In a letter to line managers this week Barclays informed staff that as a result of the changes to the off-payroll working rules, from 1 October it will not extend the contracts of contractors who provide their services via personal service company, limited company or other intermediary beyond February 2020.
“From 1st January 2020, new contracts and contract extensions will be arranged on a PAYE basis only”, stated the letter.
“Contractors who provided their services via a personal service company, limited company or other intermediary and who choose to continue working for Barclays can do on a PAYE basis (via the agencies and manage service providers they currently use).”
Lloyds will not extend contracts for those using personal service companies beyond 20th March 2020, with contractors being given three options: leave the company at the end of their contracts, take a permanent job (if an appropriate role is available and their skills merit it), or join an umbrella company. Lloyds’ contractors were informed at one-on-one meetings that they had until 25th October to let the bank know which option they would prefer.
Andy Chamberlain, IPSE’s deputy director of policy, labelled the decision “short-sighted”, “extremely damaging” and “bad for business”.
“IR35 is impossibly complex, and for a long time, we have warned the government against forcing this complexity on to businesses across the UK,” said Chamberlain. “The risk is that they will panic, as Lloyds seems to have done, and harm the self-employed and the wider economy.
“Perhaps worst of all, this may just be a taste of things to come when the changes to IR35 come into force next April. We urge the government to halt and rethink this dangerous policy. Now, facing an uncertain economic future, this country needs the flexibility and dynamism of the self-employed more than ever, and the government must do more to support them.”
The problem for banks, and other large businesses that use a large number of contractors, is that they are such a massive organisations that they might not pick up everyone engaged by a limited company.
But from a corporate perspective, it makes a lot of sense because going through the hassle that’s going to be created by the CEST test, people disputing their rulings and so on will undoubtedly put a lot of extra, unnecessary work on businesses
However, their position could well have a knock-on effect on staffing. Barclays has the right to do this, but if those contractors are required by the business then they have the right to say ‘I’m not going to work for Barclays’.
One of the broader issues at stake is the potential for smaller businesses affected by the new rules to take Barclays’ lead and issue similar blanket bans on contractors.
The real question is going to be how the market calms down in the aftermath of the April deadline – whether contractors find their net pay falls or on average stays the same.
When the public sector rules came into force in 2017, IT contractors, in particular, had the option of moving to private companies and saying ‘I don’t work for the public sector’, and the net pay for a lot of contractors continued to remain the same.
However, with the rules now spread across both sectors, there is a possibility some contractors could see a fall in their net pay, with expenses being a major factor. Those that currently claim travel expenses, for example, will be out of pocket.
If your business engages contractors, and you are still considering your approach post April 2020, it’s make your mind up time, although any decision may have consequences for your business you would rather avoid.
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