Off-payroll working in the private sector


Brian Rudkin

Brian Rudkin

Director and Head of Employer Services


With confirmation that the Government’s controversial IR35 legislation (off-payroll working in the private sector) will come into effect from 6 April 2020, now is the time to understand how it could affect all main parties in the private sector employment chain. 

The scope for potential failings could be significant at various touch points; whether this is caused by deliberate, or ignorant actions. 

At the end of May, the most recent in a series of Government consultations on the topic closed. This particular consultation explored the practical implementation of the new legislation by seeking insights from a cross-party section of stakeholders in private sector employment.

It is not unrealistic that Personal Service Company (PSC) contractors, employers and agencies may have concerns, given how these same changes affected public sector workers in 2017. There were difficulties ranging from lack of time to prepare, lack of support, inadequate technology, incorrect grouping of workers and complexities around the PAYE and NIC deductions were all too commonplace; much of which is still ongoing in the sector.

In our consultation response we were clear that, whilst these changes are inevitable, and we are generally supportive of Government remedies to ensure a robust system, there are steps that should be taken to mitigate risk to all parties involved in the public sector employment chain.

Status Determination & lengthy employment chains

Requirements for a statutory Status Determination would confirm whether a PSC contractor is a freelancer or not and provide transparency for both the contractor and employer. However, questions arise over who should decide this; the employer, the contractor, or someone else in the chain. Regardless of ironing that out, there needs to be clear guidance on how a determination is reached, so that it is applied equally and fairly. The guidance would also need to outline the roles and responsibilities for all parties in the employment chain to ensure this information is cascaded within a suitable timescale, with the result being correct payments made to the contractor.

Which sectors are likely to be most affected?

Typically, those sectors which use PSC contractors tend to be those where there is a limited supply of experienced workers; for example, Construction, Oil & Gas, Financial Services, Creative industries, Technology, and Transport & Logistics. It should be noted that any sector can have PSC contractors as part of the workforce and should be reviewed as appropriate.

What you can do now to prepare

These changes will come into effect from 6 April 2020 and although the final details are to be finalised, there are things that can be done now to ensure a lesser impact when the time comes.

  1. As an employer you can take steps now to identify if you have a PSC contractor population, and whether the off-payroll rules will apply to their role. The Government have an online tool to help you do this.
  2. Agreeing a clear information flow across your employment supply chain now could minimise the risk of key information not being shared across all parties.
  3. Conduct a risk review of your employment operations to identify any areas of risk. This can include financial, operational and reputational risk. Use this to create a strategy to embed IR35 practices from 6 April 2020.

Our Employer Services team have extensive experience in this area. If you are a private sector employer and are concerned about how IR35 legislation might affect your business, please get in touch.