Key highlights from the discussion
Impact of IR35 Reforms
The introduction of IR35 reforms has ushered in substantial changes, particularly within the UK space. These reforms have strategically shifted the impact to the end user or enterprise client, exerting influence across the entire chain of engagement. Larger businesses found themselves with more flexibility, navigating the reforms with relative ease. In contrast, mid-sized enterprises faced the challenge of striking a delicate balance between maintaining competitiveness and addressing compliance concerns in this altered landscape.
Challenges Faced During IR35 Implementation
The implementation of IR35 posed notable challenges for legal and compliance professionals who had to interpret and adapt to the evolving regulations. Crafting contracts for both inside and outside IR35 became a complex undertaking, demanding extensive communication and education efforts to ensure clarity. The sudden imperative to determine employment status introduced uncertainty and challenges into the process, further complicating the landscape for organisations navigating these regulatory changes.
Workarounds and Strategies
In navigating the challenges posed by IR35, various workarounds and strategies emerged. Some attempted to use statements of work to alter the end user's designation, seeking a shift in the dynamics. However, relying on blanket determinations and accountants' opinions proved to be common misconceptions, highlighting the necessity for active client involvement in the determination process. Despite these challenges, certain organisations, such as Worksome, have stepped forward to provide a platform facilitating proper determinations and enhancing overall compliance in the face of IR35 reforms.
Future Trends and Considerations
Looking ahead, the introduction of upcoming tax offsets is poised to instill confidence for businesses in their engagement of freelancers. In the advertising industry, the anticipation is for a surge in freelancers entering the market, driven by the rise of remote work and potential uncertainties related to AI. Ongoing trends continue to revolve around the digitisation of talent acquisition processes, reflecting the broader shift towards digital platforms. Additionally, the potential impact of EU directives on the gig economy remains a significant consideration for future developments in the freelancing landscape.
Strategies for Talent Acquisition
In the realm of talent acquisition, strategic shifts are evident, moving away from the reliance on perma-lancers to adopting a more diversified network of freelancers. Organisations are increasingly collaborating with freelance communities to expand their talent pool, fostering connections and introductions. Embracing the efficiency of digital platforms has become a key strategy for finding and onboarding freelancers seamlessly, reflecting the contemporary landscape of talent acquisition.
Potential Legislative Changes
Anticipating potential legislative changes, the EU platform workers directive and proposed Labour Party policies may wield influence over gig workers and alter employment classifications. The prospect of streamlining employment statuses from three to two categories raises concerns about unintended consequences, particularly affecting workers positioned just outside the existing classifications. These potential shifts underscore the need for a nuanced and comprehensive approach to legislative changes in the employment landscape.
Evolution of Work Approaches
The discourse around IR35 has catalysed an evolution in work approaches, transitioning from rule-based to project-oriented engagement. Creative organisations, in particular, are leading this shift, departing from traditional linear processes in favour of more flexible and efficient project-based models. In essence, navigating the dynamic landscape of gig work, compliance, and talent acquisition necessitates a commitment to continuous adaptation and collaboration among legal, compliance, and HR professionals. Future trends indicate a more confident engagement with freelancers, buoyed by evolving legislation and the integration of digital platforms.
Read the full transcript:
We have incredible experts in legal and compliance. Still, we talk to some organisations about legal and compliance in the worries around IR35, and the impact is hard. We've heard stories of companies saying they don't engage with the company workers anymore; that's it. Still, then, we have participants in the room. We have two panel here who are driving the strategies around independent contractors and how to engage them correctly especially in the freelance community and I publishing a data point quite recently around the freelance world of work and it's 5.4 trillion in spend Which is absolutely incredible right and then most recently we had the world economic forms starting to talk about digital jobs for kind of moving away from this concept of a gig worker, maybe an Uber driver potentially to perception of people have of the freelance economy and moving more into senior skilled workers highly paid global and flexible right and that one that they gave them is a 73 million individuals right now or in those positions and they expect that to grow in excess of 90,000,000 x 20 30 so the opportunity is significant right the opportunity is massive for us be able to understand how do we access an incredibly talented bunch of individuals but also a bunch of people who expected from us the freelance community and work is coming along right now are actively looking for organisations who can enable them to do the work that they want to do they don't want to work set hours and time anymore, they want to work in deliverables and milestones. How we come together and how we figure this out is critical for success. I think about productivity and the expectations of business leaders, the ones who get the work done, your CEOs; your senior leader is your CMO. They don't worry about it. I don't want to know about the cat in the way of engaging people. What they care about is how we got our bottom line. Are we going to get it done quickly and be able to engage with incredible cools of talent around the world to further introduce our panel? Let them talk; give us a little. You're at your job site, maybe with some experience, and it will have some questions.
