A third of private sector organisations in the UK who regularly engage non-permanent contractors, including temporary workers, are unaware of the reforms to IR35 legislation due to come into effect in April 2020, according to new research from Hays.

The survey found that 24% of those private sector employers who are aware, are concerned about the reforms.

Over two thirds (68%) of medium and large sized organisations in the private sector believe the biggest risks of IR35 to be potential cost increases, followed by 56% who are concerned about a loss of key talent. Nearly half, or 46%, of private sector employers believe the changes to the legalisation will make it harder to engage non-permanent contractors.

The reforms to IR35 legislation are aimed at tackling perceived tax avoidance by interposing a Personal Service Company, or PSC, to mask what HMRC argue is in fact an employee and employer relationship.

Reforms to IR35 legislation were introduced in April 2017 to the public sector, placing the responsibility of deciding whether a contractor is inside or outside IR35, onto the engager.

The upcoming IR35 legislation will be enforced from April 2020 for medium and large sized organisations in the private sector.

Hays found that 43% of medium and large sized private sector organisations who engage non-permanent contractors have begun preparing for the changes coming into force in April 2020. A fifth said they hadn’t begun preparations and over a third (37%) were unsure.

In addition, 53% of private sector organisations who say they use non-permanent contractors were unsure of the proportion of their temporary workforce who are personal services contractors (PSC).

Simon Winfield, Managing Director of Hays UK & Ireland, commented, “Organisations should begin to address key issues associated with the IR35 reforms to avoid potential risks including increased costs and workloads, as well as a loss of key talent. In a skills-short market, it’s important that employers take these risks seriously to avoid losing talent to other organisations who are better prepared.

“For employers who are already underway with their preparation, changes to the legislation are an opportunity for them to secure better investment in engaging contractors, lower their overall contractor costs and become a destination of choice for top contracting talent,” Winfield said.