Are we heading for a Public Sector brain drain?
The activation date for IR35 is fast approaching and Cedar Recruitment asked over 140 current public service contractors about their readiness for the new legislation. The new law will hold public sector clients responsible for ensuring the compliance of their contractors. Additionally there is widespread suspicion that similar legislation will inevitably be rolled out to private sector contractors.
Louise Gapp, partner and head of procurement division at Cedar, commented: “At Cedar we work both clientside and with contractors in the finance and procurement industries and so bear witness to uncertainty on both sides of the fence. We are concerned about the level of readiness of the market and wanted to better understand how the IR35 changes will impact our industry and so surveyed our contractors. The results indicate a worrying lack of understanding and readiness from the potential workforce affected.”
When asked if they understood the new legislation, 33.8% of respondents said they did not, whilst 39.44% said they somewhat understood.
49.3% claimed they were not ready for the IR35 changes and of the contractors questioned, 65.4% said they were considering withdrawing their services from the public sector.
Gapp added: “There is clearly still some confusion regarding the new legislation and an alarming proportion of contractors considering leaving the public sector. Whilst we at Cedar are sympathetic to the aim of preventing tax avoidance, we fear that IR35 could be a significant backwards step for modern work practices. “
The very worrying aspect is that the market isn’t ready, and for many it is too late. Agencies paying contractors after April 6th will need to apply the legislation, and if inside IR35 paying the 13.8% employers NI on top of the money paid to the contractor. And you can’t just willy nilly deduct the money from the contractor. Some agencies are in for a big shock. That bombshell aside, the HMRC tool is half-baked and giving wrong answers, leaving a potential liability still resting with agencies that rely upon it.
Dave Chaplin, CEO, ContractorCalculator