Olivia: I'm Head of Talent MullenLowe advertising business, and I've been working in recruitment for a long time, predominantly in the house, but I have some agency experience and sort of freelance hiring. The bulk of work I've done there has been in my current role, so when IR35 came in, I think we all had that excellent relief when it was delayed because of Covid, and then it hit, so yeah, I looking forward to talking to you about how we've handled that.
Russ: good morning. I'm Russ, and I work for another major company called Publicis. I am the Director of Operations, so my teams look after all of the permanent highs and then naturally take on managing the freelancers; significantly, since IR35 was changed, I have a desire to get things compliant.
Fiona: I'm Fiona Coombe, the director of legal regulatory research at SIA. SIA is an international advisory consultancy focusing purely on contingent work for solutions. I am qualified as a solicitor here in the UK and have been involved in the recruitment and staffing industry for about 25 years; I am VP of the contingent. Workforce management work, so very buzzy title had compliance as well. People mostly know me as I have been in contingent work for space providing solutions to workers for 24 years and have seen everything about IR35 since its inception and everything in between.
Colin: First of all, what was your experience at the start of IR35 from a legal and compliance perspective?
Ray: Many years first, and most certainly weren't in a position right now, so I didn't care about it as much. People thought it was a hindrance and were concerned about what impact it would have. One of the things that I remember thinking about is in the Netherlands, they've got a law in place that affects chain law, brings the client into put skins in the game for when IR35 came in, and they said we're going to let the worker effective self determine my point was this isn't going to have any impact whatsoever whoever the client into it and that's interesting is what the reforms effectively did so from my perspective remember, it was annoying.
Fiona: Back in 2000, working as the head of legal services at the recruitment and employment confederation, we had to interpret the law and write contracts for our members to use. I remember writing in our contract and then very quickly being asked to write one for being outside IR35 and one for inside IR35; we spent months and years trying to explain to people that it's not just what's written in the contract didn't always work that way.
Fiona: Just under changes, so when the regulation changes, I think that was what impacted everybody in the room to place liability with the client from your perspective on the roles you were in at the time what over the impact you were seeing a lot of around, sudden having to do the exercise of determining whether somebody was an employee or self-employed, and a lot of uncertainty really because it is an uncertain process.
Ray: It was game-changing from the UK space, and it suddenly meant that whoever the user was, the enterprise client had so much of an impact on what happened with that, and everybody, depending on where you were within that chain, really meant or the size of your business your top tier ones were just, but we're big enough to be able to say no to today's workers so that's the way we're going to be the ones down the bottom small so it doesn't bother the ones in the middle is it hit that win okay, we have care about it, but we have to be competitive we can't necessarily shut everybody out, and it was that that hit and it was a real absolute game-changing
Colin: What was it like for you when IR35 was implemented?
Russ: The clear thing about it was the changes to IR35 were quite public. There's a lot spoken about it, and I'll be honest about my time, saying this isn't a new legislation, isn't regulations, just a change. It has always existed in place. It's just now us, as all the feeders are, liable so so around control for me and make sure we know what we're doing before the changes always be the drama around make sure we should contract so that when we had freelances of workers coming into our workplace that they were a sign of a bit of paper and not a bit of worker make sure they got paid so much my energy will finance surround this lances coming in. If we are issuing them anything we need to catch things, needs to sign his terms around our house to avoid us as a business then the other IR35 changes come in. We like, oh wow, we are liable now, so conversation is getting controlled and finding those freelancers we're unaware of the Hidden.
Colin to Liv: What are the workarounds, and how did you get creative around engaging with workarounds at this time?
