NHS IR35 probe reveals ‘damaging unintended consequences’

Most hiring managers in the public sector say skilled contractors have upped and left them in the lurch, as a direct result of April 2017’s changes to IR35, new research shows.

In fact, 51 per cent of managers who typically hire for the National Health Service said they were now without skilled contractors they once had solely due to IR35 reform, says IPSE.

In the contractor trade body’s survey, co-run with the CIPD, out of 115 hiring managers, a further 71% are now “struggling” to hold on to the contractors who they do have.

But about the same proportion which has already seen contractors quit since the IR35 status decision shifted to engagers like the NHS, say they are suffering a trio of other side-effects. 

Specifically, 52% of the managers report that since IR35 changed, their costs have increased; delays have been incurred and thirdly, some projects have been cancelled.

“They [the hiring managers] confirm what we have been hearing anecdotally for a long time” said IPSE’s chief executive Chris Bryce.

“[The IR35 reforms have] caused serious damage right across the public sector, stalling major TfL projects and even contributing to the NHS staffing crisis.”

But as the public sector is only a fraction of the size of the private sector, “the consequences will be far worse,” he added, “nothing short of a disaster” if the changes are extended.

Among contractors, 800 of whom were surveyed alongside the hiring managers, 40% have seen projects delayed, and 35% have witnessed costs increasing -- both since IR35 changed.

The projections aren’t bright either. It is now harder to recruit contractors for 75% of the managers, 80% of whom report a heftier workload from the admin burden of the reform.

“The way the IR35 tax changes have been implemented has had damaging unintended consequences for the public sector,” said the CIPD’s Charles Cotton.

"It's important that the government is in genuine listening mode during the consultation on its plans to extend the IR35 changes to the private sector to ensure that the potential implications are fully taken into account. If necessary there should be a complete rethink of the private sector roll-out.”