HR staff fear for public bodies over IR35 change

More than nine out of 10 HR officers predict IR35 changing from next month will have anywhere between a “mild” and “very” negative impact on the public sector, a survey shows.

Competitiveness when it comes to sourcing skills is the main concern of the officers, who are staff at bodies affected by the changes, known as the off-payroll rules, said Harvey Nash.

The recruitment agency’s HR practice director Lisa Wormald said: “IR35 [changing] in the public sector will be a real disruptor for human resources professionals.

“With austerity and cuts already biting hard, attracting and retaining contingent talent is only going to get harder.”

Worse still, HMRC have “not thought of” highly-skilled workers in the public sector reacting to the changes by moving to the private sector, a tax expert who met with the Revenue said on a ContractorUK webinar.

The HR officers clearly have, as “talent acquisition” is their second-biggest concern, with an equal chunk worried about “innovation” at their public body and how it seems set to suffer, Harvey Nash found.

These fears are informed by what almost four in 10 PSC contractors have told them -- they will seek contracts outside IR35, and one in four will move to the private sector.

But the HR officers regard ‘going private’ as little more than a short-term fix, as 80% of them expect April’s off-payroll framework to eventually be applied to the commercial sector. 

“Should this come to fruition, the implications for innovation and competitiveness, especially in sectors such as technology...could be even more devastating than those expected in the public sector,” Harvey Nash warned.

More pressingly, HR officers at public bodies and recruitment agencies are preparing to make new types of payment (as ‘fee-payers’), and potentially to assess PSCs’ IR35 status.

But the help provided on these areas by HMRC has been “far too little and far too late,” according to Danny Batey, senior tax consultant at Bauer & Cottrell, an IR35 status advisory.

“The whole sector is in chaos with everyone looking for a quick fix. What is going to happen when the first payments, subject to the new rules, are made?” he asked.

“[And] the result of the [IR35 digital] tool is entirely different depending on who completes it. We have seen many cases where an ‘outside IR35’ result has been obtained by the contractor or the agency simply answering the two substitution questions, but the public sector itself has had no input.”