Liv: I don't know if we really found any workaround as such. There was a lot of natural pushback from hiring managers in the business. Well, we never had to do this before, and I used to work at X Company six months ago. They didn't interpret it like that cause that's the key thing: different industries and businesses are probably interpreted quite differently in some senses. They should've been quite a fool with them. Many people just want to hire soul traders or say, well, actually, but if we hire this person in this country, then IR35 doesn't apply. Still, then that opens a whole new can of worms around, right to work all of that kind of stuff, so I think it's just about for us it was about standing firm and having a platform like Worksome in place where we could do proper determinations just to make sure that we keep things on track and ultimately that we are a lot more organised in how we're contracting and making sure we're a lot more compliant because the way we engaged with talent before was probably quite lazy.
Colin: But you didn't stop right? You continued to engage. It wasn't like, I think, the blanket determinations that some companies had, which was like, we're scared of this. We don't know what's happening.
Liv: The advertising industry will always rely on the freelance community. Tate is the nature of what we do. We are a client-focused business project work with the best in the world, brief and never going to land in a way where you know you're not going to have to pull freelancers into delivering a project, so it's about being more innovative. How we work with freelancers and make sure that we properly understand the rules and rags and those changes, but it's never going to have an impact on you; it's only going to have an impact on you, only need for freelancers.
Colin: For yourself, Russ, how do you guys think about the war that freelancers do in it? How do you help the business determine when they can use it freely?
Russ: Yeah, probably previous as well because the previous organisation worked with with the blanket, Ben, finance act, so heavily reliance on the finance, people, organisation, and early days in the meetings, because especially skills there are special roles which only the freelance market office and I sold someone to a 200 a year, therefore, more expensive so a lot of the work, I think the places out there is no in the freelance workers have a specific skill set that we definitely need in the business and the real problems or things to catch the people who come in for short term work or contingent work who should be employees and make sure that we are hiring our contingent workers who truly are and who aren't who maybe should be on the contract because the conversation around us surround it and that's because a lot of freelances are hired, and maybe noncompliances should be freelances I've never worked in the business which doesn't work
Colin: I'm going to ask Ray a question. They're going to get a little technical, but we need to understand more about what's happening within IR35 legislation to last rate around workaround, what the work you've seen attempted, and why they won't work.
Ray: There's lots of workaround I've seen attempted there. Probably the easiest one is top of the tree, for everyone is a statement of work which ultimately you're trying to shift who is considered the end user of that worker because if they end up a small business, then the IR35 reforms don't count and therefore the worker consult to determine whether the inside or outside, so moving the risk away from the client let the actual client the problem is with that is the term statement of work gets people to believe if I write this in a contract then I'm okay it's not it goes back and work is very much. The sort of thing you've organised with a big company, you've got deliverables, you've got about some money that's going to be associated with those deliverables, all of these things, but it doesn't work, it's difficult to work when you're working. With an individual worker to say that that's at work and then what you're actually really technical you're actually gotta argue or test whether it's a supply of labor, doesn't matter how you dress it up go on for years wants to know or can't sleep at night then I'll give you some stuff you can work with.
Ray: Around the new tax offset and the impact on how to leverage independent contractors can help us understand a little bit more again because you're very much in the realms of accountants now, which I have to be boring as well what you are effectively doing control of all of the revenue that's being put in it comes from the worker in the limited company, where it comes from the client and as employment taxes, but they have them in separate pots and ultimately what the changes coming in April that we're going to break down the barriers of those pots and be able to see if some if there's money come from one angle, we can offset that against the charge against the other angle That seems sensible but sensible generally don't come together, but finally seen the light of day that's what they're doing, which makes a big difference because we previously because they didn't gel those pots. The end-user was liable for whatever employment costs were imposed against an inside IRA worker, regardless of what taxes have been paid with, regardless of what taxes may not have been paid already by everybody. I'll finish doing this change. It means that the potential or cost or associated charges of working with somebody misclassified as inside has decreased by 70%. That's the biggest part that this will make, so whatever risk you had in your head, whatever value you had is working with someone else misclassified is that down value by 70%, give or take, but that's where you can go with.
Colin: It's a significant drop, right, Fiona? What I mean is think about this: if you want to continue on also, what strategies do you think you can use to find this talent as well?
