Research from the Freelancer & Contractor Services Association (FCSA), shows that plans to put public sector contractors on the payroll as part of HMRC new intermediaries legislation meet with resistance from agencies, end-hirers and contractors.

HMRC’s legislation is due to come into force in April 2017. FCSA research shows that 37% of intermediaries who source or support contractors for public sector roles believe that end-hirers will seek to place their freelancers on agency payrolls, with 23% also suggesting that hirers who source contractors directly will most likely seek to place them on their payroll as temporary workers.  Those contractors being placed on the hirer payroll will be taxed as employees, but will not be entitled to the same statutory benefits as employees despite being taxed as such. Moreover, 26% of intermediaries also reported the likelihood of the workers they source being placed on fixed-term contracts by the client. 

However, the poll also revealed that 34% of intermediaries report that contractors will not accept being payrolled, 38% state that individuals will not accept fixed-term contracts, as they do not want to be employed by the end-hirer. Also - and crucially, for public sector hirers - 29% are aware that contractors will be actively looking for work outside the public sector as a consequence of the proposed changes. 

“Our research has revealed a mismatch in thinking between contractors’ intentions and the options being considered by agencies and public sector hirers,” Julia Kermode, Chief Executive of FCSA, said. “Contractors are simply not going to accept fixed-term contracts or being put on the payroll as temporary workers.  We are already seeing contractors not accepting public sector contracts beyond April 2017 due to the proposed changes.  They are shunning false “employment” engagement mechanisms which contradict the reality - that the hirers’ needs are contingent so contractors’ skills are sought on an as needs basis, therefore employment is a nonsensical solution.”

“The Government seems intent on forcing the entire workforce to be employed which is an incredibly outdated stance and a real concern given the UK’s reliance on the flexible workforce to support the UK economy, and we strongly urge Mrs May and her policy team to ditch these proposals now.  Not only are they impossible to implement but, based on this evidence, will starve them of the very skills they need, and never more so than now as contractors will be key in helping to manage the UK’s exit from the EU,” Kermode said.

“Beyond the private sector is a physical and virtual global world of work that is hungry for the skills that the UK public sector has access to and Government ignores this at their peril.  It is unthinkable that it might be prepared to jeopardise losing this essential workforce. It is a no win situation in an already stretched public sector that relies on temporary workers, and I hope that policymakers will listen to our concerns,” Kermode said.