More than half of public sector hiring managers in the UK have lost skilled contractors as a direct result of changes to IR35 in the public sector.

The information comes amid new research by IPSE, and the CIPD (the professional body for HR and people development). It confirms that the IR35 changes have had a seriously damaging effect in the NHS and across the public sector.

NHS Trusts hit hard

The study is based on responses from 867 contractors and 115 hiring managers (84% of whom were from NHS Trusts). It has found that not only are hiring managers losing contractors, but a further 71% are also struggling to hold on to their contractors.

The tax law changes have also been associated with project delays, rising costs and even project cancellations.

Tough job for hiring managers

Contractors and hiring managers have felt the strain. Eight in ten hiring managers said they had seen a substantial increase in the workload involved in engaging and paying contractors. And three-quarters confirmed that it is now harder to recruit contractors.

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In response to the damage across the sector, IPSE is calling for the government to halt the extension of the changes to the private sector.

“These figures are a resounding retort to HMRC’s deeply flawed research on the impact of the changes to IR35 in the public sector,” Chris Bryce, IPSE’s CEO, said. “They confirm what we have been hearing anecdotally for a long time: these changes just have not worked. In fact, they’ve caused serious damage right across the public sector. This includes stalling major Transport for London projects and even contributing to the NHS staffing crisis.”

More trouble ahead?

Bryce warned that the repercussions felt within the private sector could be even more damaging. “It would be nothing short of a disaster,” he said. “For the good of the self-employed, for the good of businesses across the UK, and for the good of the economy, the government must take heed and reverse these dangerous, reckless plans.”

Charles Cotton, senior performance and reward adviser at the CIPD, added: “It’s important that the government is in genuine listening mode during the consultation on its plans to extend the IR35 changes to the private sector to ensure that the potential implications are fully taken into account. If necessary, there should be a complete rethink of the private sector roll out.”

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