24th November 2020

National call on staffing agencies to launch IR35 education exercise for the construction sector

News

According to a survey of more than 200 construction businesses, over a quarter (26%) report being unaware of the upcoming IR35 changes and their consequences. Recruitment agencies are now called to launch a major education IR35 campaign for the construction industry to create a smooth transition come April 2021, when the new legislation comes into effect.

The IR35 rules govern the tax status of an individual working as a contractor (or freelancer) and whether, for taxation purposes, they ought to be deemed an employee on the payroll. Businesses that fail to exercise reasonable care in determining the IR35 tax status of a contractor could face significant fines.

Four in 10 (44%) surveyed by Randstad Construction, Property & Engineering (CPE) are aware that they need to prepare for these changes imminently or are currently part way through this process. Only 30% report having a plan already in place, placing them in the best possible position.

Recruitment agencies could now be in the driving seat in what could be a national call for a major IR35 education drive. The education exercise would be to ensure the majority of construction businesses are prepared for significant changes to contractor tax legislation.

For those agencies with a large contract worker base, it is worth noting that about 98% of construction companies or projects hire contract workers, which means almost all clients on an agency’s books will be impacted in some way.

The pandemic has also created greater pressures around cashflow, with 43% of construction employers not knowing what the additional costs as a result of IR35 might amount to at this point.

The construction sector also accounts for 7 percent of the economy and supports the wider economy via demand for building materials and housing goods. Any delay to talent acquisition will have a knock-on effect on project schedules and the supply chain, which has already had a tough year due to pandemic-linked lockdowns across the globe.

“Worryingly, despite having an extra 12 months to prepare, our latest findings reveal that the majority of construction businesses aren’t ready for changes to IR35,” said Owen Goodhead, Managing Director at Randstad Construction, Property and Engineering.

“Tax regime changes are likely to have fallen on the backburner given the upheaval generated by Covid-19, with survival mode kicking in for many,” said Goodhead.

He continued, “But these changes will have a deep impact on recruitment and HR processes and operations, with the need for in-depth stakeholder training and deployment of new management tools.”

According to the report, the pressures of the pandemic have impacted the ability of businesses to prepare, with this additional business pressure hampering IR35 preparations for 60% of respondents.

Goodhead said: “It is still possible to prepare for IR35, but businesses need to act urgently, to start impact assessments and seek high-quality advice.

“To put things into perspective, offers made to contractors now on the basis of a six-month contract will last beyond the 6th April 2021 and will therefore be in scope. This means the onus will be on the employer to determine the IR35 status of contractors and exercise reasonable care in doing so.”

There’s a better way to grow your recruitment agency

Back office, payroll, and CRM software that saves money and helps your agency grow. The ultimate recruitment tech stack – because you’ve got better things to focus on. Book a demo to find out how you can save agency costs up to 85%.



Download your free guide

7 smart ideas to grow your recruitment agency.

Download Now
Download your free guide

Latest Posts

Recruitment

The road (out of Covid) is long with many a winding turn…The road (out of Covid) is long with many a winding turn…

26th July 2021

Unfilled vacancies slowing Covid recovery As the UK attempts to get back to normal by bringing an end to its...

Read more
Recruitment

How do recruitment agencies work?How do recruitment agencies work?

23rd July 2021

The evolution of how recruitment agencies work The world of work is changing rapidly. Among the many economic change drivers,...

Read more
Recruitment

Experience overcomes ageism and closes the gender pay gapExperience overcomes ageism and closes the gender pay gap

12th July 2021

The increasing importance of older workers Ageism in the job market has been a hot topic for some time now,...

Read more

See what ETZ could do for your agency with an online demo

Save hassle, time and money with our powerful software.

Book a Demo

Sign Up To Our Newsletter