Fiona: There's nothing that companies physically need to do HRC do the work in background to work out which taxes already been paid by the contractor but it is that risk profile isn't that that's key for for client understand now that the liability is not as great as it would've been Prior to this change coming up in April in terms of strategies for for finding talents in one of the things that that the changes in 2017 and 2021 pushed a lot of people into using umbrella companies and rather than a blanket determination not to use three Ankit was we will use freelancers but they have to go through an umbrella company I've been there are issues with umbrella companies and there are many out there do very good job but also take risks and there's a new law coming in a new criminal event coming in in April which will if it is a type of tax arrangement is considered to be tax avoidance by HLS they will issue a stop notice and if that company or anyone within the supply chain, I suspect Continues to promote that then they will be guilty and offence so they're there. The government is taking measures to try and crack down on some of these issues, but there's still the opportunity to use if talent wants to go through an umbrella company.
I think one of the challenges we have is not necessarily internally with hiring managers, but with the individual and some cases that individuals have taken recently talk a little bit about some of the more cases that we've had but also one worked in HR, but it worked the business uncontent work for so my role is a workforce HR business partner Arguments legal team, primarily who use our source legal services was both the definition between a solicitor and a barrister and the reason was it was it was in the context of IR35 and was more about a general expert and a specific expert and trying to help them understand that the way we got to it was well solicitors like a general practitioner incredibly talented, well, educated and amazing individual what they do expertise is a surgeon nation, diaries of expertise and what they do and it was the only way we could kinda get to an impulse cause sometimes I think it's not necessarily, but all the right intent within the organisation of what we're trying to do sometimes the pushback is from the talent right as the talent commands a certain price, certain level of expertise or certain role within the organisation and try to force it through so any thoughts on that?
Ray: the best line I always get here all the time is my accountant says I'm outside IR35. I love it. It's nothing to do with the accountant. Of course, they've got not put any money on the table for this, so it doesn't matter what their accountant says, and that's where we politely have to say, great, it's actually to do with the client who's taking us to we're working for the client. Still, you talk about celebrities, which is another one that always gets thrown at me. We're working with somebody, and they're a big name on whatever is irrelevant. Again, it doesn't matter. They're a big name, and how they work and operate matters. There are lots of cases that have gone through the UK recently on big names. Ultimately, one of the big parts that came out on that is they are operating in business on their own, and that the biggest one that came out recently was Kay Adam, who had her own brand and a lot of that sort of thing, It was it's against Phil Thompson the football presenter on sky who gets a prominent footballer. Everybody knows him on the street. I'm sure he has many photos taken, but they sat back and said he doesn't have his own brand. He's not in business on his own account. He's just a guy sports present, so at that point, he's employed, and that's the thing it doesn't matter about the personality. The character of what it is is, again, the conditions. However, everybody's operating, and that doesn't matter if you know a little tech consultant or if you are someone who is on mainstream TV who does the same to apply across the board.
Colin: What is ahead in 2024? What does it mean from low, like what does leveraging freelance talent in the advertising industry mean? I think we spoke just before, and about what you guys were saying, we were very much in the advertising creative industry, but I think in all organisations to the larger organisation, I think, representative of a component of business that doesn't necessarily get a lot of support her engagement and typically operates on the fringes so I'm really interested in
Liv: The new tax offset role, I think he's probably going to instil a lot more confidence for businesses and acquisition, teams, HR teams in terms of firing, freelances, and going back to doing that I think it's important for businesses not to sort of slip on the new processes that they put in place though, and make sure that the business is following those. There are also some wider things for our industry that there is a lot of talk about with tougher office mandates. Many people will go freelance because they're enjoying the flexibility of working from home, so will there be more freelancers on the market for us to choose from? There is also talk about AI being a largely unknown entity, and some teams exist in a year or a few years. Will companies want to freelance more while we figure out what will happen and what the shape instructions of all our teams will look like? So, I think it all feeds into this year. There is always going to be, I think, for a lot of businesses, finance teams trying to get the business not to use as many finances because it is quite costly, but I know I definitely think there's going to be more confidence around hiring freelancers now.
Russ: We very much identify who answers and how the business needs so much work went into the previous IR35 amendment to bring in more complied of close control to it, and partial fear with the changes that the rebellious worker kick off again and race around, but my council has told me out of 100 times if not more and we expect kind of that thing again or you don't need to worry because you know the liabilities on me but it is making sure we keep track in the calendar talent with the freelancer well and a lot of the considerations around what you guys caught often per answers that the freelancers who engage time and time again, and establishing those that just work for our business and they are true lances to work different different places because it's really easy if you find good quality workers to engage time and time again them before you know it they've been with you for six months eight months a year and make sure it remain complied on that and the flipside that as well that point around hybrid working, and then the business will changing a lot of employees and coming freelances and us to see really really commonly expected to kick off again, which is where someone's employed by us on Friday, and then they had to sign office the same seat on the Monday as a freelancer and business at risk so it is making sure that the controls we put in place as the IR35 change, we keep we keep.
