Changes to the IR35 Off-Payroll working rules are increasing costs for public sector organisations, according to findings from the Association of Professional Staffing Companies (APSCo).
Nearly half of the survey respondents said the cost of sourcing contractors had increased since the new rules were introduced. Of these, 46% reported that rate rises were in excess of 15%. In addition, 70% revealed that contract numbers in the public sector had decreased since April 2017.‘As we feared, it seems that these changes have had an adverse effect on the supply of contractors to the public sector,’ said Samantha Hurley, Director of Operations at APSCo. ‘The increase in rates which has been noted can be attributed to two factors: the scarcity of resource created by candidates moving into the private sector, and the market adjusting by passing on additional tax and national insurance costs to the public sector client.’
The research also showed that, in April 2016, around half of APSCo survey respondents said that more than 75% of their public sector contractors were working through their own PSC. By August 2017, this figure had dropped to 20%.
“There are fewer contractors now being supplied through PSCs and there is an obvious consensus on the increase of use of umbrella employed contractors, with 82% recording a rise. This is a trend our members anticipate to be ongoing,’ added Hurley.
The APSCo believes that HMRC is continuing to consider an extension of the Off Payroll rules into the private sector, and warns that this will have an adverse impact on the strength of the UK’s labour market and economy.
