IR35 changes have made hiring contractors more complicated. Now more than ever, it’s important to make sure you really wring the value out of your contractors and make the most of their expertise.
Managing contractors based on their IR35 status is the best way to ensure you’re using them in the right way.
Managing contractors inside IR35
“If your contractor is inside IR35, they are, for all intents and purposes, an employee of your company for that time,” Mark explains.
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Of course, this means that employers are responsible for paying the contractor’s tax, national insurance and sick leave, just like traditional employees. But this also has an impact on how you should manage your contractors.
“A contractor working inside IR35 should get the same management, care and attention that you would give to your permanent employees. How do you keep permanent employees engaged? You give them KPIs, and manage them daily to make sure they have everything they need to reach them.”
Documentation and reporting
A contractor working inside IR35 requires you to set clear expectations and give them everything they need to meet them, managing them closely as you would a permanent employee.
“It’s within your remit and responsibility to manage that person.”
“It’s within your remit and responsibility to manage that person and determine how it is you want to collate information about what it is that they’re doing,” Mark explains. “Documentation, reporting, making sure they’ve got email addresses, whether you expect end of assignment reports, mid-assignment reports – you need to be clear about all of this and then oversee it, as you would with an employee.”
Knowledge transfer
Taking the time to properly onboard a contractor working inside IR35 will ensure they do their work well.
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“Knowledge transfer is often done through traditional consultancy tools.” Mark explains. “Workshops and one to one sessions can all be used to guarantee smooth and effective transfer of knowledge.”
Setting goals for contractors outside IR35
Your approach needs to be completely different for contractors working outside IR35. They should be working independently as an expert selling a service. Managing them requires a clear roadmap with measurable deliverables.
This is what keeps the contractor engaged – they’re motivated by completing something. There’s a clear start, middle and end,” Mark explains. “So by having a clear roadmap and journey that an individual can deliver on, outside IR35 almost looks after itself.”
Documentation and reporting
Contractors working outside IR35 should be working towards clear deliverables, rather than daily or weekly touchpoints. A six-month project might be split into smaller goals, delivered every four to six weeks. These expectations need to be set out at the beginning of the working arrangement.
“You need to plan with the contractor and have a mutual agreement in terms of what’s going to be delivered.”
“You need to plan with the contractor and have a mutual agreement in terms of what’s going to be delivered,” Mark explains. “That might change or evolve slightly over time, but by and large, you should have a pretty clear template.”
Knowledge transfer
A contractor working outside IR35 won’t need hands-on management. But they will need detailed project briefs, a clear roadmap, and a good idea of what’s expected of them when it comes to meeting and reporting.
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You shouldn’t be monitoring them, helping them understand their role, using KPIs, frequently communicating or having one-to-one check-ins. However, there is obviously some knowledge which is fundamental to them being able to deliver.
It’s also important to remember that you don’t want their knowledge to leave with them when the project ends. Since you won’t have daily contact with an outside IR35 contractor, it’s up to you to ensure you capture any salient knowledge from their work on the project.
Accountability
There is only so much you can manage someone. Ultimately, whether a contractor is inside IR35 or outside, accountability is a key part of making sure you get full value out of your investment.
It’s important to be clear about what impact missing deadline will have, or not delivering to a high enough standard.
IR35 doesn’t have to be complicated. Our Contract Complete service is designed to take you through every step – from finding contractors and determining tax status to managing them on the job. Get in touch to find out how we can help you with IR35.
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