Colin: How do you guys strategies around our that we talk a lot of control to talk to a lot of compliance?
What's actually what your talent acquisition strategy to enable the business to be successful to achieve those goals to be able to successfully deploy a campaign in 24 hours if that's what the client comes in and says, hey, we have to get this done tomorrow
Russ: Sometimes freelance that the whole perhaps of the market is there is fast talent is a short-term immediate need you didn't know that you had a week ago, and now all of a sudden you don't need all my time working with bangers with recruitment teams around freelances. You have to add stress to it to try out what's coming up, what we need to work on, and what needs to be sorted. You've got the business needs to use controls and make things really clear and make sure they see this relationship between everyone so not just the manager grabs a freelancer in place and else knows about it, but make sure that everything is in place to control the process. Several of my respective HR operations are very much around keeping the communication open between everyone, but that's what Worksome allows us the control, and we've got our talent there. We make sure that that's how we bring freelancers into our business, and we know what's going on.
Colin: And Liv, from the TA's perspective?
Liv: We've had to move away from relying on perma-lancers and just having a quite small, black book and people that we would always go to hiring managers and is always gone to a known entity. If they can have one, someone who knows our process is always working, but we have to be smarter and broaden the network that we're working with because we want to we don't want permanent answers in the business, and that risk from IR35 respective, so it is strategic because you can be with freelancing as Russ said given it, so you know such false quick turnaround, it is around, making sure that you understand where the gaps are in the business and making sure that you were constantly widening your pool of freelancers. If there's one thing to say about freelancers, they are a great community. They are always great to introduce you to other people if they need help to get out that time because they're booked, so you know, tapping into them and being part of those freelance networks and a hiring professional.
Colin: Fiona is looking forward to 2024. What's on the horizon for us all?
Fiona: I think one of the trends that we've seen an SIA over the last couple of years is the increasing use of digital platforms for finding workers, mainly freelances, but staffing firms are also increasingly digitising their processes for finding onboarding talent, and I think one of the things that may surprise people is that you know there's an EU platform, workers directive, coming down the line, which could potentially impact, not just the drivers and the deliveries of this well, but could actually be a wider impact have a wider impact and then just those types of workers at the moment I think the directors is probably it's not finalised once it is finalised, which is probably going to be during this year. States in Europe will have two years to implement, and you may be asking why I am bothering to mention this in a UK audience, but what happens in Europe, in terms of many of the directives they've been bringing out, we might all slag off Europe, but look at GDP in the effect that's had around the world and on data privacy legislation they also bring out one on AI, which is used a lot in recruitment, so I think we need to keep one eye on Europe and what's happening there.
Colin: So, and then we're a little bit closer to you guys here.
Fiona: The labour party has said they want to reduce the employment status issued. Obviously, for tax, you have two types of employment status, either employee or self-employed for employment law, you have three types so there's employees, workers, and self-employed, and workers encompass all people on contract for services like agency workers, freelancers, you know who are not genuinely self-employed, etc. the labour party want to streamline that into employee and employed, and that could unintentionally catch number several people who might just about fall outside our certifies, but could on another looking at the circumstances bring them into employment, so that's something to watch out for.
Colin: What we have learned is that IR35 is here, and it's here to stay. But actually, it's probably generated as a conversation more about the difference between rule-based and project, based on a difference between how we engage under things like supervision, direction, and control in the past and how we should be looking at how work gets done with regards to more of a project-based approach there's a long journey to go I think with organisations, but what you the creative organisations which are typically the ones the first to move right in and how new ways of work are hopping or a pushing us away from this linear process of how many FTEs I have how much going to get work done, consider my budget, manage hiring freezes so I'm going to bring some temp workers. I'm going to outsource it to somebody else right there. They moved away from that model, and how they look at our work is in projects. Then, they create a concept. They're saying, okay, we've got four FTEs, and we need three freelancers. We might outsource a bit here, and we called it done quicker and more compliantly than you do using the traditional method.