Contracting in the time of COVID-19


Date: 1 May 2020

Closeup of bricklayer hands holding hardhat and construction equipment.

The whole country is facing unprecedented challenge in 2020, both in terms of the nation's public health and the ongoing economic impact of having everyone bar key workers effectively confined to their homes for 23 hours a day. This situation is of course having a huge impact on all workers, but contractors face a particular challenge due to the working model they traditionally adopt.

With no permanent sole employer, contractors are likely to be in an especially vulnerable position during the COVID-19 crisis. This may become more precarious as the lockdown continues. So, what can employers do to help make things easier for contractors and to ease their burden?

Supporting contractors during COVID-19

Firstly, it never hurts to reach out to your contractors to see how they are doing. While you may have already done this for your full-time employees, your contractors could have been missed as they're often not included in all-staff emails or team stand ups.

Each contractor's situation is going to be different, but you may find that there is something simple you can do to make life easier. The Government has been trying, but failing, to find a catch-all solution to support the self-employed, so contact from you during this very tricky time is likely to be greatly appreciated.

Secondly, although things are tough for UK businesses generally, if yours is doing okay financially, try to keep your contractors on board. You'll be doing them a huge service, as well as ensuring your own projects are not affected by a lack of skilled personnel. If it's looking like you may have to let them go, is there anybody in your network who may be able to benefit from their expertise? Consider referring on if you can so your contractors can continue to receive an income.

So far, I've only mentioned the things that may be inside your immediate control. However, there are other issues that will massively affect contractors throughout the country.

First, let me talk about COVID-19. Back on 26 March, Finance Minister, Rishi Sunak, announced a raft of measures intended to help the self-employed and bring them into line with the measures already announced for employees. Unfortunately, even if we accept the Government's optimistic account that 95% of self-employed people would be covered by the new measures, this still leaves 5% unable to claim. With an estimated 5 million self-employed people in the UK, that would indicate that around 250,000 people are unable to claim help.

This begs the question of how those who don't qualify are supposed to survive. What about sole directors of limited companies, subcontractors or those who have only recently become self employed and who haven't yet submitted a tax return? It's all very well to say 95% will qualify for help - but it's no comfort to those that don't. And just how accurate is the Government's figure of 95%? The true number of people who have been missed by the new measures has been estimated at closer to 1 million or 20% of self-employed people. This simply isn't good enough.

Contractors, who have been the lifeblood of our country's economy for so long, deserve to have the same rights as employed workers during this time of crisis. As a business you can lobby your local MP and keep the plight of those 'forgotten' 1 million people firmly on the Government's agenda. A solution needs to be found that will ensure a basic level of income is afforded to everyone in order to prevent households from falling below the poverty line.

Forthcoming changes for contractors

Looking further ahead, another piece of legislation that is going to greatly impact the contracting market is the private sector implementation of IR35. This has, thankfully, been postponed to 2021, but the Government seems determined to push this ill-advised legislation through.

IR35 has already caused untold damage to the public sector, with 20,000 locum consultants choosing to leave the NHS, and some Trusts feeling they had no choice but to ban contracting altogether.

If you use contractors, or are a contractor yourself, the best thing you can do is start preparing for IR35 in advance of it coming into force next April. If you employ contractors, you will become responsible for ensuring they fall outside of IR35.

How can you do this? Firstly, review your processes and plan to use some of the online tools and guidance out there to help you navigate the new rules. There are a few tools, including one recently launched by Crunch. You can also help guide your contractors through the same process, directing them to tools such as Crunch's contracting tool.

Finally, don't become one of those employers who lose their nerve and decide to implement a blanket ban. The purpose of the legislation is not to criminalise contractors or those who employ them, but to crack down on people who have been effectively employed but claim the advantages that come with self-employment.

If you can demonstrate that your contract is outside of IR35, you and your contractors have nothing to fear.

Copyright 2020. Article made possible by Darren Fell, CEO and founder at Crunch, an online integrated software and service accountancy firm.

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