As more and more businesses start to utilize the strategic advantage that an agile contingent workforce can bring, the more important the need to understand what it takes to do so compliantly.
Whilst the demographic and engagements of your contingent worker population may be a stark contrast to that of the Uber case (Uber vs. Aslam and others), all businesses should consider the wider impacts of this case on the classification of contingent labor.
The Supreme Court recently found that Uber’s drivers are indeed workers and not self-employed. The classification of these workers could have a number of carry over points and wider implications that businesses should be aware of in the run up to April 2021.
The level of control applied by the end client. The control framework that the Supreme Court felt was applied (at the time) to the workers via Uber played a major factor in the outcome of this case. Jump forward to post April 2021 when HMRC assess your contractors against the principles of IR35,almost identical considerations will be applied.
By the time April 2021 comes, some businesses will have been planning strategically for years on the implementation and even used it to their advantage on “the war for talent”. On the other hand, many businesses will have just limped over the line.
From a “future state” perspective, what is the strategy of your business for contingent workers? Does your IR35 program have a Phase Two?
With this point in mind and considering the importance that a control framework plays in creating working practices supporting the use of independent contractors, what has your business done to consider theirs?
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Some useful questions:
- What steps has your business taken to assess the “current state” control framework in place within its business areas? (Notice I said business areas, as it can often change throughout different areas of the same organization.)
- Does this current framework apply the appropriate degree of control to the appropriate engagement to support the compliant use of independent contractors?
- If it doesn’t, then is this limiting your businesses’ use of independent contractors?
- What impact will this have on your business?
- What is the potential IR35 risk this is creating for your business?
Consider in-place contractual arrangements. Another point clearly with a transferable consideration in terms of April 2021 is that the Supreme Court felt that the contractual arrangement did not represent the operational day to day workings of the engagement.
When applying this to IR35, this is an important consideration as it enforces that businesses cannot assume that due to the “correct” contracts being in place, they are protected against the risks of IR35 post April.
Consideration needs to be given to how this engagement between the client and contractors actually works. What are the working practices of the contractor? How is the business delivering its services, what is the control framework in place? Do the contractors actually own any delivery risk and is the right of substitution clause legitimate?
This point is particularly relevant when considering businesses and suppliers which are attempting to set up SOW (Statement of Work) structures which were previously Staff Augmentation.
The TAAR (Targeted Anti-Avoidance Rule) highlighted March 3 budget will be particularly relevant here where the sole purpose of the restructure and engagement is to move it outside of IR35 without any other commercial reasons.
As we approach April 2021 a good question to consider here is what is the next phase? What will become evident over the next year or so is the impact a businesses’ approach to IR35 will have on its ability to source and retain the talent it needs to remain agile in the ever-changing business landscape.
