It’s Time for CEOs to Properly Address IR35
The Royal Bank of Scotland has followed suit with Lloyds and Barclays, recently announcing it will get rid of all freelancers ahead of IR35 next year.
RBS revealed that after 28 February 2020, all contractors must change their status to PAYE or umbrella (working for an organisation that employees and pays contractors), or be at risk of getting the kick. It’s a drastic move for RBS and as the deadline looms, it won’t be the last time we see a large business making this decision.
That’s the problem with taxation changes; according to Kevin Corne, Chief Operating Officer at Sullivan & Stanley, many businesses see them as negative, so make knee-jerk reactions to quickly resolve them.
Businesses are looking at IR35 with a transactional lens and not taking into consideration its transformational capability. However, if they took some time to really assess the impact, it has the potential to open up doors and opportunities for businesses and contractors.
This is why we decided to create a report, ‘Change Is Good: Why IR35 Presents Opportunities for Business and Contractors’, to uncover the current consensus in the UK on IR35, as well as the positive outcomes it can bring.
We were shocked to find that less than four in ten (38%) businesses currently have a robust strategy in place. This means that almost three-quarters run the risk of not being ready on time – and that’s a concern.
Of the 500 business decision-makers surveyed, a fifth stated they expected to be ready up to three months after IR35 is enforced on 6 April 2020; 32% said four to six months after the change date; and nearly one in 10 (9%) think it will take them seven to 11 months beyond April to be up to speed.
We found that the problem seems to lie with confusion and lack of education – a surprising 71% were unaware of the date that it will come into effect. While more than half (54%) saying they haven’t received enough information and 52% claiming it is contradictory or confusing.
So, making sure businesses have the right advice and support to make successful changes in time is vital. With 47% hoping IR35 would bring an opportunity to review and improve systems, we decided to uncover its positive outcomes.
Benefits for businesses:
- Take a step back – it’s easy to lose sight of why your workforce is shaped as it is, so IR35 is the best excuse to stop and take stock of your current situation and the value it’s delivering. Ask yourself, can you really share that ROI back to the business and demonstrate success on time?
- Change your model – more than half (54%) of respondents were committed to changing their financial model due to IR35. So, now is the time to design your operating model so your business has the right talent and resources in place to be fit for the future. In reviewing the existing employment strategy, businesses will be able to identify many areas that can be improved
- Bring your customer front of mind – IR35 is a business issue, but we’re all consumers. If you keep the customer in mind when reviewing and developing your operating model, it leads to longer, more loyal relationships. This, in turn, increases revenue and profit over time. So taking an inside-out approach to building a team that will delight the customer is a win-win for everyone
Benefits for contractors:
- The best aspects of the gig economy – businesses will want to work with the best gig economy experts who can share their vast skills and experience on multiple projects, driving the right outcomes for the company and the wider UK economy
- Be measured against deliverable outcomes – rather than just having a timesheet signed off (if at all), there will be increasing personal satisfaction and respect from the organisation and industry at large
- The ability to earn more – this may spell the end of the day rate, as companies agree to a specific budget for a project. That also means a defined timeline, which should help contractors accelerate completion and move on to new projects more quickly
It’s clear that if prepared correctly, IR35 presents an opportunity to revolutionise operating models that future-proof firms, give freelance experts the recognition they deserve and change business for the better. Not all doom and gloom as we are led to believe!