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tax-and-treasury, Temporary, Permanent...

Is regulation making Permanent Employment the future?

There is a degree of conflict between regulation and the open labour market that currently operates in the UK and more importantly the emerging preferences of ‘Millennials’ and beyond who desire a more flexible way of working and see careers as being beyond the traditional structure that has existed for decades.

IR35 regulations that were tightened and implemented in the Public Sector have had a significant impact on the contracting market where a substantial number of professionals in ‘self employment’ have either migrated to the private sector or transferred into permanent employment simply because it became too onerous and the ‘benefit’ of being your own boss diminished significantly.

Often the ‘benefit’ was financial and based on a contractor being in ‘disguised employment’ ie: simply working on a self employed basis to take advantage of favourable tax savings and therefore the regulation does much to ensure HMRC receive what they rightly deserve however for those that are legitimately self employed it has deterred them from seeking opportunities in a public sector that urgently needs reinforcement from high quality professionals, particularly the healthcare sector.

Now the very same legislation is being considered for consultation in the Private Sector.

How will that impact the important contracting sector where companies can utilise expertise on a flexible basis, having access to people with skills that they may need for a specific purpose or project or only for a short period of time? This has long been an effective way for them to manage resource and cost whilst the contractors themselves become an important mechanism for the ‘pollination’ of expertise across companies and sectors.

The magnitude of the challenge is amplified when you consider the impending EU exit where (potentially) expertise from Europe may not be as readily available. Similarly, the emerging generation of young professionals seek employers that provide a greater degree of flexibility & ‘balance’ and contracting is one way that they can achieve that.

Many reports about the future of the UK workforce state that job creation amongst the SME sector will be at the forefront of economic growth with many of those organisations being the ‘green shoots’ of future industry heavyweights. The recent moves toward regulating the growing ‘gig economy’ in the UK also pose significant challenges for both the organisations and workforce, not to mention the government. These issues require a more modern regulatory framework to support the ‘new world of work’ so will it simply be a case of accountants & lawyers developing ‘workarounds’ and trying to out run or out think HMRC so contracting and emerging types of work can survive?

Is this where tax experts truly earn their money developing legal frameworks that please both employers, workers and government? …

or will it drive both companies and professionals toward more traditional permanent employment and will that put the UK at a competitive disadvantage against other economies with a greater degree of flexibility for workers?