IR35 and Brexit: How MSPs and RPOs can weather the storms

The implementation of the new IR35 rules into the UK public sector has caused monumental discomfort to all involved. Yet, despite the chaos and a series of court cases later, HMRC is still considering extending those rules into the private sector.

With only one significant IR35 win in the last decade (against Christa Ackroyd, the BBC presenter), it’s difficult to see how HMRC can view the implementation as a success.

The private sector consultation is now closed, and as we await the verdict, due this week, it feels as though we’re sitting in the eye of the storm. The eerily calm silence highlights numerous concerns: Should we be preparing for a whirlwind of tech talent shortage? Is it time for UK businesses to batten down the hatches and fight back?

It is my fear that the combination of political and regulatory forces could amplify an already acute tech skills shortage. We need to stay competitive on the world stage. Already, our universities are being raided by Silicon Valley’s tech giants who coax our best talent overseas (an affliction dubbed ‘AI brain drain’).

Gloomy Forecast

A recent recruitment survey found that 80% of IT contractors will demand more employment benefits if they’re to be classed within IR35.

A study by Harvey Nash Recruitment Solutions also revealed that 49% of participants have begun to exclusively seek private sector contracts in an attempt to avoid the tax clampdown (and no doubt, the confusion).

Bearing the brunt of these increasing costs, public sector organizations are already finding it hard to afford the skilled technologists needed since the implementation of the new off-payroll rules last year.

As 40% of all UK tech workers are contractors, the threat of IR35 being implemented in the private sector could cause vast disruption.

When the dark clouds of IR35 collide with Brexit’s thunder and lightning, we could see a perfect storm facing organizations needing tech talent. These are more than headwinds: The lack of available resource and rising costs will damage the economy.

PREMIUM CONTENT: IR35 and Off-Payroll Working Rules: An Overview

The Brexit Threat

Brexit could result in the widening of the supply and demand gap. In a recent Harvey Nash Tech Survey, we found a third of London tech professionals originated from outside the UK.

How would we replace these? With the loss of 86,000 EU working nationals since 2017, the uncertainty brewing from a possible no-deal Brexit could have negative consequences on the UK’s tech industry.

With little to no hard evidence of what Brexit will look like in March 2019, the risk of a skill shortage is very real. However, a Government-commissioned report released in September gave some hope that caps on skilled migrant workers might be scrapped.

A Step Back?

This political tsunami could see the UK’s tech industry take a step back.

While Tech Nation places UK tech expertise second only to Silicon Valley’s, it is evident that the impact of IR35 and Brexit could stand to erode this.

The combination of increasing costs and a lack of benefits within IT contracting, alongside growing anxiety over a no-deal Brexit, could spell the end to the UK’s growth as a leading global tech player.

How to Waether a Skills Shortage Storm

Businesses must define innovative and dynamic resourcing strategies to satisfy demands for the best talent, cost savings, governance and compliance.

In recent months, many more MSP and RPO clients have begun requesting alternative ways to source talent. Here are some solutions you might consider:

Contractor Audit: Ensuring your contingent workforce is compliant to all UK legislation, financial and tax laws. You don’t want to end up like the BBC!

Contractor Alumni: Proactively managing a bench of previously engaged resources that you can call back on. The benefit of the Alumni is that you are not paying an agency an expensive sourcing fee, but only a payroll fee as the candidate is already known to the organization.

Statement of Work: An alternative solution to the normal ‘time and material’ model where contingent workers are engaged on outcome-based deliverables. From individual agreements to squad-based project teams, SoW is becoming more and more popular as organizations prepare for a post Brexit and IR35 world.

MORE: Preparing for IR35


Colin Morley

Colin Morley
Colin Morley is director of professional services at Harvey Nash Recruitment Solutions, a division of Harvey Nash Plc, and a provider of MSP solutions to private, not-for-profit and public sector organisations.

Colin Morley

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