need information about the assignment and information about and from the interim you intend to hire. Therefore, strictly speaking, you are unable to determine IR35 status until you have selected your interim. In reality this means that you will need to work very closely with your recruiter, to gather the complex information needed to complete the tool. It would also be advisable to look at your on-boarding process too to deal with any potential risks. Again, your recruitment partners can help.
All existing interim contracts that will roll past 6 April will need reviewing. Each one will need their IR35 status determining and you will need to inform the agency it is contracted through. Based on our research, some interims may leave assignments deemed to be inside IR35 or seek to renegotiate. So best to plan now to allow time to hire replacements, or to renegotiate contracts such a change will inevitably trigger.
It is advisable to partner with a reputable recruitment organisation that will be fully compliant, manage the risk, and deliver complete recruitment solutions so you can retain access to the talent the sector needs.
Article written Jan 12th 2017, by Toni Hall, local government consultant at Penna.
Penna are running IR35 briefings for interims in London, Birmingham and Manchester to advise of the latest updates on the new legislation. You can book a place HERE.