After a very turbulent 18 months through the changes brought about by a number of things including IR35 and Covid 19, I sat down with Andrew Chamberlain, Director of Policy at The Association of Independent Professionals and the Self-Employed, to discuss how the contract world has adapted and the changes the last 18 months has brought.
How has IR35 affected the contract market since the final rollout earlier in the year?
It has impacted the market very significantly, although it impacts some sectors more than others. Many big hirers in the financial services sector took the view they would not work with limited company contractors at all and insisted all go through an umbrella company. This meant they didn’t have to test IR35 status but it also resulted in skilled workers leaving in the middle of projects creating a huge resourcing problem. Contractors who stayed on regardless faced a significant drop in their take-home-pay, some have been able to negotiate an increase in their day rates, others have had to accept the hit.
In other sectors, organisations have taken different approaches to compliance. Some have been slow to act at all, possibly hoping the whole thing might go away. HRMC are now beginning to do more compliance activity so they would be wise to urgently address this problem.
Some clients have ‘blanket assessed’ all their engagements as ‘inside IR35’, hoping this would minimise any risk of investigation from HMRC. There are two potential pitfalls here – contractors feel cheated and leave; and HMRC may still be unimpressed because those clients have failed to take ‘reasonable care’ as the legislation requires.
Many clients have done their best to make accurate determinations but they are dealing with very complex case law so it is highly unlikely they’ve got it right in every instance, despite their efforts.
Overall there has been a huge increase in the number of ‘inside IR35’ roles which has restricted the market and forced contractors to close their limited companies, go into permanent employment, work via umbrella companies or stop working altogether. It’s not all bad though. There’s still quite a lot of ‘outside IR35’ work available, just not as much as there was previously.
How has the pandemic impacted the contracting landscape? Are we seeing more contractors move over to permanent contracts?
The pandemic had a huge impact on contractors. There was about 5.1mil self- employed, and now there is around 4.4mil. One of the problems was that Directors were not eligible for the Self-Employed Income Support Scheme (SEISS), and furlough did not support those who paid themselves in dividends. There was a big drop off in the work opportunities for people which saw their turnover fall off a cliff edge. Some of these people may have retired earlier than planned, or gone into permanent roles.
However a lot of the self-employed have survived. We know from our confidence index that confidence has been shooting up in the last two quarters, and we are on the path to recovery.
Has the pandemic revolutionized the recruitment process?
Well, we have hired over this period, and the process has moved fairly seamlessly onto the digital platform. We have all adapted to Zoom interviews very well.
Top tip for delivering an excellent interview virtually?
As an interviewer, you have a duty to be well prepared before the interview, and if you have a colleague joining you then you need to agree on set questions you will ask all candidates, which relates to all interviews.
The way you present yourself in a virtual interview is perhaps more important now, so ensure you dress smartly. When you are staring into a Zoom link, it can make some people feel more nervous, but for others it is easier than walking into a room, and the interviewer should bear that in mind. It is also important to look into the camera.
I think the self-employed were at the forefront of adapting to this technology as they are used to working with different clients and remotely, so they had adopted this way of working and interviewing before Covid.
As we move out of the pandemic, will you continue orchestrating interviews virtually or will you try to meet candidates in person?
I will be inclined to make a greater use of virtual platforms, but it will be on a hybrid basis with the final interview likely to be held in person.
For what reasons do you typically hire contractors?
In some cases you are more likely to find the specialist skills you need amongst freelancers. An increasing number of highly skilled professionals are asking themselves “why would I want a boss when I can work for myself and pick and choose my projects”? So sometimes you need to hire people on a freelance basis simply because the best people are freelancers. Sometimes it is because the client needs someone more temporary or short term.
We are lucky to have people who work in this way in the UK, because it is good for our flexible labour market, and very good for business.
Any general advice for candidates looking to move into contracting?
My general advice would be “if you want to do this, go for it”. Finding your first client and getting your first contract is key, then you can go from there.
Have a think about what corporate form you want to take as this will impact how you get paid. I would say you need to talk to an accountant from the outset. As a contractor you need to deal with tax, so if you’re unsure get an accountant to help you deal with it upfront. There are lots of people out there who can help you.
Over the past year have you seen day rates go up or down?
We have largely seen day rates going down, but as we all know from the news, inflation is going up so it is possible that day rates now will be going up again.
If you want your day rate to go up, you need to market yourself appropriately and if your skills are needed your rate will go up.
And finally, what top things do you look for when hiring a contractor?
- Experience
- Professionalism
- Skill
- Availability!
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