Part qualified recruitment market unaffected by IR35

If you have been living under a rock over the last few years, you might have managed to avoid the term IR35. IR35 is the name given to tax legislation in the Income Tax (Earnings and Pensions) Act 2003. It’s legislation created by the government to reduce tax evasion amongst non-permanent workers on self-employed contracts. They are often referred to as disguised employees who are doing the same work as permanent employees, however under their own company to enable them to claim the same tax efficiencies of a business. 

Considering the many areas that IR35 has had a direct impact on the market - from limited contractors to companies changing their recruitment policies - it has not had a significant effect on the part qualified and transactional level so far.

Why hasn't IR35 had a wide-reaching impact?

• Traditionally part qualified accountants haven’t used personal limited company payment structures as there were only marginal benefits on offer to them for doing so. Instead, the majority of these candidates have been paid through daily/hourly rates via PAYE basis or umbrella companies, so IR35 has had little effect on their take-home income.
• Generally, part qualified accountants tend to get paid a premium for performing contract roles, so they’re still in a strong position and normally provided with enough of an incentive to elect for contract roles over permanent opportunities through the added benefits.
• Organisations still have a strong need for flexible resources to cover many different situations that occur, such as maternity covers, illness, projects and many other uncertain situations that present themselves from time to time.
• Many companies have a preference to outsource payroll for contractors rather than dealing with it themselves and therefore elect to hire candidates on daily/hourly rates, as the agencies will take responsibility for the admin and all other areas that come with that coverage.

However, some organisations do not fully understand the rules around contracting, and the after-effect of IR35 has led to some companies taking a blanket approach to recruitment and deciding to recruit roles on a fixed-term contract basis instead.

As an experienced part qualified recruitment consultant here at Marks Sattin, I predict that in the long term, competition for talent will dictate the market and lead any companies taking this blanket approach down the route of using temporary workers again. Otherwise, they will risk not accessing the best temp professionals with the right skills and experience for their business at the time when they need it most.

Find out more about the impact IR35

You can read our previously published article here on how IR35 will impact contractors and employers. If you would like to discuss any of the above from a candidate or client perspective, please don’t hesitate to contact me directly.