Why IR35 isn’t the end of the contract workforce in manufacturing and logistics

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By Kris Simpson, Head of UK B2C, Cool Company.

The implementation of IR35 has not been without its problems for businesses. In the logistics industry, the HGV driver shortage has been much publicised. And elsewhere, there has been a knee-jerk reaction, calling a halt to all contractual work, for fear of a breach of legislation.

Anyone who had previously relied upon contractors has found themselves needing to rethink their business model. Which has inevitably engendered excess cost and time.

But while disruption is a predictable part of any legislation change, IR35 doesn’t necessarily spell the end of the contract workforce. Businesses can still benefit from contract workers’ skills just as simply. It’s just a case of finding a compliant approach.

Why is IR35 causing such problems for businesses?

When you come down to it, the main issue that IR35 brings up for employers is related to admin and risk. For those continuing to work with contractors, there is the new burden of proving that contract workers are genuinely that, and not employees in disguise. While for the businesses taking the decision to move all contract workers onto a PAYE system, there is the expense and time of onboarding and offboarding new team members. And for many businesses this will be the first time that they have operated in this way, meaning that dedicating more resources to payroll and HR personnel will need to happen. The expense can easily snowball as the administrative tasks add up.

The alternative is simply to do without the talent of contractors. But that has the knock-on effect of limiting a business’ ability to scale. Their flexibility to serve their customers. And their inherent capacity for growth. And that’s where umbrella companies have stepped in to close the gap.

How can umbrella companies help businesses to manage IR35 disruption?

Umbrella companies are essentially employment solutions for contractors. Acting as the intermediaries between the contractor and the businesses that need their services, umbrella companies take care of the legal requirements relating to the onboarding of a contract workforce. The umbrella company will manage payroll, HR, worker rights, contracts, and all other administrative aspects. Enabling businesses to return to a fuss-free contractor working relationship, while the contractors gain the benefits of an employee, retain their autonomy, and ability to pick and choose their clients.

The one area that umbrella companies can’t help businesses with, is increasing the contractors' pay. In logistics, in particular, many of the contractors previously employed on a contract basis have moved on elsewhere seeking work with the highest earning potential since the implementation of IR35. Meaning that the major challenge now, is finding the right people to work with your company.

How can businesses attract contractors back to their business?

Right now, demand is so high in most sectors that contractors can pick and choose their clients. To stand out, your business needs to develop a reputation for fairness and professionalism. 

More than anything else, contract workers are looking for clients that treat them with respect, as valued members of their team. This means offering a fair rate of pay. Clearing invoices promptly (something an umbrella company can help you with). And acknowledging a good job well done. Briefs, where relevant, should be clear and concise, with any necessary resources provided. And the contractor should be treated with courtesy and professionalism at all times.

In building a good relationship with your contract workers, you’re more likely to retain them. And to tempt them back when you need them, should their services not be required on a regular basis.

IR35 has caused disruption. It hasn’t been easy for any business to get through. And most businesses that have made use of the freelance marketplace have had to seek legal advice to ensure that they are working to the requisite standards. But if you can’t afford that significant infrastructural change that means removing contractors  from your business, HMRC-approved umbrella companies could provide the solution. 

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