Why changes to IR35 rules require smarter onboarding of contractors

 

contractors

Trying to stay on the right side of constantly shifting employment legislation is a challenge that faces all HR leaders.

It’s particularly the case with recent changes to the way that IR35 classification works. This is the ‘intermediaries legislation’ which was first introduced in 2000 to prevent tax avoidance practices via limited company contractors.

In April, 2017 this legislation was revised by HMRC (HM Revenue and Customs) to move the responsibility and liabilities for IR35 status within the public sector from contractors to employers.

The change means many freelancers and contractors who previously operated through PSCs (private service companies) are now treated as employees.

But while contractors and freelance workers have lost tax benefits, they have gained none of the rights that a normal employee can expect to receive - such as paid holidays, pension contributions or sick leave.

Calls for employment privileges

This has triggered increased calls from contractors for greater privileges. This was the finding of a recent survey of more than 1,500 independent workers by Qdos Contractor.

It found that 89 percent of freelancers and contractors want more employment rights when working within the IR35 category. Half of those surveyed wanted paid holidays, nearly a quarter (23 percent) called for pension contributions and 14 percent believed they should receive sick leave.

With the IR35 changes expected to be rolled out to the private sector in 2019, it’s going to be an increasingly contentious area that HR teams will need to keep a close eye on. Compliance requirements require companies have robust employee onboarding systems in place to properly manage contracts and ensure informational clarity.

Onboarding software provides a solution

It’s an area where digital methods of managing onboarding are providing companies with significant advantages. A cloud-based system such as webonboarding automatically generates a complete digital log of all documents that are exchanged with any new hires including contractors.

With contract templates automatically adjusted to match the job role, it provides employers with the tools needed to ensure the status of each individual is clearly defined and documented. The contractor will also get to feel engaged sooner, from the moment the role has been offered.

The importance of correctly identifying the status of contractors was recently highlighted by the case of a former BBC presenter, Christa Ackroyd, whose loss of contractor status meant a £400,000 tax bill.

Webonboarding provides a smarter way to onboard new employees into your business - reducing admin time, boosting efficiency and improving employee engagement: Find out more.

 

Sources:

https://www.peoplemanagement.co.uk/news/articles/contractors-greater-employment-rights-ir35

https://www.contractorcalculator.co.uk/what_is_ir35.aspx

https://www.peoplemanagement.co.uk/news/articles/former-bbc-presenter-unpaid-ir35-tax-hmrc

 

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