Changing the culture of how engagers utilise contractors
It’s fair to say that, in my time supporting the temporary labour sector, I have, on many occasions, witnessed engagers treating contractors in much the same way as employees.
The off-payroll legislation was introduced to combat this very practice. Not because the treatment was unfair in any way, but because such behaviour contradicted the spirit in which specific tax laws had been intended.
In essence, the off-payroll legislation was introduced to ensure that if a worker was acting like and being treated like an employee, often defined as a disguised employee, then the income generated should be taxed in the same way as an employee’s income.
However, with responsibilities for IR35 previously sitting solely with the contractor, engagers had little need to invest time and money understanding the fundamentals of a piece of legislation that did not relate to them or have any impact on their business performance or profits.
Contractors are not employees, so don’t treat them like employees
Following the off-payroll reforms in April 2021, engagers in the private sector have now had the responsibility for the off-payroll legislation placed squarely at their door.
Failure to correctly assess the employment status of a contractor engaged by their business could result in fines and penalties for engagers.
All of a sudden, the tables have been turned and engagers have found themselves having to read up on the legislation and gain a true understanding of its implications.
In my opinion, the situation following the reforms in the private sector is clear and simple.
Engagers should hold no fear of utilising contractors who provide their services through an intermediary. However, contractors are not employees, so don’t treat them like employees.
Setting clear parameters and deliverables
If we treat contractors like the service providers they are, and not like employees then we should meet most of the constraints of the off-payroll legislation.
Having a clear and defined plan of what the contractor is being engaged for and for how long will help to clarify the distinction between service provider and employee.
Setting clear parameters and deliverables in the form of a statements of works (SOW) prior to the engagement will give all parties, including any external observer, a transparent and defined picture of the nature of the arrangement.
The SOW should include timescales, milestones and gateways necessary to review the progress and performance of the project.
Deliverables should be defined, achievable and agreed to by all parties along with the financial implications of failure to deliver.
The whole arrangement should contrast to that of an infinite employment arrangement where the employee gets paid irrespective of performance and delivery.
Consistency is the key
Importantly, this methodology must be practiced consistently throughout the organisation.
Simply having a set of written documents that prescribe the above will not be enough to meet the demands of an HMRC investigation.
If contractors are providing their services on site, as is often necessary, inviting them to team meetings or providing them with corporate workwear will undermine the whole arrangement in the eyes of HMRC.
Treating contractors like employees in the workplace must be avoided. From the receptionist to the MD, all members within the organisation need to understand the difference between a contractor and an employee, and treat the individual accordingly.
Guidelines and processes regarding the engagement and treatment of contractors should be clearly communicated throughout the organisation to ensure that there is a consistent approach to contractors throughout the organisation.
Providing training for those that may come into regular contact with contractors or utilise the services of contractors from time to time is also a good way of ensuring consistency in the treatment of contractors.
Whatever you decide to do, consistency is key.
Workr Compliance – helping you to utilise contractors consistently and compliantly
If you and your business have a need to utilise or continue using contractors but have concerns about meeting the requirements of the off-payroll legislation, then Workr Compliance can help.
Workr Compliance can provide you with impartial advice on how to engage high-calibre specialist contractors whilst effectively managing your supply chain in an efficient and compliant manner.
We can help you remain competitive in the demand for specialist skills and talent whilst meeting the requirements of the off-payroll legislation and minimising the risk of an incorrect assessment.
For a free, no-obligation audit and assessment of your IR35 compliance process, you can speak directly with Andy Webster, Founder and Director, Workr Compliance, on 07827 810851 or at firstname.lastname@example.org.
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