Why IR35 May Be a Force for Good

While client companies and day-rate contractors alike watch the unfolding political stramash in the UK with baited breath (and, in some cases, fingers & toes crossed), hoping for a stay of execution – we ask:

“Is the IR35 roll out to the private sector really such a bad thing?”

The not-so-simple answer, of course is that it depends which hat we are wearing. As a young consultancy whose founders still spend time out in the field, providing day rate services for clients – of course we are not at all enthused. No matter how specialist or self-directed we consider ourselves to be, the simple truth is this is likely to count for little as large clients adopt a blanket approach to the arrival of the legislation.

Result? Increased uncertainty – with the only certainty being reduced income.

But – wearing our other hats (our much cooler LiqidGroup hats) – we can’t help but wonder if this change is the wake-up call required by many of our past, current and prospective clients.

The household names comprising Scotland’s world-famous financial services sector have developed working and staffing practices in which it is the norm – rather than the niche, specialist exception – for roles to be undertaken by contracted, day-rate resources. Programmes often run for multiple years, during which time the specialists recruited to deliver them become the de-facto experts on the systems and processes being created, altered or integrated.

And so – when these programmes are eventually delivered – those same specialists are retained to undertake the next multi-year programme.

Projects are nearly always costed based on day rates, head-count and projected durations. Very rarely indeed is it the case that projects (as opposed to supply of software of entirely outsourced services) are put out to tender. Is this pricing of all work as a multiple of day rates really providing best value for the shareholders and customers of these financial powerhouses?

It’s not simply a value problem either; there are two other critical elements in play.

Firstly – there is a significant drag exerted by the effort, uncertainty and inefficiency of individually hiring members of a team from the available population of contract resources (available at the precise point in time you wish their role to begin).

Secondly – there is the non-trivial issue of incentivisation. You would never hire a builder to remodel your house, sign up to a 6 month project with an projected cost – and then extend that to a 9 or 12 months at double the cost without ending up in court. Employees of a company have a stake in the success of that company and participate in various incentive schemes designed to reward performance and loyalty. A well-structured supplier contract will define very clear responsibilities and financial implications for non-performance. Day rate contracts? Not so much.

It goes without saying that we believe there is a better way…