Outside IR35 is a Major Compliance Risk, Said Big 4 Consultants Everywhere
And yet it's just an urban myth...
Imagine you're the CEO of a large multi-national company. You have strategic partnerships with some major vendors you spend a lot of money with. Imagine they come to you one day and tell you that they need to put their prices up by 20%. Imagine you say no, I won't pay that extra 20%. Then they say to you, well that's fine, but we won't be able to make all of the current resource pool available to you. You may end up with some less experienced resources instead, but for the same price, or maybe just 5% more. How much effort would you expect you and your team to go to, to maintain the status quo of quality and price? Some, for sure. And yet as far as IR35 reforms and compliance are concerned, most have made virtually no effort at all. More on this thread a little later.
I opened, I admit, with a controversial title. But as alluded to in my last blog about the plight of contractors forced inside IR35, the IR35 reforms that have now NOT been repealed, are a source of a substantial conflict of interest in the consulting industry. Imagine being able to charge your client a big fat hourly rate to advise them on a topic that has been given the potential to have its perceived complexity ratcheted to stratospheric levels, and whilst taking all of the time necessary to explain those complexities, one can essentially force one's client to put a huge dent in one's competition? A consulting firm's dream come true.
Of course it isn't JUST big 4 consultants. Contractors are a major competitor to most consulting firms. But not all consulting firms are neatly placed to advise big business on compliance matters. The major shift of hundreds or even thousands of businesses to only engaging contractors inside IR35 is a substantial benefit to all consulting firms, but especially the larger ones. Companies are then faced with contractors looking for or even demanding 20% or more increase in rates. This closes the pricing differential to consulting firm rates and makes them look a bit less expensive. Still expensive of course, but less so.
But it isn't just about price. Many companies won't pay the increased rates, and whether they will or not, lots of contractors have thrown in the towel and sought permanent employment. Where better to seek it than well-paying consulting firms? As a result, there are far fewer contractors available on the market place, putting a huge dent in a major competitor for business and providing an opportunity for big firms to grow their market share.
Here's the flip-side of the same coin. The truth of the matter is that the essence of IR35 compliance is not the least bit complex. If you need a time-boxed piece of work to be delivered, beyond which you don't need the work delivery mechanism, even if that box of time is or turns out to be 3 years or more, you can most likely procure that work delivery legitimately outside IR35, to the substantial benefit of yourself as the client, your contractor(s) and the recruiter that supported you in finding the resource. Why would a big 4 consulting firm take a short amount of time to explain how simple it is, lose out on lots of advisory services revenue and boost their competition? Not good business for sure.
Why am I bothering to write it down? Is this just a rant I needed to get off my chest? For many that read it, that's all it will be. But if even a really small number just stop and think for a moment, they might just comprehend that the reforms have created an inexorable force by the utterly unsubstantiated whisper of unnavigable complexity and substantial risk. A whisper that has been taken up and amplified into a chant that must not be ignored, because look, NO ONE dare ignore it.
A gigantic perception has been built on the foundations of those reforms, and yet it's a perception that is utterly false. It has bullied and cajoled many company leaders to heed bad advice and make bad decisions, and to tolerate major compromises they probably don't even understand the impact of. Maybe they don't even notice. And yet all they have to do is read my opening paragraph. Surely the vast majority of leaders in large companies understand the value of talent? Its potential to drive their success? To save them from failure? Surely they understand that a talent drain, in fact any compromise in the race to secure the best talent, is handing the edge to their competitors? And yet they have done nothing about it. IR35 compliance is straightforward and takes minimal effort, with the right support and advice. 34square, for example. And we won't even charge you, the client organisation. If you are frustrated by the compromises IR35 compliance has unnecessarily forced upon you, why not give us a shout?
I've said it before and I'll say it again. Compliance. Don't park up, get out of your car and walk when you see the 30mph sign. And fall behind your competition. Just drive at 30mph. It really is as simple as that. Especially don't park up, get out and walk if it's the company selling walking shoes that advised you to do so.