Temporary positions decrease due to IR35 as permanents rise

Despite a rise in permanent positions and a rise in demand for staff, temporary positions are falling for the second month running due to IR35.

This is according to the Recruitment and Employment Confederation (REC) and KPMG’s UK Report on Jobs which showed that February 2020 was a good month for permanent jobs but not temporary ones.

Neil Carberry, chief executive of the REC said:

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.

ContractorCalculator, a website that provides resources for contractors and freelancers found that 23 per cent plan to quit contracting due to IR35 and 21 per cent intend to change career.

HM Revenue & Customs (HMRC) Check Employment Status for Tax (CEST) has also come under fire. It is a tool provided by HMRC to see whether or not you fall within the IR35 legislation.  Only 2 per cent of contractors view CEST as effective. As well as 79 per cent of contractors not trusting HMRC to stand by the results of the tool and 72 per cent not trusting its accuracy.

Interim Partners, part of New Street Group, a leadership and people solutions consultancy found that nearly a fifth (19 per cent) of contractors are now looking for permanent positions.

ContractorCalculator said:

A key criticism of IR35 is that its compliance requirements are too complex and burdensome. Uncertainty about the tax risk imposed on clients and agencies has led to blanket bans on limited company contractors. Nearly half of contractors said they had left their last client due to IR35, 42 per cent of clients have banned PSC contractors and only 12 per cent have conducted assessments.

Dave Chaplin, CEO of ContractorCalculator and IR35 Shield said:

The devastation is happening now and the findings of our survey speak volumes. Contractors are out of work and are abandoning their clients.  The flexible workforce is being destroyed because many firms are not ready, do not understand how to navigate the legislation and are acting non-compliantly, primarily because they have been let down by HMRC’s lack of guidance and because final legislation has still not been published. Businesses will suffer as will the UK economy as work moves offshore and contractors’ careers and livelihoods are destroyed.

The UK Report on Jobs is compiled by IHS Markit from responses to questionnaires sent to a panel of around 400 UK recruitment and employment consultancies.

ContractorCalculator’s survey is based on the response from 12,327 contractors.