At the start of April, contingent labour supply chains across the UK faced a rise in National Insurance (NI) contributions. This legislative change encouraged careful planning and strategic adjustments to mitigate the impact immediately and longer term. Although the off-payroll working rules (Chapter 10 ITEPA) and the recent rise in Employers’ National Insurance contributions are not directly linked, these increases are likely to have an impact on how the off-payroll rules are viewed and navigated by those supply chains utilising contingent labour through Limited Company intermediaries. How have supply chains been dealing with the off-payroll rules so far? At Workwell Enterprise, we’ve seen a broad spectrum of responses to the legislation in terms of their sophistication. While there’s been a general trend towards taking the legislation more seriously as it has matured, there are still many instances where due diligence isn’t being carried out properly. This often results in a high number of Limited Company contingent workers being classified as inside IR35 and pushed towards an 'on-payroll' route, either by becoming employees of the recruitment agency or engaging through a compliant PAYE umbrella company like Workwell. What impact could the changes to Employers National Insurance have on off-payroll due diligence? Not only has the rate at which Employers’ National Insurance increased (it’s gone up from 13.8% to 15%), but the earnings threshold at which an employer becomes liable to pay National Insurance on an employee has also decreased (down from £9,100 to £5,000). This creates a ‘double-whammy’ for the employer; the rate increase makes the Employers’ National Insurance contribution larger for each employee, and the threshold decrease brings more employees into the scope of National Insurance payments. Simply put, these changes make it more expensive to be an employer. In the case of contingent labour supply chains, this cost is often passed up the supply chain to the hiring organisation (the entity responsible for IR35 assessments), even though they are rarely the employer themselves. A likely consequence of the recent changes is that supply chains should have started looking at cost-cutting. An effective way to reduce costs is by enhancing off-payroll due diligence to ensure a sophisticated approach that avoids shortcuts and inherent inside-IR35 bias. In short, supply chains that have rushed through off-payroll compliance with a bias towards inside-IR35 determinations will face higher costs with the new Employers’ National Insurance changes. On the other hand, supply chains that have addressed the legislation and granted outside-IR35 status to those who qualify will experience lower costs. How can IR35 status be easily reviewed? Using an assessment tool like IR35 Complete™ not only helps you manage your compliance obligations but also ensures that those who qualify for outside-IR35 status are granted it. IR35 Complete™ is a practical, holistic solution to your compliance obligations, which includes access to our online IR35 assessment tool. It leverages our in-depth expertise and proprietary technology to ensure compliance throughout the contingent workforce supply chain. We will also be hosting an upcoming visual podcast focused on this topic. Find out more and register here.
Here to help
We provide support services to recruitment agencies and hiring organisations to help them compliantly deal with all the various bits of legislation that relate to engaging contingent workers. If you’d like to discuss your existing compliance framework in more detail and run through some ideas on how you might be able to make improvements, feel free to reach out. Click here to find out more about IR35 Complete™ or get in touch with our expert team on 01923 910833.