Half of contractors would ask for a pay rise and benefits if found to fall within IR35, survey finds

Organisations told to plan for higher costs and increasing demands from freelancers for employment rights 

Half of freelance and contract workers would seek a pay increase and other benefits if their hirer categorised them as falling inside IR35 legislation, a poll has shown.

A survey of contractors by Brookson Legal found 50 per cent of those polled would ask for more money if recategorised as falling under IR35 when the changes to off-payroll rules are rolled out to the private sector this April. 

Just over a fifth (21 per cent) of the 516 UK contractors polled said they would challenge an ‘inside IR35’ decision.

Andy Chamberlain, deputy director of policy at the Association of Independent Professionals and the Self-Employed, said employers could not expect to continue business as usual without offering contractors caught within IR35 some form of compensation. “I think that it is entirely natural, and should be expected, that [a contractor] will say: ‘If you're saying that I'm acting and behaving like an employee, why don't you give me employment benefits?’” he said. 

Chamberlain added that where firms find the relationship between contractors and organisations resembles employment, they should consider hiring them as employees. “The client has to decide: do I want to have an employee or do I want to have a contractor?” he said. “If [employers have] got people who they believe are acting like employees within their company now, they should employ them.”

Under IR35, if a contractor is deemed to carry out similar or the same work as a permanent staff member their employer is required to deduct income tax and national insurance contributions as if they were an employee. The legislation was introduced to ensure workers undertaking similar roles paid similar tax regardless of whether they are an employee or contractor. 

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Changes coming into force in the private sector in April shift the responsibility of assessing which contractors fall into this category on to employers. The changes have applied to public sector employers since 2017.

According to draft legislation, employers using recruiters to source contractors will receive some protection from tax liabilities if assessments are carried out incorrectly, but could still be left with bills to foot if the recruiter is unable to pay up.

Matt Fryer, head of legal services at Brookson Legal, said a lack of government guidance and uncertainty over the changes to the rules had made it difficult for recruiters to provide the right advice, but also placed the onus on them to do so. “Many [recruiters] have already found themselves doing much of the heavy lifting when it comes to communicating the changes up and down the supply chain,” he said.

He urged recruitment firms to educate themselves on the changes as soon as possible, adding: “With such a short timeframe left to address IR35, recruiters will play a pivotal role in ensuring the changes are properly enforced and will also be answerable to HMRC when the time comes.”

Brookson Legal’s survey also found the majority of contractors didn’t trust employers to accurately assess their IR35 status. Less than a quarter (22 per cent) said they thought hirers would make the right assessment of their IR35 tax status, while just 3 per cent believed the private sector would be ready when legislative changes come into force this April.

Survey respondents were also unsure whether to trust recruitment agencies with IR35 assessments. More than three-quarters (77 per cent) said they didn’t know whether to trust such agencies or not. However, Brookson Legal said recruiters could play a vital role in communicating the application of the new rules to both employers and contractors.