Should you be using contractors in your business?

There has been a lot of chatter about using contractors since the changes to IR35 were first floated. For many, it has attracted negative connotations, primarily because it is not thoroughly understood what the changes will mean. Recruit 12 has always been heavily involved in the supply of short- and long-term contract staff to the engineering and manufacturing sectors so we thought we would set out the facts and take a look at the huge benefits that using contractors can bring to your business.

 IR35 – the Facts

IR35 is the off-payroll working rules introduced by HMRC to make sure that workers, who would have been an employee if they were providing their services directly to the client, pay broadly the same tax and National Insurance contributions as employees.

The rules apply to workers who provide their services through their own limited company or through a third party or umbrella company. IR35 doesn’t apply to sole traders, however, rules for determining employment status do. Currently, IR35 for private sector end clients has been the responsibility of the contractor, but from April 2021, it will be the client who is responsible for assessing the individual’s employment status and disclosing whether they are inside or outside IR35.

Inside or Outside IR35 – What does it mean?

 ‘Inside IR35’ means that the contractor is considered an employee of the end client and therefore their income is subject to PAYE tax and National Insurance contributions. Some of the factors that could indicate your contractor is working inside IR35 are:

  • They carry out all the work in the contract
  • They are being paid on a time basis
  • They are supervised by someone within the end client’s business
  • They work for one client on a long-term basis
  • They work out of the client’s premises and don’t have their own business identity

 ‘Outside IR35’ means that a contractor is operating as a genuine business with premises, their own insurance and website and work for multiple clients. Some of the factors that could indicate your contractor is working outside of IR35 are:

  • They can delegate the work to another person
  • They do not receive employment benefits such as holiday or sick pay
  • They decide how and when they work
  • They supply their own equipment
  • They work with more than one client

Which end clients need to know about IR35 rules?

IR35 rules will not apply to small businesses. In these instances, it will be the contractor who is responsible for assessing whether IR35 applies. The Companies Act 2006 defines a small business as:

  • A business with a turnover of less than £10.2million
  • A balance sheet total of £5.1million
  • A business with fewer than 50 employees.

So now we have ironed out the nuts and bolts of IR35, what are the benefits to your business of using contractors?

Contractors have long been used by businesses for a variety of reasons:

  • They offer businesses flexibility for certain projects or tasks.
  • They offer expertise and specific skill-sets that you may not have within your existing workforce.
  • They can reduce a business’s costs as there is not the need to upskill the current workforce for short term purposes or special tasks that are not a permanent feature of your business.
  • They can provide your business with a short notice workforce meaning you have the ability to take on short notice projects.
  • They can provide temporary cover when your business needs it
  • They offer businesses the ability to be more agile, flexible and adaptable.
  • Coronavirus has meant that businesses have had to adapt. Not just to a shrinking workforce due to self-isolation, illness and shielding, but to working within a more challenging environment and industry.

How can Recruit 12 help you with your contract requirements?

  1. We act as an umbrella company for our contractors, which means we help to determine their IR35 status. We pay our contractor’s fees which means the headache of IR35 is taken away from our clients to ensure they can focus on their business.
  2. We qualify each of the contractors we work with to establish their skillsets, experience and qualifications so we know that they are perfect for the project you want them for.
  3. The technology we use as a company means we have access to a vast pool of talented engineers with specialist skillsets and niche project experience.
  4. Our experience in the contracting marketplace means that the best engineers come to us to find them bespoke, niche and complex projects to be involved in. If you want the best for your business, our books are where you are going to find it.

What should you do now?

If you think that using a contractor for specialist or one-off project or to provide temporary cover within your business, you need to speak to our team today. We have highly skilled contractors who are looking for their next project now and demand for these skilled engineers is growing. You can either contact our team by email info@recruit12.com or by phone at 01527 834 612 or take a look at our website and use the ‘contact’ section.

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