With just weeks to go until changes to off-payroll working in the private sector are introduced, employers – or the recruitment firms they partner with – will soon be responsible for setting the tax status of contractors who work through a Personal Services Company (PSC). As part of this reform, the tax liability will also transfer from the contractor to the fee-paying party.

While I think it is fair to say that these reforms have not necessarily been welcomed by the vast majority of HR leaders, the good news is that the Treasury has recently released a compliance statement which confirmed that HMRC will take a ‘light touch’ approach to penalising businesses for the first year, suggesting that only companies which deliberately don’t comply will face penalties.

This so called ‘soft landing’ does offer some welcome relief for personnel teams who may be facing challenges when it comes to implementing appropriate processes to manage contingent workers, or ensuring that new systems are compliant. However, there is no escaping the fact that employers which haven’t already must get up to speed on the new rules – and quickly.

Despite the fact the introduction of IR35 in the private sector has been on the horizon for some time, anecdotal evidence suggests that some businesses may have postponed preparing for the changes amid ongoing uncertainly around what the final legislation would look like – or even a misplaced hope that plans would be scrapped at the eleventh hour. In fact, a survey of APSCo’s membership, undertaken in December 2019, revealed that although more than three quarters (79%) of the professional recruitment firms polled believed that most of the businesses they work with were aware of the incoming changes, just 51% said the majority of their clients were actively preparing for the updated legislation.

Recent updates to HMRC’s Check Employment Status Tool (CEST),  high profile blanket bans on PSC contractors, such as those imposed by HSBC and Barclays, and a last-minute review into implementation will also have done nothing to ease the concerns of HR leaders who may have already felt confused or overwhelmed by the incoming reform. Now, though, there is no escaping the fact that this is happening imminently.

Today, companies should already be at a stage where they have reviewed existing contingent workforces to determine what employment models individuals are working through to understand the extent of PSC contractor usage. Those which haven’t must do so urgently. They should then work with trusted recruitment partners to discuss which roles are likely to be in scope across different levels, and if individuals with these skills are thin on the ground or easily replaced, so that plans can be put in place to enable them to sustain and grow future workforces effectively.

It is worth noting that, while this legislation is new to private sector businesses, it is fundamentally an extension of rules which were introduced into the public sector in 2017. As such, many recruitment businesses already have extensive experience in helping clients to manage this period of change. However, even staffing partners that don’t work with public sector organisations can still be your greatest ally as you become accustomed to the new legislation.

Good recruiters are happy to place genuine contractors outside of IR35 and are able to help HR teams to navigate the new landscape. The best firms will work with employers to identify legitimate contractors, determine the status of these individuals and advise on contracts accordingly, helping HR teams to overcome reasonable care requirements. Recruiters who are also the fee-payer can also remove potential liability from the employer, so that businesses can continue to benefit from flexible, agile, highly-skilled workforces without fear of repercussions.

Even by the Government’s own calculations, the majority of PSC contractors are genuinely self-employed. Furthermore, HMRC has long maintained that it genuinely wants businesses to comply with the new rules and that it has no intention to start a witch hunt. The publication of the latest compliance statement suggests this HR directors should not yet be panicking about the rule changes.  However, if we’ve learnt anything from the public sector roll out, it is that we are now entering a period of significant change. By working with expert recruitment partners, businesses can ensure that they navigate the new landscape easily.