If you are currently working within the interim market, you are undoubtedly being bombarded with information and questions from all sides on IR35. Personally, I see drastically differing approaches to how companies are choosing to deal with it. Some appear to still have their heads in the sand, some are taking a practical approach to finding the right solutions, and others with more drastic approaches of cancelling all interim contracts prior to the April 2020 deadline. Wherever companies are on this journey, the uncertainty is clear. The big question is whether IR35 will fundamentally change the interim market for good or will it burn brightly before becoming an accepted change like the Agency Workers Regulations, Working Time or other legislation in previous years?
What exactly is IR35?
Essentially this is legislation is aimed at reducing “disguised employment”, where organisations may engage with limited company contractors to avoid paying Employers National Insurance, and for interims who are deemed to be doing permanent roles, via personal service companies to pay less tax. For a clearer understanding, I would certainly recommend viewing the advice on our website, which has been compiled with Brookson Legal, a leading IR35 specialist law firm.
Importantly, let me say what it isn’t:
- It isn’t legislation preventing organisations from employing interim managers.
- It isn’t legislation preventing organisations from using interim managers to cover permanent roles.
Both of these are common misconceptions I have heard, although it’s true that it may change the way in which the interim is paid.
So how do we define an “Interim”? Who are we talking about?
There are a number of definitions, including the Institute of Interim Managers (IIM) who state that an interim is “the provision of a business solution by an independent executive for a finite period of time.” Ultimately, it is about bringing in unique skillsets at a time of change, turnaround, crisis, or indeed other periods which are unlikely to exist internally within an organisation. There is also a clear difference between genuine “Interims” and “Contractors”. My colleague Aled Homer has written an excellent blog exploring this in more detail.
So how could IR35 help interims, and clients?
Firstly, it is important to consider why professionals choose to pursue an interim career. Whilst I haven’t asked every interim, I have met in the last 12 years, I am yet to meet a single one who says they chose this career so they could do the same work, and just pay less tax.
So, with this in mind, I think for genuine interim managers, there are potentially some very positive outcomes coming from IR35:
- Clients will need to be more specific – Each interim assignment outside of IR35 will need a clearly defined scope of work, setting out clear, objective deliverables and outlining how this will be measured in terms of the end goal. How this is then delivered will be the responsibility of the interim.
- Defined project timescales – Having signed up to the project, based on specific deliverables in an achievable timescale, it then becomes important to not allow the project scope to creep, making the timescales harder to stick to. Mutuality of Obligation becomes increasingly important to ensure successful project delivery.
- Genuine project-based assignments – because clients need to be more specific, it will create an environment where genuine project based work becomes the norm. This will be delivered by a trusted consultant, producing greater ways to measure ROI on projects.
- Staying removed from the politics of organisations – an interim is not a permanent employee, and nor should they be treated like one. This works both ways – they are not there to appraise, develop or performance manage your permanent team. They are there to consult, pass on knowledge and experience, and in many cases, to challenge the client and to ask the difficult questions. IR35 increases the need for this, but rather than decreasing their value, it increases it through the need to be genuinely impartial and independent.
The main reason is always around flexibility, doing interesting work with different clients with clear defined scopes of work, and having control to deliver programmes of work in the way they feel is best suited to the delivery of the project. Nothing here has drastically changed.
The desire to continue to engage interims managers with highly specialised experience for short term periods is unlikely to change. With organisations increasingly applying leaner operating structures for greater efficiency, it won’t be cost effective to keep this inhouse, so the demand for these skillsets remain, particularly in the growing world of the “gig economy”. Therefore, the interim service offering remains essential.
Hopefully with the introduction of IR35 to the private sector, it will help organisations become more focused on achieving ROI from their interims through specific projects and deliverables, and ultimately creating more interesting assignments for interim managers.
All of these will increase not just the project nature of interim work, but also from a client perspective, it will also increase the efficiency of interim managers, by allowing them to be fully focused on the area they have been recruited to deliver on.
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