Don’t rely on a consultancy to solve IR35

There are better ways than hiring a consultancy to solve IR35

June 19, 2024

As a senior leader, you have hopefully been aware of IR35 reforms for some time now. With the delayed 6th April deadline looming, and no IR35 expertise in-house, you may have hired a consultancy to assess your contract workforce.

Most consultancies will aim to help you understand how many contractors you even have working for you at any given time, assess their IR35 status with CEST, and start removing as much risk away from the business as possible.

Most companies Worksome has partnered with over the last 12-months started their IR35 adventure by doing the same. For contracts adjudged to be ‘Inside IR35’, you will have seen some contractors decide to join full time on PAYE. Some will leave. The rest will be pushed onto 3rd party payroll at their recruitment supplier or an umbrella.

What does this mean for your business?

More full time hires!

This feels good, growing your team following a COVID hit in 2020. But is it? Wasn’t there a reason they were contractors in the first place? Will your core team be as large as it once was? It’s clear that the most successful companies are fast to flex, change direction and take on new projects to get ahead of competition. Organisations, such as Google, now see less than 50% permanent headcount - which means they can move with the highs and lows of demand, trends, economic shifts, and regional expansions.

Ask yourself: do your permanent staff have the skills needed to compete in the future?

Consultancies will have likely suggested to push risk to 3rd parties

This only ever means one thing. Higher costs to your business. Pushing contractors onto PAYE with an umbrella will see them leave eventually for a fairer way to work - often to startups or a competitor who is treating them fairly. They’ll also experience a cost themselves, with most umbrella companies charging £100 per month. Meanwhile, recruitment suppliers should be hired to find you amazing talent. Not to manage tax. Once this responsibility has been put upon recruitment suppliers, your business will become reliant on 3rd parties to not just find your talent, but manage them. Negotiating fees and reducing costs in the long term will become very difficult. Did you know? Worksome has seen recruitment supplier fees drop to as low as 10-12% over the past 12 months, as companies ask their Preferred Suppliers to simply find talent - and not rely on them to payroll their workers. Recruiters carry less risk, have less compliance to adhere to, and can do what they do best! Did you know? 80% less time is spent managing the end-to-end hiring, onboarding and payment process with Worksome. This resulted in 50 days of time saved throughout 2020 for one UK company.

No long-term plan for new hires

You can continue to advertise full time or Fixed Term roles, and struggle to find the best talent. This is often the case in new skills, particularly in tech. Any new hires will go through an arduous process as you manage CEST determinations or push them onto payroll with 3rd parties. The whole hiring process continues to be manual, wasting hours of time across hiring teams, HR, and Finance. We’ve even seen companies attempting to ‘green light’ every contract hire with approval from a Company Secretary or Head of Tax. None of this is sustainable for a business truly wishing to compete in the next 5 years. Did you know? 80% less time is spent managing the end-to-end hiring, onboarding and payment process with Worksome. This resulted in 50 days of time saved throughout 2020 for one UK company.

And data to show for it.

The consultancy will come and go, leaving behind a long invoice detailing their billable hours. Your contractors are now either on the payroll and looking for their next gig, or being paid by a 3rd party. The terms were reviewed in the audit, but you have no guarantee that compliance and tax is being properly managed. Worst of all, there’s no visibility of anything. No data. Your business has become less competitive, and you have no way of gleaning insight into how to improve.

As a senior leader, you still have time to take control. April 6th will come and go, just like the consultancy. Your business has time to get a scalable, better and cheaper long term solution in place to manage your contractors and suppliers.

Now is the time to consider your contract hiring workflow — is IR35 going to be yet another process slowing down key hires and restricting your plans?

I imagine your consultancy won’t have told you this before scoping the project with you.

Why can’t IR35 be a positive for your business?

The very best companies are adopting IR35 for what it is, considering their current workflow, and correctly engaging freelance talent Inside and Outside of IR35. Instead of outsourcing this new headache, use the opportunity to bring your operation into the 21st century. Take away the spreadsheets, countless Right to Work checks, supplier setup forms, reliance on recruiters, and the late payments. Take control of your workflow, your talent pool, and find the very best talent without increasing cost or creating risk. HMRC only believe 1/3 of current contractors should likely be ‘Inside IR35’, so shouldn't require a wholesale change to your current workforce.

Rest assured, Worksome had the same challenge. Our team landed in the UK from our Copenhagen HQ in May 2019. As we pay 1000s of contractors, we asked ourselves the same questions, and soon started to explore the market and review the options too (see our own analysis of options here)The solution we have built solves IR35 headaches, integrating tax compliance into the hiring process, and insures against any mis-classified employees. The platform even saves total cost (instead of increasing it) for our enterprise customers. Today, Worksome helps companies manage talent for the most exciting projects in the world - from social media teams at creative agencies, design teams at the world’s coolest brands, to hardcore IT workers in corporate finance (we are told this can be a fun job too!) - so it was clear we needed to make sure we catered for this area of tax legislation to help all businesses thrive.