IR35: The Big Recruitment Standoff of 2020With the clock ticking towards the IR35 deadline, it is gearing up to be an interesting quarter, especially from Sean Young's personal perspective as an Associate Director on Parallel's permanent recruitment team.
With the clock ticking towards the IR35 deadline, it is gearing up to be an interesting quarter, especially from my personal perspective as an Associate Director at Parallel focusing on Permanent recruitment services throughout the UK and EU. So far, it has been interesting to hear what our clients have to say about their hiring plans for this year...
The best phrase I have heard yet to sum up the current situation is: “we are in a Mexican standoff”.
Clients really want their excellent, highly skilled freelancers to take internal Permanent roles. This would be a huge win for clients who would be able to retain the freelancers that they employ who tend to have many years of specialised experience. Also, and let’s not be shy, clients would save themselves a lot of money when those day rates become annual salaries.
From the freelancers’ side, IR35 poses a difficult scenario for many. There are good, secure and well-paying roles on offer at good companies. All those IR35 headaches would just disappear if they simply accepted the permanent salary; however, that permanent salary is the main problem. Even though the salary package is loaded with great incentives (such as healthcare, sick pay, pension or a bonus), even in good course, it still does not quantify to the amount received from the freelancer rates previously on offer.
On top of that, when you are a freelancer, there is an added attractive element of project-based work. As a freelancer you can move from one new project to the next, which is complemented by a “get in/get out, avoid office politics and move to the next project” mentality. I get the feeling that there is a forlorn hope of a way out or a solution to this issue, but aside from the “Umbrella solution” (which isn’t attractive to many experienced freelancers), there doesn’t seem to be a resolution that satisfies both the client and the freelancer.
Until clients have settled on a solution confirming the status of freelancers, they cannot and will not start the hiring process for those roles that freelancers currently occupy.
Let us also not forget HMRC, the third dominant party in this standoff. A party which doesn’t seem to be standing down any time soon. IR35 is inevitable and it will be implemented on April 1st, 2020.
So, where does this IR35 standoff leave “the market”? Well, demand continues to remain high, a fact unchanged by IR35. However, until clients have settled on a solution confirming the status of freelancers, they cannot and will not start the hiring process for those roles that freelancers currently occupy. Whether they plan to change the status of these roles to permanent roles or if they will “umbrella” for their freelancers has yet to be confirmed. What we can expect is something comparable to an avalanche in demand for these skilled workers come March.
There seems to be two adopted approaches to navigating the challenges IR35 has thrown up, although I have my concerns regarding how effective either will be:
1. Clients offering fixed term contract salaried positions for 6-12 months. These are the least attractive roles in the market. With an abundance of permanent roles, why would any highly skilled candidate take a six-month fixed term contract role versus a permanent position for the same monthly salary?
2. Freelance candidates are asking for their daily rate to be multiplied by the amount of days worked and using this figure as an expected yearly salary. Often the main reason freelancers can charge a daily rate above that of their permanent counterparts is down to the nature of the work being specialist and therefore only required for a period of time. Not two, three or four years.
With the deadline drawing ever closer, a resolution for both client and freelancer is needed fast!
Keen to get the thoughts of anyone in a similar situation? Get in touch with me to have a confidential chat about how IR35 will impact your team’s hiring plans or your job after it is implemented in April.
+44 (0) 20 3326 4117