Option 2 ‘Inside’ IR35
With the new IR35 deadline set to 6 April 2021, personal service companies are temporarily back in good grace and free to engage with SAP employers on old rules.
Following the government’s decision to delay the IR35 rollout, many businesses that had previously blanketed all contracts as ‘inside’ IR35 or completely banned PSC contracting are reversing the ruling.
Employers like Sainsbury’s and Deutsche Bank have reopened to the contingent workforce and are actively looking for better ways to ensure compliance with IR35 before the new deadline rolls in.
But even with the additional year to prepare, we can still expect the SAP landscape to undergo severe changes in the coming months. That’s why we’ll continue to assist all our clients and contractors with the transition and make sure business continues as usual for contracts ‘outside’ and ‘inside’ IR35.
Here’s everything you need to know to prepare.
IR35 FAQ for clients
‘Will I still have access to the best SAP talent’?
bluewaveSELECT will continue to connect clients with SAP contractors in the usual manner through our hidden network of experts. If you’re currently employing PSC SAP contractors and won’t be able to do so after 6 April 2021, we we’ll help you convert to a PAYE model and find talent ‘inside’ IR35.
‘What about the additional costs to contractors’?
A 2019 Brookson Legal survey found that 50% of contractors expect to negotiate better terms once the legislation hits the private sector.(1) That means businesses converting to PAYE may need to consider offsetting the additional costs by offering pay increase or additional benefits to retain top talent.
‘How can I ease the transition’?
While we’ve already communicated the changes across our supply chain, you should take steps to guide your contingent workforce through the transition. It’s important that your SAP contractors are aware of how the new model of employment will affect their work flexibility and take-home pay.
IR35 FAQ for SAP contractors
‘What it means to be ‘inside’ IR35’?
When the legislation rolls out on April 6, 2021, clients, instead of contractors, will become responsible for making status determinations (on-payroll vs. off-payroll) for the contingent workforce. As a result of the assessment, your contract may be considered either ‘inside’ (employee for tax purposes) or ‘outside’ (independent contractor) IR35. If it falls within, your work will be subject to PAYE terms and similar taxation to that of a regular employee.
‘Will this affect my take-home pay’?
Unfortunately, HMRC’s push against the private sector is going to impact take-home pay for all contracts deemed ‘inside’ IR35. According to ContractorsUK, the associated taxes and NI contributions can affect the final pay by around 20%.(2)
It’s important to note that calculations will differ from contract to contract, but even if you’re caught by the legislation, you MAY not lose out too much financially if your client adjusts the rate or offers additional perks to compensate.
Some SAP businesses are already demonstrating a willingness to partially offset the extra cost and increase rates to retain existing contracts. You can also become eligible for a number of employment benefits which are inaccessible for independent contractors. But that’s not all.
Our analysis of the job market indicates that flexible, remote work arrangements are gaining popularity with SAP-enabled businesses. That means travel and accommodation costs may soon be a thing of the past as fully remote placements become the norm across the industry.
Read our article ‘The “Remote” Future of the SAP Job Market Past COVID-19’ to learn more.
‘Can I still work on contracts “outside” IR35’?
Yes. Even if one of your contracts is caught by the legislation and converted to PAYE, you can still engage with ‘outside’ assignments and enjoy the flexibility of working through your PSC. Status determinations are limited to a particular contract and won’t affect anything else.
As the new IR35 deadline approaches, contracts ‘inside’ IR35 will soon become a norm for some clients and contracted SAP workforce. By acting now, you can minimize the extra costs and mitigate the risk of delays hitting your business-transformation programmes.
Are you an SAP professional or company requiring SAP expertise or advice on IR35?
Let us know at firstname.lastname@example.org or +44 (0) 1423 559 559.