Growth in fixed term contracts with benefits: the new opportunity for interims

12th March 2020

By John Wakeford

With confirmation in Wednesday’s Budget that the extension of IR35 to the private sector is going ahead next month, interim consultants face a big decision.

From April 6, medium and large sized private sector firms (over 50 employees) will bear the responsibility for determining the IR35 status of all their off-payroll workers.

In sectors like financial services, major employers including high street banks have already indicated they are taking a safety first approach and ending all such contracts, amid claims HMRC’s own Checking Employment Status Tool (CEST) is still not delivering clear outcomes.

This draconian response could effectively force interims on to company payrolls, paying full income tax and National Insurance and being taxed on expenses as an employee.

There have been warnings in the trade press in recent months of a mass exodus of contractors operating through Personal Service Companies, many of whom it is claimed will either move abroad or take early retirement to avoid the new tax regime. Others may opt to go back to permanent roles or move into non executive directorships.

But the reality is that like Brexit, whatever your personal view, IR35 is here to stay and we have to adapt to the new market conditions to find solutions.

What has not changed is the need for businesses to have ready access to executive talent. This may be to help steer them through organisational change, or following the sudden departure of a senior director, or simply the requirement for a highly specialised skill set they do not have in-house.

Both clients and candidates need to show flexibility, and we are already seeing significant changes in the interim market which reflect this.

For example there has been a notable rise in the number of fixed term contracts, many of which build in a benefits package and retention bonus – which go some way to making up for the income lost through IR35.

For the interim this could offer the security of a six to 18-month contract with full holiday and sick pay and a bonus, then the flexibility to take a break before their next assignment.

A lot of businesses will take the opportunity to undertake a strategic review of their entire executive recruitment policy in the light of this significant change to interim manager engagement.

The message I would give to both clients and candidates is to be flexible in your approach.

Clients need to consider that if an interim consultant is having to swallow a sizeable cut in their daily fee due to IR35, an attractive fixed term contract of reasonable length with benefits and a retention bonus at the end could help cushion the blow.

Meanwhile candidates have to accept that IR35 is here to stay, so now is the time to look at the lucrative fixed term and permanent contracts that are out there for the right person. But clearly it would be advantageous to be immediately available – i.e. not on a six month notice period!

These are unprecedented times of economic uncertainty, with Brexit and the coronavirus looming large, but for the astute headhunter who works hard to maintain a strong network 2020 could be the year they really earn their corn.

John Wakeford is MD of HW Interim. Contact him at johnw@hwglobalpartner.com or on +44 (0) 113 243 2004.