The top 3 IR35 challenges to overcome when building an automation team

The United Kingdom’s IR35 tax legislation, which was delayed due to the impact of COVID-19, is finally coming into force.

IR35 seeks to identify so-called “disguised employees”: contractors who are working for clients through intermediary companies, and who would otherwise be classified as employees of the client. As of April 2021, private-sector businesses are responsible for assessing the tax employment status of their contractors, and whether they should be taxed as employees instead. 

An October 2020 survey found that only half of UK contractors planned to keep working as a contractor beyond April 2021, while 18 percent would stop contracting entirely. It’s no surprise that IR35 is expected to dramatically shake up the UK IT landscape, which often depends on contractors to fill in-house knowledge and skills gaps.

Despite the changes of IR35, many companies are still looking to enact digital transformation through robotic process automation (RPA), automating their employees’ tedious, manual, time-consuming tasks. So how can these organizations get the automation experts they need, all while IR35 is shrinking the size of the IT contractor pool? Below, we’ll discuss 3 challenges that companies will face with IR35 when building an automation team, and how you can take steps to overcome them.

1. Lack of in-house knowledge and skills

For many businesses, the most obvious and immediate consequence of IR35 will be that it becomes harder to find experts in automation and other IT competencies.

According to the 2020 survey linked above, just 17 percent of contractors said they planned to become a full-time employee after IR35 comes into force. Meanwhile, a full 38 percent said they would leave contracting by retiring, closing down their limited company, or moving on to “other plans.”

The effects of IR35 will therefore have a ripple effect throughout the IT industry, with more than half of contractors planning to move in-house or leave the field entirely. The UK automation skills gap, which is already a grave issue for many businesses, will become an even larger concern.

Now more than ever, companies need a reliable source of IT personnel who have the skills and experience they need to build an automation team.

2. Increased costs

Lower expenses and greater convenience are two of the main reasons why companies use contractors. Although contractors generally charge higher rates when compared with in-house team members, companies don’t need to retain them on a long-term basis—nor do they need to pay all the salary and benefits of a full-time employee, or the costs of hiring, onboarding, and training.

The repercussions of IR35 will likely increase organizations’ IT costs in multiple respects:

  • Businesses that stop using contractors, or reduce their use of them, as a result of IR35 may find their staff costs increase, as they have to hire in-house workers instead.
  • According to the Association of Accounting Technicians, companies who use workers “caught” by IR35 will have to pay additional costs for hiring these contingent workers.
  • Many contractors who remain after IR35 comes into force will likely be able to raise their rates as a result of this decrease in supply.

Given these issues, more and more organizations are looking for a cost-effective solution that can still offer them the automation expertise they need.

3. Handling IR35 status questions

A third consequence of IR35 will be the additional red tape that contractors and businesses alike need to handle before working with each other.

Instead of using their own individual limited companies, for example, many contractors will switch to payroll intermediaries such as “umbrella companies” that work with their clients. Unfortunately, many such umbrella companies operate their own internal IT systems such as payroll, accounting, and onboarding, and aren’t ready for the surge in demand that IR35 will bring.

Not only will IR35 create challenges such as lack of talent and higher IT costs, it will also engender greater administrative complexity. This means that more organizations will look for larger firms who already have teams of automation experts on had, and who can cut through the red tape and start developing solutions fast.

convedo Digital Experts

The problems posed by IR35, along with other challenges such as COVID-19 and Brexit, require businesses to rethink the ways that they fill the automation skills gap, and they’re increasingly turning to automation partners such as convedo. For over a decade, convedo’s consultants have trained our clients to use automation tools from market-leading technology vendors. Now, we’re helping to close the UK automation skills gap by building the next generation of intelligent automation teams.

convedo’s Digital Experts program has a simple mission: connecting enterprises with the top-tier talent they need to stay competitive in a rapidly changing business landscape. We find outstanding IT graduates; train them to use the latest automation, workflow, robotic process automation, and AI technologies; and then embed them seamlessly into our clients’ workflow. We have the talent you need, and we can offer it in an IR35-safe manner.

From Microsoft and Appian to OutSystems and Blue Prism, convedo’s Digital Experts program gives enterprises the intelligent automation tools and technologies they need to excel. That’s why we’re trusted by some of the world’s leading brands, including KPMG, Deutsche Bank, and Swiss Air.

In the wake of IR35, convedo’s Digital Experts program may be exactly the solution you need. check out the Digital Experts website to learn more. Then get in touch with our team of automation experts today for a chat about your business needs and objectives.

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