As predicted on this site, the outlook in 2020 for LTD company contractors is looking very bleak. We are barely half way through January and a number of high profile and large global companies have already announced that they have no intention of fairly assessing IR35 status but instead will force contractors to engage them via an Umbrella company and PAYE.
Regardless of industry commentator's sentiments I personally do not see a quick turn around of this strategy having worked in the industry for 30 years. I have seen first hand how large firms will use 'opportunities' like the one presented by the IR35 reform to reduce their costs. I could never see large corporate firms being kind enough, as suggested by some, to increase day rates to compensate for the loss of earnings caused by Umbrella/PAYE. In fact, day rates have been declining for 20 years and large corporate firms now use a combination of 'tools' to reduce their temporary resource costs, such as:
- Rate cuts of at least 10%.
- Enforced Mandatory Time Away (MTA)/unpaid leave which can be as much as 8 weeks/year.
A number of factors have emboldened the actions of large corporate firms in the last 20 years which have all assisted with providing them with a very good hand to play.
- Mass outsourcing/off shoring of pretty much all IT roles. What started as basic help desk roles now encompass sys admin, development, project management etc.
- Multiple financial crises such as the year 2000 Y2K/dot-com and year 2008 banking recessions.
- IR35 (UK).
Is this the end of contracting as we know it?....