Empowering the Freelance Economy

IR35: Contractors lose their independence, now careers finds new report

Contractors are ready to crack after careers and livelihoods shattered by IR35 regulations/Photo Source: Photo by Cup of Couple via Pexels
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Twelve months on Contractors are still considering leaving their profession due to IR35, according to a new survey. The news comes at a time that experts call for a boycott of the Future of Work Review as they predict it could stifle self-employment further

  • Eight out of ten contractors have considered leaving their profession due to the impact of IR35
  • 41% of contractors are still considering leaving the industry a year after IR35 was implemented
  • 70% of contractors surveyed have considered using an umbrella company specifically to avoid IR35
  • Independent project manager contractors feel victimised by recruitment agency blanket bans
  • The latest government Future of Work Review is seen by experts as a ploy for a snap-election

Twelve months on from the implementation of IR35, the UK’s contractors are still considering leaving their professions due to uncertainty concerning the new legislation, a survey of 500 contractors has found.

While eight out of ten contractors originally believed that leaving their profession was the only way to navigate the new legislation, the number of contractors still considering doing so has fallen to 41%, as the upheaval of IR35 has calmed and contractors and businesses have found new ways of working. 

Project managers feel victimised over recruiter blanket bans

That said, project manager contractors that have spoken to The Freelance Informer have revealed they have had little choice since the Off-Payroll rules have been adopted for the private sector but to join umbrella companies. The reason? Engagers are banning any independent contractors that run their own business from even applying via a recruitment agency. As one contractor told their recruitment agency, “That’s discriminatory”.

Cool Company, the payroll company that conducted the survey, 39% of contractors are no longer considering leaving their profession, and 21% say that that was never an option.  And when asked how they would rate their overall experience of the first 12 months of the reformed IR35 legislation, almost two-fifths (37%) said it was positive. Whilst only 20% said they’d had a negative experience. And contractors have been finding different ways to deal with the legislation. 

Whilst 70% of contractors surveyed have considered using an umbrella company specifically to avoid issues with IR35, only whilst 30% have pursued this avenue. And a further 29% have not considered this option. 

Despite this, on average, contractors say that 59.40% of their contracts over the last 12 months have been inside of IR35 – more than before the legislation was introduced. When thinking back to the 2021 reform, most respondents believed that 55.45% of their contracts would have been deemed inside of IR35, on average. 

“IR35 affects working lives”

Kris Simpson, Cool Company’s Head of B2C Business UK, comments: ‘While it is obvious that IR35 is continuing to affect the working lives of contractors and the businesses they serve, it is encouraging to find that the impact hasn’t been as devastating as originally predicted. Although almost half of all contractors are still clearly experiencing a difficult time. 

“Finding new ways to provide their services is the key for contractor success. This might be changing their client base, so that they work only with the smaller businesses not included in the reform. Working with overseas clients, beyond the reach of the legislation. Or finding clients through an umbrella company.”

Simpson said some 980,000 temporary workers were on assignment every day during 2020 – marking the integral part they play in the economy. However, Simmson says more help needs to be given to the 41% of contractors still considering leaving their profession.

Will the Future of Work Review grow or stifle self-employment?

As previously reported by The Freelance Informer, Matt Warman MP will be leading a review into The Future of Work in an effort to form a thriving labour market. The announcement came in the same week that the government chose to omit the employment bill from the Queen’s speech.

Dave Chaplin, CEO of contracting authority ContractorCalculator finds the call for yet another review as just more “lip service” by the Conservative Party.

This is more lip service I fear by a government that continues to ignore the experts who feed in their advice on a regular basis in the hope it will be recognised and help to shape policy for the better. We have seen countless reviews but it’s action that is needed, not more reviews.

“There is general apathy in the market these days to help Government with their reviews. Why should all us experts work for free, providing our expertise, so Government can just ignore us?

Dave Chaplin, CEO, ContractorCalculator

“The Terms of Reference in this latest review look like a dressed-up foregone conclusion to me. Something of this nature should be wide-ranging and take a considerable amount of time but they have a very short period in which to garner evidence. My guess is they have decided a thing needs to be done, and are seeking to gather the views, with an air of legitimacy to make it happen.

“We need action, and we needed an Employment Bill.

Chaplin is placing his bets that the review is simply an information-gathering exercise, to shape some vote-winning policies for a rumoured snap-election.

He continues:

Given the inaction of the Conservatives in this area, experts who still want to make this happen might have more chance of shaping a better future if they start advising the Labour Party, helping them to shape good policies for the next General Election. Labour is more likely to enact something meaningful if they gain power.

“…We’ve seen it all before I fear! The Tories purport to support the hard-working British public but the public are the voters and they are fast losing faith in a government that simply does not put its money where its mouth is.”

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