With contracting mostly dead, this is how clients can continue to have access to flexible expert workforce
Clients have been using contractors extensively. However, this is changing due to the new IR35 (“off payroll”) regulations coming into effect on 6/4/2021.
Clearly (and quite understandably) clients don’t want to be exposed to IR35, having just got over GDPR compliance…
⇒ Many clients simply rolled their eyes up at the prospect of the new regulations and the risk they present and decided to mitigate the risk by not engaging contractors anymore.
⇒ Most remaining clients refused to take IR35 risk and intend to force contractors to be ‘inside IR35’ from 6/4/2021. This option is not without its disadvantages:
⇒ Many contractors will refuse to work inside IR35 and will leave – causing disruption to projects and on-going work.
⇒ Fewer contractors in the market means clients find that they have to offer higher rates, to attract remaining contractors and to share the pain of the additional tax burden. The new bottom line is: clients pay more and contractors get less. Lose-lose situation to all.
⇒ Consequently, demand is reduced and supply is reduced. The contract market has shrunk to a fraction of its previous size. According to some surveys conducted recently, as many as 25% of contractors intend to leave the market. Good contractors were always in short supply. The impact of this could be devastating.
But … annual resource plans have peaks and troughs … clients still need a flexible workforce! Which raises the question – how can clients get all the flexible workforce they want without using contractors or facing IR35 risk exposure?
The answer is simple: IR35 only applies to PSCs (Personal Service Companies). Typically one-man-bands where the contractor is also a director and has no other employees. Clients could use small consultancies instead of PSCs to get access to flexible workforce. But (I hear you say), but, we don’t like consultancies! Because:
1. Day rates are typically much higher than those of contractors.
2. It is hard to control consultancies. Their reputation is a mixed bag at best. They know ‘all the tricks in the book’. They only care about entrenching themselves with the clients and selling even more expensive consultancy services. They can be very arrogant and try to dictate their ways of working over client existing processes and needs. The more chaos they cause, the more chargeable days they can sell.
3. Consultancies will do all they can to save money, including pushing all the work they can to their back-offices in cheaper outsourcing locations. This is unattractive to clients for various reasons, especially now with the Covid-19 virus crisis, clients would rather have local solutions.
Wouldn’t it be GREAT if a small consultancy, not subject to IR35, were to charge the same rates as contractors did, were attentive to client needs, collaborated with the clients rather than impose, were happy to integrate with client processes, and all its workforce was local?
Kalian Consulting Ltd (KCL) believes it has identified a gap in the market, so we do exactly that. Contact us for an initial discussion about your flexible workforce requirements.