How has the pandemic benefited contractors with IR35?

It would be an understatement to suggest that 2020 and 2021 were terrible years for private sector contract workers in the UK.

First came the pandemic and the inevitable pausing or cancelling of many programmes of work; then came IR35 to really kick the specialist interim workforce whilst they were down.

As a result, organisations were plunged into an unknown world of adapting to remote or hybrid working for their employees and contractor workforce.

This blog is not going to explore the pros and cons of remote work (spend 2 minutes on LinkedIn and you will find at least 5 examples of that).

Instead, we are going to accept that hybrid/remote work is being adopted by organisations and examine the potential knock-on effect of this when it comes to a shift to outcome-based work.

In turn, we look at how that relates to IR35 and the potential opportunity it presents contractors.

Last week, I discussed challenges with a new client around the management of their current interim workforce (both independent contractors and consultancy providers). Specifically, in the new age world of hybrid/remote working, they felt they had no control on the work being conducted by their interim workforce which led to uncertainty on whether they were getting value for money. ?

This led to a discussion on structuring work packages to be delivered on a deliverables basis as opposed to the way contractors have typically engaged (purely 'Time and Materials' based contracts).

In other words, contractors moving to a model where they are paid for delivering a series of deliverables as opposed to being paid for the amount of time they clock up.

It was deemed beneficial to the client to shift to this way of working as it puts more accountability on the contractor to deliver benefit, without needing to outsource projects to costly traditional consultancies.

Whilst this is clearly beneficial to the client, how does this help contractors??

Simply put, by taking on accountability of deliverables as opposed to being paid for logging-on or turning up to the office for 8 hours a day, contractors are significantly more likely to have their engagements deemed as outside of IR35. This is because it reflects more of a Business-to-Business relationship with their client as opposed to that of an employee (who are paid regardless of what is delivered).

So how has the pandemic helped contractors through IR35?

Pandemic = Quicker Adoption of Flexible Working.

Flexible Working = Greater desire to move to Output Engagement Model

Output Based Engagement Model = More likely to be deemed outside of IR35.

Operating in this way, whilst usually safely outside IR35, does involve an obvious level of delivery risk to the contractor. Therefore, it is imperative that the following is in place prior to the start of any engagement such as this:

1. A well defined scope of SOW deliverables in place
2. A governance / change control approach agreed with the client to manage change effectively
3. Clearly defined payment milestones related to deliverables
4. Ensure dependencies are logged and agreed with the client prior to starting
5. Regular dialogue / feedback loops agreed with the client

In most cases, operating through a strong consultancy partner who will take care of these factors for you and work with the client, will ensure all of the above requirements prior to and during the engagement are met.

To find out how Forbes Project Solutions, A Korn Ferry Company are supporting clients within exactly this, get in touch with Client Services Director?Tom Dobson today!