Before April 2021, IR35 became a word that would send a shiver down a recruitment agency or client’s back due to the changes that occurred with the legislation.
The changes to the legislation meant that instead of a contract worker being able to assess their own IR35 status it now fell to the client to complete the assessment and for the recruitment agency to pay them correctly.
If they were assessed as being “Inside IR35” (Employed Status) then the agency could pay them via an umbrella company or under the agency’s PAYE scheme.
If they were assessed as being “Outside IR35” (Self-Employed Status) then the agency could pay them via the candidate’s limited company, via an umbrella company or under the agency’s PAYE scheme.
If the assessment was done incorrectly or if the agency did not pay the candidate via the correct payment method, then the client, agency and candidate could be liable for fines and unpaid taxes.
Understandably, clients were concerned with the time and risk aspect of having to make this assessment of the contractor’s status, plus the grumblings from candidates who may have to move from their own limited company to an Umbrella/PAYE payment method due to the decrease in take-home pay.
This meant that many misinformed clients decided it was too much work and effort and so moved away from contract placements and decided to only offer permanent opportunities.
However, since April 2021, the contractors who were assessed as “employed” and had to move from their own limited company onto an Umbrella/PAYE payment method are now used to this scenario, with some managing to agree an increase in their rate to compensate for the decrease in take-home pay.
Plus, recruitment agencies have since implemented robust internal compliance processes to guide their clients through the assessment process before they start looking for candidates. They have also assessed their Umbrella company listings to ensure they are processing candidates’ pay correctly.
This has meant that clients who created an internal process themselves to comply with the new IR35 legislation back in April 2021 are now increasing their contractor placement numbers and taking on some quality candidates.
Therefore, businesses that used to hire contractors should now be looking at placing contractors within their recruitment strategy to take advantage of the currently available candidates on the market.
By working with a recruitment agency with a firm understanding of IR35 and with good internal processes in place to ensure that both the agency and the client are protected, clients who are returning to the contract market can do so easily and with little risk attached.