Contractor survey: businesses continue to struggle with IR35 reform
The anniversary of the IR35 reforms in the private sector is fast approaching. At Kingsbridge, we’ve been keeping a close eye on the contracting market. We decided to go back out to our contractor base to hear their thoughts on the market since the off-payroll reform. The survey had over 1,600 responses from contractors and revealed some concerning statistics. We’ve pulled together a report of the results, or you can read on for the headline stats.
One in five contractors are leaving inside IR35 contracts
Over 21% of contractors that received an inside IR35 status determination statement (SDS) said that they left to find an outside IR35 role. In a candidate-driven market, contractors will be unlikely to accept inside IR35 assignments. This is further backed up by 60% of contractors telling us that they plan to look for an outside IR35 role over the next few months.
Over 40% of inside IR35 contractors have increased their day rate
For contractors that were determined as inside IR35, over 40% said they had increased their day rate by at least 10%. This shows that placing genuine contractors on to the payroll can be an expensive move for clients. For businesses struggling to find talent, you should consider reviewing your IR35 processes.
Andy Robinson, Commercial Director at Kingsbridge commented:
“We all know that finding and engaging with a contingent workforce is challenging and struggling to find the best people and stay ahead of the competition is not easy. For businesses struggling to find talent, one of the best pieces of advice would be to look at improving your IR35 processes.”
Half of contractors subject to a blanket ban
Despite pushbacks from contractors, many businesses continue to enforce PSC bans, as a result of pressure felt by businesses and nervousness around the rules. 50% of contractors said that they were subject to a blanket ban. However, Andy Robinson warns that this could be a short-sighted approach, which could result in businesses missing out on some of the best talent out there.
“Many businesses continue to enforce PSC contractor bans, with the vast majority pushing contractors on to the payroll or via an umbrella company. This is a result of pressure felt by businesses and nervousness around abiding by the rules. However, this is a short-sighted and potentially self-defeating strategy which risks warding off the best talent. Not only has this approach resulted in businesses becoming far less agile but it has also been reported that the reforms likely contributed to economic disturbances such as the HGV crisis.”
It’s not all doom and gloom
The good news is it’s not all doom and gloom and there are a number of end-hirers that are managing their IR35 process compliantly and pragmatically. At the time of the survey, 81% of contractors said they had been assessed as outside IR35. 12% of contractors were assessed as inside IR35, with the remaining 7% receiving a mixture of inside and outside assessments. Andy Robinson commented:
“Encouragingly, we are already seeing reports of U-turns and reversals of contractor bans, just like we did when the changes were introduced into the public sector back in 2017. For this reason, we remain optimistic that those organisations that took a blanket approach to the reforms will start to rethink their processes in 2022 to attract the talent they need and gain a significant competitive advantage in a post-pandemic landscape – one where flexible workers are set to play an even greater role in the UK economy.”
To get the full overview of what our contractors said, you can download the IR35 survey results in full here.