With the UK Budget 2024 came a proposed shift in liability from umbrellas to agencies and end clients and a rise in National Insurance (NI) from 13.8% to 15%, every People and Procurement team in the UK will still be holding their breath as they contemplate the impact on contractor payroll costs and processes. These changes signal a need to rethink how temporary and contract workers are managed, especially for those relying on umbrella payroll.
The key impact of the UK Budget:
- Payroll costs for direct-sourced talent may now fall on your company
- Recruitment agencies may need to expand their services to offset these costs
- Talent engagement strategies will need a refresh to stay compliant and cost-effective
For companies operating under IR35 'blanket bans,' the Budget emphasises the need for flexibility in handling independent contractors. Blanket policies are no longer sustainable due to increased NICs and heightened compliance risks.
Here’s how to adapt:
- Weigh the cost increase of operational shifts and NICs
- Consider engaging contractors on an individual basis without direct control
- Analyse your engagements to identify cost savings within your contractor pool to support more progressive policies
Worksome customer data shows a potential 27% cost savings when engaging Outside IR35 rather than Inside IR35 or PAYE. Despite previous HMRC estimates that 60% of contractors would likely sit Outside IR35, companies that quickly adapted are seeing million pound in savings, boosted employee productivity, and faster project turnaround times. Meanwhile, top talent is moving away from rigid umbrella setups toward independent, innovative clients.
As we all should now know, HMRC will assess each contractor’s status based on their contract and their Status Determination Statement (SDS), to ensure compliance with IR35 rules. Too much control over the contractor means a likely increase in cost and now complexity. Contractors outside of IR35 must operate independently, without benefits similar to full-time employees, to remain classed as ‘Outside IR35’.
Workflow, Policy, Education–In That Order
The core focus of your business case for independent talent:
- Faster access to quality talent (sourcing time typically cut in half)
- Lower engagement costs (est. 27% savings)
- Increased productivity and revenue generation (onboarding from 12-18 to 1-3 days)
With well over a year to adjust, companies have plenty of time to pilot and optimise contractor management for both Inside and Outside IR35 compliance - as well as Sole Traders, which is another growing population of skills-based workers. The opportunity is ripe to establish better workflows, progressive policies, and adequate training that support independent work and boost compliance at speed.
At Worksome, we view this as a unique chance for businesses to improve compliance, productivity, and worker experience. Our clients are already benefiting—perhaps it’s time for you to join them.
And exhale…