Home IR35 – What Is It And How Does It Affect You? Contractor billings plummet as IR35 reform takes hold

Contractor billings plummet as IR35 reform takes hold

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Contingent worker billings have dropped for the second consecutive month, a report from the Recruitment and Employment Confederation (REC) and KPMG has revealed.  The blame for the drop was placed firmly on the government’s IR35 reform policy, with the extension of the rules for large- and medium-sized businesses due to be implemented on April 6.

The March Report on Jobs showed that demand for staff in general had expanded at the quickest rate for over a year.  Placements of permanent employees rose at the quickest rate for fourteen months in February, which recruiters attributed to continued market confidence following December’s general election.

The increased confidence also led to more workers entering the job market, meaning that the measure of candidate supply – which has been in freefall – fell at the weakest rate since June 2013.  Some recruiters mentioned that people are now more willing to seek out new roles.

Starting salaries for permanent staff continued to rise, and at a quicker pace than has been seen recently amid greater competition for candidates.  However, the rate of increase of temporary and contract rates slowed to a forty-month low.

Recruiters also reported that the incoming IR35 reforms, known as the Off-Payroll rules, also contributed to a slower rate of decline in candidate numbers overall, as contractors pushed out of their existing roles made themselves available for both permanent and contract work.

Commenting on the latest survey results, Neil Carberry, Recruitment & Employment Confederation chief executive, said: 

“It’s great to see how the state of the jobs market has improved in the past few months.  Businesses are feeling positive, placement numbers are up, and the number of vacancies is now rising at the quickest pace for over a year.  It shows just how important stability can be.  With a little confidence about where the economy is heading, employers can make clear plans for hiring and put them into practice.  Politicians must be careful to maintain that stability – whether that’s in negotiations with the EU, or making sure that the tax and skills policies in next week’s Budget work for business.  This is even more important given the impact that coronavirus may have on the economy in the spring.

“The stark outlier in this data is the much slower performance of the temporary market.  With less than a month to go until the IR35 changes kick in, we’re hearing about more and more companies putting a blanket ban on hiring contractors – and we now see this influencing the availability of flexible workers too.  The government urgently needs to stop and think about how to make these changes more effective.  They should start by delaying implementation in order to properly regulate umbrella companies.”

James Stewart, vice chair at KPMG, said: “the upturn in the UK jobs market remains steady, evidenced by a further rise in the number of people placed into permanent job roles and at the quickest rate in 14 months.

“However, looking ahead, the current big unknown is the impact and influence the coronavirus may have on market confidence, let alone the lingering uncertainty around the actual Brexit deal.

“Businesses will be hoping that next week’s Budget provides some relief and investment to help get the UK back on the path to growth.”

6th March 2020.