Employers across the UK are unprepared for changes to off-payroll working in the private sector, according to new research from recruitment trade body, the Association of Professional Staffing Companies (APSCo).

Earlier this month, the government published draft legislation to expand IR35 off-payroll working rules to the private sector.

The new rules, which are due to come into effect in April 2020, mean that changes to IR35 legislation, which were introduced in the public sector in April 2017, will be extended to medium and large private sector companies.

From next year, businesses engaging independent workers will become responsible for setting the tax status of these individuals. As part of this reform, the tax liability will also transfer from the contractor to the fee-paying party in the supply chain, which is typically the recruiter or the company that directly engages the individual.

A survey of APSCo’s membership found that fewer than half, or 39%, of the professional recruitment firms polled believe that most of the businesses they work with are aware of the incoming changes. In addition, just 12% said the majority of their clients are actively preparing for the updated legislation.

When asked if the organisations they recruit into are expecting to pay more for contractors after the changes are implemented, 10% said ‘yes’, 21% said ‘no’ with the remaining 69% ‘not sure’. This suggests that many are unaware of the wider potential consequences of the reform.  

Previous research from APSCo following changes to off-payroll working in the public sector found that 45% of professional recruitment companies witnessed the costs of resourcing contractors increasing after the new rules were introduced. Of these, 46% reported that rate rises were in excess of 15%. 

Samantha Hurley, Operations Director at APSCo and Co-Chair of HMRC’s IR35 Forum, commented, “Businesses now have just months to get ready for incoming changes to IR35 legislation but, as this research suggests, it seems that many may be ill-prepared.”

“Companies which haven’t already must urgently review their existing contingent workforces to determine what employment models individuals are working through to understand the extent of personal service company (PSC) contractor usage. They should then work with trusted recruitment partners to discuss which roles are likely to be in scope across different levels, and if individuals with these skills are thin on the ground or easily replaced, so that plans can be put in place to enable them to sustain and grow future workforces effectively.”

For more on IR35, refer to SIA’s report, ‘IR35 Off-Payroll Working Rules: FAQ’.