Empowering the Freelance Economy

Contractors get the chop

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ContractorCalculator urges in a press release for agencies and end-clients to terminate contractor contracts before April

  • When Freelance Informer received the below press release in its Inbox, it was taken aback by the headline, and perhaps even more so by the messenger, ContractorCalculator.
  • The ContractorCalculator press release warned that recruitment agencies and end-clients should consider terminating contractor contracts before April to avoid Off-Payroll-related costs, namely a higher Employer’s National Insurance bill.

A press release encouraging a more favourable, equitable and proactive outcome for contractors surely would have been more welcome by the freelancer community. Especially for those contractors that have been asking for their contracts to more accurately describe their outside IR35 status if they are working on a project that will continue past April.

Many large hiring companies have yet to inform their contractors of their status or how they would like to categorise them. Careless inside IR35 cookie-cutter wording on a contract can often be the culprit of unnecessary conflicts. And just plain messy if the end-client is taking an ad-hoc approach with its freelancers, yet the contract wording suggests otherwise.

Now that the release is out, what can contractors learn from it?

For one, the release’s messaging (as you can read below) is yet another impetus for agency-hired contractors to take over the reins when it comes to their career and financial future.

For some, the possibility of an agency and/or end client cancelling a contract is very scary indeed, especially if there has yet to be a discussion of a renewed contract. For talented individuals to be treated with such carelessness is unprofessional and hurts all parties involved. It also hurts the economy where there are gaps in employment and tax generation.

The Freelance Informer salutes those end-clients and agencies that created fair contract solutions and rates for freelancers over the past year.

More freelance platforms coming to market

The freelancer and workstyle revolution is growing and with that comes the demand for more job platforms. LinkedIn’s upcoming new service called Marketplaces, is aiming to give freelancers and contractors greater choice on how and where they can find and network for future projects.

Marketplaces, for example, which is still in development, will let its 740 million users find and book freelancers, pitting it against publicly traded firms such as Upwork and Fiverr, according to two people with direct knowledge of the matter, The Information has reported.

Be sure to keep an eye on our Who’s Hiring section for company hiring news and business sectors that are scaling up.

The ContractorCalculator press release:

Ill-prepared firms may need to let their contractors go says contracting expert ahead of Off-Payroll deadline

With the Off-Payroll legislation due to hit the private sector in just a matter of weeks, Dave Chaplin, CEO of contracting authority ContractorCalculator and IR35 Shield says any firm yet to conduct an IR35 status assessment on its contingent workforce may need to consider terminating its contracts to avoid considerable financial risk until due processes are put in place.

60,000 businesses, 20,000 agencies and 500,000 are set to be impacted by the new tax rules and Chaplin spells out the risks for those firms that are not ready:

  • Any contract which overlaps and continues after April 6th, for which the client hands an “inside IR35” assessment to the agency, will generate a considerable extra unplanned cost for the agency. The agency will incur 13.8% Employers’ NI on top of the contract rate, which they will have to fund because it cannot be lawfully deducted from the contract rate.
  • For the client, if the contractor is “inside IR35” and they have not passed the determination to the agency, then they are the “fee-payer”, and worse for them, due to an inherent legislative flaw, the money passed to the agency must be treated as employment income, which means a new Employers’ NI bill of 13.8% on top.
  • For contractors who are “outside IR35”, the issue does not arise.

Commenting, Dave Chaplin said: “Regrettably it’s termination time for any hirer that is not ready for IR35 Judgement Day on April 6th – let your contractors go, get your strategy in place and start assessing your contractors again under the new rules and with new contracts.   If you don’t, you will have a mess on your hands and significant additional costs to bear too. 

“The message is clear – wave hasta la vista to your contractors and hope that they’ll be back, once you’ve assessed them correctly.”


Be prepared to ask for what you need

If agencies and end-clients actually act on the above press release’s suggestions, contractors should be prepared to ask their agencies right now (don’t put it off) for a revised contract so as not to disrupt ongoing work.

However, if neither your agency nor end-client show any signs of changing your existing contract, which you should have combed through yourself, then you could just sit tight and let them handle the additional NI bills. How you want to play out that scenario is completely up to you.

In the meantime, reach out to IR35 and Off-Payroll experts such as Bauer & Cottrell or Qdos to create a contract that you would like to use for existing clients or future projects. However, it may be worth asking them to look at your existing contracts to see if they are outside IR35, which could save you time and money.

Think and act like a business, not a worker

It would be wise to start actively looking for outside IR35 Off-Payroll opportunities by contacting potential hiring companies directly as a small business would.

Interim management may also be an area to consider if you have a considerable amount of project experience. Tony Barker is a great person to follow on LinkedIn for Interim Manager topics. Check out his portfolio here for inspiration to showcase your own work.

Having a recruitment agency on your side can take the job search ‘pain point’ away, but if certain agencies are not working for you then you may need to consider changing your agency once your contract has completed or sooner than you think – gets terminated.

Smaller companies that are scaling up could also be an option for you. You can read about these companies in our Startups section alongside the venture capital and tech press: Sifted, Techcrunch, Pitchbook, Axios, etc.

With so much uncertainty surrounding the jobs market, updating your portfolio and networking skills could be your best plan of attack.

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