Employment law can be complex and the energy sector is not immune from the confusion that surrounds IR35.
There is now less than a year to go until April 2020 when the IR35 off-payroll working rules come into force within the private sector – impacting all medium and large businesses that hire contractors.
With 12 months to go, now is the time to go back to basics – try to avoid all the myths and scaremongering around “disguised employees” (to use the language of HMRC) – and focus in on what you can do to get IR35 ready. It is important to remember that what constitutes being inside or outside of IR35 isn’t changing; it is the responsibility for applying the rules that is. Just like in the public sector, where the new rules were introduced in 2017, the responsibility to determine tax status and the associated tax risk is moving from the contractor to the hirer.
What IR35 steps should you take?
Audit your contractor workforce so you understand your IR35 challenge. There is no need to panic. Contractors who are currently outside of IR35 should still be outside after April 2020. An audit will help confirm this. For those contractors where you’re unsure of their IR35 status or they’re ‘borderline’, undertaking an audit ensures you have time to look at contracts and working practices, and make adjustments to help protect the contractor status.
No one wants to lose highly-skilled and valuable contractors. Talk to them. They’re looking for reassurance that you’re able to fairly assess their contractor status. Without good communication, contractors will be nervous about the impact of the new rules and may start to look for alternative contracts. Seek expert legal advice early on so your HR teams have all the information and guidance to hand to make the right decisions.
If you engage contractors through third-party recruitment agencies ensure that IR35 is on their radar. All parties involved in the supply and hiring of flexible labour will have IR35 responsibilities, so you all need to understand your obligations and have robust processes in place.
IR35 presents an opportunity to spring clean your policies and contractor contracts. Once you have everything in place, managing the IR35 challenge will be a whole lot easier and will avoid last-minute panic and mistakes that could result in a talent drain.
IR35 is a specalist area of employment law so it’s important to understand that you’re not expected to have all the answers. The key thing is that you take steps towards IR35 compliance. Seeking support illustrates that you’re taking your obligations seriously and working towards understanding the employment status of your flexible workforce. The clock is ticking down to the new rules and, with the right guiding hand, you’ll be able to confidently hire and retain your contractor talent. Getting ready for IR35 is more than just about compliance, it also means a competitive advantage.