Why the April 2021 Off-Payroll rules will boost Direct Contracting
In this article we look at one of the lesser publicised impacts of the “Off payroll” working rules from April 2021.
Historically, many large organisations have shied away from taking on contractors direct, preferring to interpose an agency into the equation, in order to distance themselves from potential tax claims from HMRC claiming that contractors were “disguised employees”.
We know of many instances where a client has sourced their own contractors, only to choose to administer the arrangement via a tame agency in order to lessen the risk of pursuit by the tax man. From April 2021 however, the job of determining the contractors tax status moves to the hiring organisation itself, so the client can no longer distance themselves from any potential tax implications in this way.
This will likely polarise the contract market in the following way – risk averse organisations are likely to give up using contractors all together (at least in the short-medium term) but organisations that place more value on the flexibility and skills that contract resources bring in, will find there is now even less of a reason to employ an agency to administer the relationship.
The agency model will therefore lose an important part of its current benefit to clients, enabling the direct hiring model to grow. In short, conditions are ripe for a mini-boom in direct contracting post April, even though the size of the overall contract market may well shrink as risk averse companies quit the market.
Over the last 4.5 years, Contract Spy has been assisting and driving the market to move towards more direct contracting, a trend we are expecting to continue to accelerate. We have enabled hiring organisations of all sizes to access a dedicated pool of direct contractors in order to fill their vacancies for highly skilled and flexible workers, at the same time bringing together all the advertised direct contracts in one easy to use database for contractors seeking a direct commercial relationship with the company they are contracted to.
There has never been a better time to move into a direct client contract.