Private Sector IR35 consultation & Government research highlighting issues from Public Sector

The Treasury/HMRC published a press release confirming the consultation on extension of public sector off-payroll rules to the private sector. It’s statement “We estimate that two thirds of people working through a company are genuinely self-employed and not affected by these rules. But around one third are working like employees” confirms the expected impact of this reform in the contingent workforce supply chain.

The release includes a ‘Rumour’ and ‘Fact’ section designed to dispel some of the negativity around these reforms, but delving deeper into the Governments own research proves there have been negative outcomes for public sector bodies:

• half of public bodies have had disputes with agencies or contractors about off the new payroll rules
• six in ten public bodies are spending more time on admin of contractors as a result of the reform

Qualitative interviews showed that in some cases, off-payroll contractors had left public sector bodies after being declared within the rules, but were replaced with other off-payroll contractors willing to work within the off-payroll working rules, resulting in no overall change to contractor numbers. In a few cases, numbers decreased because more off-payroll contractors were moving onto payroll as paid employees, or because off-payroll working reforms had prompted public bodies to review the extent to which they needed to use off-payroll contractors.

Some public sector bodies reported difficulties in filling vacancies felt there were fewer suitable contractors available in the marketplace since the reforms and that the process of filling contract vacancies had become more time consuming after the reforms came into effect. This was particularly the case for doctors and social workers.

Public sector bodies reported that they initially struggled with implementation due to needing to understand the legislation in a short period of time and there was a perception that the guidance had repeatedly changed which made this task more difficult. In most cases, public bodies felt their understanding improved over time, although a few still lacked understanding about rules relating to substitution and the provision of equipment.

In a few cases, where public bodies had high volumes of contractors working in the same role and under the same terms and conditions, the same assessment result was applied to all existing and future off-payroll contractors working under those same conditions. The research states that “This approach is considered by HMRC to be compliant” but the consultation fact sheet also states “Evidence shows that the vast majority of public authorities made assessments on a case-by-case basis”.

Engage is rolling-out its unique, end to end, neutral Vendor Management Solution amongst public sector clients and their agencies who have been affected by the off-payroll rules and stands ready to help its private sector clients who will need the supply visibility it provides to ensure recruitment and staffing operations aren’t thrown into chaos when the legislation is implemented.

Read the Consultation Factsheet here.

Read the Public Sector off payroll research here.

More about Engage VMS here.