UK Government Issues Update on the 2020 IR35 Rollout

In early March 2019, the UK government released the second IR35 policy paper. The IR35, as most employers in the region know, is the set of off-payroll working rules focused on ensuring that “individuals who work like employees pay broadly the same employment taxes as employees, regardless of the structure they work through. The off-payroll working rules apply where an individual (the worker) provides their services through an intermediary to another person or entity (the client).” Noting the need for sufficient preparation time, the government determined reforms for private employers will take effect on April 6, 2020, giving medium and large-sized businesses more time to prepare.

That said, the UK government encourages businesses to take the following actions now:

• Identify and review their current engagements with intermediaries, including public service companies and agencies that supply labor to them
• Review current arrangements for the use of contingent labor, particularly within organizational functions more likely to engage off-payroll workers
• Put in place comprehensive, joined-up processes (assess roles from a procurement, HR, tax, and line management perspective) to get consistent decisions about the employment status of the people they engage
• Review internal systems, such as payroll software, process maps, HR, and on-boarding policies, to see if they need to make any changes

Takeaway: Clients may begin the conversation by asking themselves three fundamental questions:

• How do you evaluate your existing contractor (staff augmentation) workforce?
• How do you handle your SOW (external contractor) workers for proper classification?
• How do you futureproof your IR35 decision-making (process and partner)?

Moving toward the 2020 rollout date, AGS will provide background and updated information as needed to clients as they address these three fundamentals and the four recommendations by the government outlined above.