Demystifying IR35 part 2

It’s been over a year since I interviewed Michael Cleavely from CoComply on Demystifying IR35. When we released the original interview, there was a lot of confusion on what was going to happen with the UK’s IR35 legislation. Liz Truss released a budget which included IR35 changes, then reneged on it and then left government.

I thought it was time for a follow up interview with Michael to see how it was all going.

Q: What a difference a year makes. HMRC has stepped up its IR35 campaign. A lot of organisations have been fined due to mis-classification, and recently, the Labour Party has been elected to power.

Maybe, I should start with the first question I asked last time. What just happened?

Michael: A lot is happening behind the scenes! Over the past year, the landscape of worker classification and compliance has seen significant developments. In the UK, IR35 has been a central issue. As you mentioned, Liz Truss initially proposed changes in her budget, only to later retract them before leaving the government.

Meanwhile, HMRC has intensified its IR35 campaign, leading to several private organisations being fined for mis-classification. Many have managed to avoid hitting the press. This period also saw the Labour Party elected to power, bringing potential shifts in policy focus.

In the US, the Department of Labor has proposed new rules to make it more challenging for companies to classify workers as independent contractors, aligning with the EU’s new Directive on gig worker platforms, aimed at improving gig workers' rights and working conditions. These global trends reflect a broader movement towards ensuring better protections and benefits for all workers. However, this has caused controversy, and with the US election battle in full swing, it remains to be seen if there will be changes to the rules again within the next six months.

As remote working continues to remain steady, opportunities are open for hiring in international markets, and managing classification across different jurisdictions becomes a more prominent issue.

Q: Do you have any IR35 predictions with the change in Government?

Michael: We can anticipate a more rigorous approach to enforcing IR35 regulations. Labour has historically been more inclined towards protecting workers' rights, which suggests that there may be further tightening of IR35 rules and increased scrutiny of compliance. This could lead to more stringent enforcement actions by HMRC, with a greater emphasis on ensuring that organisations correctly classify their workers to avoid mis-classification penalties.

Businesses should prepare for these potential changes by reviewing their current practices and seeking expert guidance to ensure compliance. It remains critical that genuine independent contractors are classified and treated as such, as according to the IPSE, 56% of highly skilled contractors say they will never work on payroll.

Q: What are your clients' current biggest concerns in relation to compliance?

Michael: A common theme is the process of identifying, classifying, and monitoring indirect contractors as well as direct ones. In-directs pose a hidden compliance risk, but also mean that an organisation may be paying inflated fees and lacking visibility of its supply chain workforce.

It is important to realise the scrutiny on supply chain compliance is only increasing, driven by both internal stakeholders such as finance but also regulatory bodies.

Contingent Worker programmes now need to make worker classification central to their thinking, and we are seeing that more and more.? The leading MSPs (Managed Service Providers) are identifying it as central to strategy, an important and notable shift.

Not doing so raises costs significantly while increasing risk and reducing access to talent. The solutions are out there now, so there are no excuses.

There is also a growing concern about staying abreast of global regulatory changes, such as those in the US and EU, which may influence UK policies and practices.

Q: What is CoComply's current biggest focus for clients?

Michael: Discover, classify, monitor. We believe in this so much, we’ve developed a powerful tool that will help our clients support quicker engagements, guide them through classification with a certification of result and proactively monitor to ensure workers do not fall out of the correct classification. We received an Innovate UK Award earlier this year which is a testament to our current capabilities but also supports our huge ambition to solve Customer Classification in the UK, and beyond.

We are continuously improving every aspect of our service, improving reporting, multi-jurisdictional roll-out, with user experience within the forefront of our minds. We are also taking the time to educate our clients about the broader trends in worker classification, such as the new US Department of Labor rules and the EU Directive on gig worker platforms, to ensure they are all prepared for what ever comes in relation to legislation and regulatory compliance.

Over the last couple of years, there have been a few organisations I have been keeping a close eye on. CoComply is one of them.

Big issues we see organisations struggling with globally is visibility of all their workers and ensuring they are compliant with local legislation.

I love how CoComply are providing a solution focused on external worker compliance - local guidance on legislation, check & certify compliance, check back in to ensure nothing has changed in that worker engagement, to stay compliant. Specifically a call out for the UK, if you don't have an internal IR35 team, CoComply could be your answer

Now with their new product, their proactive thinking of how they can support organisations, speeding up the compliance checks using a SAAS solution (humans and AI working together), I believe it is a game changer.

"If you think compliance is expensive, try non-compliance" Former U.S. Deputy Attorney General Paul McNutty