The contracting market improved during the second half of 2019, with the improving UK economy and less turmoil in the Eurozone. There are signs that this improvement, even with Brexit, will continue through early 2020. This means that experienced IT Professionals, with the right approach, should be able to enter this profession with confidence.
The main growth areas driving solid demand for IT professional contractors are in development, specialist technical support and e-commerce.
The question of contractor rates is often a vexed one, due to the amount of influencing factors. They include the nature and type of assignment as well as the skills and experience sought. The resulting rates tend to vary from £12 – £17 an hour for junior roles; for example junior PC support roles, through to £30 – £50 an hour for experienced support staff and developers, and £55 – £150 an hour for project managers and interim management staff.
The Government over the past few years has been reviewing the Limited Companies, Taxation (IR35) and Recruitment Agencies regulations. More information, including changes to IR35 is available from the Inland Revenue (HMRC) website. As these regulations affect most contractors and the contract market in general, we recommend that you seek the advice of a qualified accountant who can advise you on how to organise your affairs professionally.
The Government has also introduced a number of regulations, of which we highlight four that we feel have the most effect on candidates, contractors and employers:
The S8 Asylum and Immigration Act creates new obligations for employers. They must now check proof of identification for all their new employees. This means that candidates and contractors need to have photo ID to hand, together with any visas where appropriate, which the employer will check and copy for their records. The Home Office has issued guidance as to the documents which must be checked.
The Agency Workers Directive (AWR) is new EU legislation which came into force in the UK on the 1st October 2011. The AWR was brought in to protect vulnerable workers from exploitation, and to ensure they receive the same basic employment conditions as their permanent counterparts. Some of the regulations, such as access to company facilities (e.g. staff canteen, access to view and apply for permanent vacancies within the company) apply from day one. After 12 weeks of service, agency workers will have the right to the same pay, working hours, holidays, and any other benefit on offer by the end client. In concept, the AWR is straight forward. In detail, it could have larger implications for recruitment businesses and their contractors. This legislation is mainly aimed at low paid workers, and it is felt that for the majority of IT Contractors who operate via a Limited Company or an Umbrella Company, it will not apply. Reflex has worked hard to prepare for this legislation and can give you advice on this. From our website, you can also download further information from the REC, which gives more detailed advice on the AWR.
IR35, also known as intermediaries legislation, was introduced in 2000 and was designed to reduce tax avoidance by contractors. HMRC believe many to be “disguised employees” – people who work in a similar way to full-time employees but bill for their services via their limited companies to make their business as tax efficient as possible.
With further changes set to come into effect in April 2020, we are undertaking preparation work for the legislative changes – which have been described by some as head-scratchingly complicated! Draft IR35 legislation was published by HMRC on the 11th July 2019 – see here.
This will extend the public sector off-payroll rules to the private sector from 6 April 2020. The rules will change such that end clients will be solely responsible for deciding if the IR35 rules apply in every contract. This will also apply to all contractors or extensions which start before 6th April 2020 and are in operation after 6th April 2020. As a result, clients will have to make that determination, which if referred to an HMRC inspector would be determined by applying an employment test. This is based on the actual working practices, rather than any contract between parties. The main IR35 deciding factors include:
- Mutuality of obligation (MOO)
- Right of substitution
- Supervision, direction and control,
- How and when the contractor is paid
- Equipment supplied and used for the contract
Click here to use the HMRC IR35 online checking tool that HMRC recommend clients use before making the IR35 determination.
Whether or not a client deems a contract or contract extension to be inside or outside IR35 will affect the options available on how a Contractor is able to work i.e. via a Limited Company, Umbrella Company or via direct payroll – further information is below. Between now and April 2020 a lot can happen, with further clarification and information expected from HMRC but also with Brexit looming the rules could change again! As a result many of our clients are in “wait-and-see mode” and so are currently extending contracts into just early 2020 in order not to be caught up in the HMRC rules. We should stress it is important to obtain independent and qualified accountancy/taxation advice before entering into any agreement.
The Conduct of Employment Agencies and Employment and Employment Business Regulations (Known as the EAA Regulations) were introduced to tidy up old legislation affecting candidates, contractors and employers, and to provide greater protection for all. However, they also produce further obligations for all parties to ensure compliance with the new regulations. Click here for further information regarding The Employment Agency Act.
The new regulations have resulted, among other things, in increased responsibilities regarding the flow of information prior to and during the recruitment process. We have incorporated the relevant changes into our Terms and Conditions and into our standard Contracts for Services. We act as an Employment Business for the arrangement of temporary contract assignments and as an Employment Agency for the arrangement of permanent job placements. Specific details of each contract assignment or permanent placement, such as rates of pay, nature of the work, notice periods etc. will be discussed with you, the candidate, prior to us forwarding your details to clients.
Currently the most practical advice can be found on the website of the Recruitment Industry standards and regulation body the Recruitment and Employment Confederation (the REC), click here for more details.
Reflex Computer Recruitment is a leading member of the REC and abides by its strict code of conduct. Links to specific guidance documents produced by the REC can be found further down this page. The main new requirements are as follows:
1. For Candidates and Contractors
Any person registering with an employment agency must provide proof of identification; ideally a copy of a form of photo ID. They must also provide copies of any specific qualifications required for a role they wish to apply for. The employment agency must have these documents before they can put someone forward for either a permanent or contract role. Click here for REC specific guidance leaflet for candidates.
2. For Limited Company Contractors
The EAA regulations were partly introduced to ensure a greater level of protection for contractors. However, they have also resulted in additional paperwork and new administrative procedures for Contractors. Also under the Inland Revenue IR35 Taxation legislation, the EAA regulations could have an impact on the tax advantages of the limited company contractor. Fortunately all contractors do have the chance to opt out of the EAA regulations, but must sign a consent form for this. Reflex Computer Recruitment have an approved consent form for those contractors who wish to take advantage of this. Click here for REC information for Limited Company Contractors regarding opting out of the regulations.
Click here to download an Opt Out consent form.