Contract hires will be affected by the proposed IR35 tax reforms set for April 2020. IR35 was first designed to reduce tax avoidance by contractors. Technically, it is possible for contractors to bill supplied services through a limited company and benefit from tax efficiencies, whilst working in a similar way to permanent staff. In 2020 the Government plans to extend IR35 reforms across the private sector. Changes in 2017 moved responsibility for policing IR35 rules from contractor to employer. Employers are now wary of the potential risks and administrative burdens of hiring contractors.
So does this mean you should avoid contract hires and concentrate solely on permanent employees? Not at all. There are still several advantages to hiring contractors. Provided that you’re aware of IR35 compliance, there’s no reason to miss out on the top talent available.
One major reason to employ a contractor rather than a permanent member of staff is flexibility. Large projects may require extra staff in order to meet deadlines. Contractors can fill these roles quickly and on a short-term basis. Contract hires allow you to supplement an existing team, or establish a new team quickly, to get a job done.
Hiring contractors is also a useful stopgap solution if a short-staffed department requires extra support while searching to fill a permanent role. And who knows: the contractor you hire might actually be the best person for the full-time role.
This “try before you buy” approach works both ways. You may find a contractor who is the perfect fit for your organisation. Or you may decide to part ways with a contractor upon completion of the project, with no further obligation. If the scope of a project is cut short, hiring contractors means less chance of having to make redundancies amongst permanent staff. If there are typically peaks and troughs in your company’s workload, hiring contractors can be an efficient way to achieve your business goals.
Hiring Contractors with Specific Skill Sets
Contractors are able to provide specialised skills in certain scenarios. For example:
- A quick turnaround project with limited time to up skill existing staff members
- A transition, such as implementing new systems or processes
A lot of contractors are certified experts, providing particular skills or specified expertise in niche sectors. They know the market inside out. They are fully up to date on the latest and greatest innovations. They’ll hit the ground running, whilst your permanent employees can continue to focus on their existing functions.
Contractors can also bring a fresh pair of eyes to your business, thanks to their broad range of work experiences. Sometimes throwing a new perspective and some innovative ideas into the mix can be just what a team needs. Contractors can add value in both the skills they provide, as well as the impact they have on the rest of the team.
Contractors might seem more expensive than permanent staff when looking at hourly rates, but they might actually minimize overall costs. For example:
- Finding a contractor, with specific skills for a short-term role, may take less resource than trying to recruit the perfect full-time employee;
- Contractors require less time, money and effort when it comes to training: the right contract hire has the full skill set from the outset;
- Contractors are responsible for their own tax and National Insurance contributions, saving you administrative work;
- Permanent employee benefits, such as company pensions and health insurance, don’t apply to contractors;
- Depending on the role, you may not need to provide office space and equipment: some contract positions are ideal for remote, flexible working.
Ultimately, contractors can help organisations meet business challenges and add value through transition periods, digital transformations, bursts of growth, and changing goals. It’s not the right option for all situations, but if you need specialist skills, have a short-term gap to fill, or need big results in a short time, then a contractor may be the perfect solution.
Sam McWilliam is the resident project and programme management specialist at Talent Locker. She focuses primarily on the recruitment of contractors as part of our business change team. Get in touch with Sam today if you’re looking for new talent but aren’t sure if you need a contractor or perm candidates.