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HMRC public sector reforms met by resistance

HMRC public sector reforms met by resistance

A wave of resistance from contractors, agencies and end-hirers have met plans to put contractors on the payroll in the public sector.

That’s according to research from The Freelancer & Contractor Services Association (FCSA), which gathered information from around 68,000 contractors as part of its study.

HMRC is planning to put new intermediary legislation in place from April 2017.

If placed on a payroll, a contractor would most likely become a ‘temporary worker’, and would be taxed as full employee, reducing take home pay.

Furthermore, in many cases, temporary workers are also not entitled to the same statuary benefits, such as sick pay, as a full employee is.

According to FCSA, 37% of intermediaries who source and/or support contractors for public sector roles believe that end-hirers will seek to place their freelancers on agency payrolls.

A further 23% also suggested hirers who source contractors directly will most likely seek to place them on their own payroll as temporary workers.

The research also found that many contractors will not accept being placed on the payroll or accept fixed term contracts. A significant percentage would also look for contracting work outside the public sector, which would have major ramifications.

“Our research has revealed a mismatch in thinking between contractors’ intentions and the options being considered by agencies and public sector hirers,” said Julia Kermode, chief executive of FCSA. “Contractors are simply not going to accept fixed-term contracts or being put on the payroll as temporary workers. We are already seeing contractors not accepting public sector contracts beyond April 2017 due to the proposed changes. They are shunning false ‘employment’ engagement mechanisms which contradict the reality – that the hirers’ needs are contingent so contractors’ skills are sought on an as needs basis, therefore employment is a nonsensical solution.

Kermode added: “The Government seems intent on forcing the entire workforce to be employed which is an incredibly outdated stance and a real concern given the UK’s reliance on the flexible workforce to support the UK economy and we strongly urge Ms May and her policy team to ditch these proposals now.  Not only are they impossible to implement but, based on this evidence, will starve them of the very skills they need, and never more so than now as contractors will be key in helping to manage the UK’s exit from the EU.”