A large number of us have encountered lots of new challenges since the IR35 changes came into place in April 2017.
So what do the IR35 changes actually mean?
To summarise, social workers who were trading as a LTD Company are now seen as being ‘employees’ for the local authority we are working with . We should therefore receive the same treatment and benefits as all of the employees working at the Council.
I can’t tell you how many times I completed the online tool provided by HMRC which would come out saying that I did not fall within IR35. It really should be based on a case by case but people have been to scared to challenge this and take it any further.
Whilst I understand that IR35 does impact on a large percentage of independent social workers I strongly believe that it is not all of us. I remain perplexed with why the focus has been social workers opposed to other professionals or politicians in our society (but I will stop there before I rant).
Are we now treated as employees?
Unfortunately I was hoping to say that yes we are and there isn’t still the divide there was around agency social workers and permeant workers.
It is important to note that Local Authorities do differ what they provide their agency workers.
What should we now be entitled to? (these are still debatable);
- Similar caseload to permanent staff
- Monthly Supervision
- Equipment provided e.g. laptop/ phones/ working at home access
- Access to mandatory training
- Sick pay
- Maternity/ paternity pay
- Access to a pension
- Holiday pay
And the list could go on.
What does IR35 mean financially for agency social workers?
The Employment Agency take off us an hourly amount for Employers National Insurance Contribution which for the average social worker will be around £3-5 per hour. Note LTD Company workers will still pay tax at 20% and from their business Corporation Tax (19%) and accountancy fees (around £100 per month) on top of this amount.
It also means that our mileage rules have changed. I used to be able to afford to work for Local Authorities which were further away as I could claim this mileage against my Ltd Company. I can now no longer afford to do this and am restricted to how far I can travel. So say I worked for a LA that was 40 miles away that would be 80 miles per day that would mean £36 for my travel, wear and tear on my vehicle and my petrol. This means that workers will not be willing to travel as far or even be able to afford to do this and then Local Authorities will struggle to find agency workers.
The agency will now pay our tax straight to HMRC. I am aware that so many Social Worker were paying different rates and even between other associates at work with different accountants people were coming out with a different amount every month.
I already know of a number of Local Authorities that have had to higher the rates for agency social workers so they are now paying the difference of the Employer’s National Insurance so that they can get people in posts. I wonder who is benefitting from this as it’s not the Local Authorities!
So yes, we are not as financially was well off as we would have been previously been:
So, what should we do?
Try and find roles which are not deemed to fall within IR35
A) The important thing to note is that if the Local Authority has become a Trust then this role does not fall within IR35 and you will then be on the higher pay rate.
B) If you are completing independent pieces of work for a Local Authority e.g. Improvement Consultant role or any independent assessments these do not fall within IR35.
Work out what the best financial option is for you
It still makes financial sense for me to remain an agency social worker. I will still come out with more money and more say in what I do and when I work.
B) Should I go agency under a LTD Company, Umbrella Company or PAYE?
What pays me more? I found this a really difficult decision to make and it took me months to decide (mainly because I also complete some independent work on the side (which does not fall within IR35).
For me personally I am now making the move across to an Umbrella Company and after a lot of research I now feel confident in the decision I have made and who I have chosen to go with.
Please, please, please be careful what Umbrella Company you go with. My advice is, do no go with the loan based Companies, this is not a good choice. Yes, you may come out with a higher rate, but ask yourself why?
Its is also important that you seek advice from an accountant for professional advice.
If you have any questions or would like some support with different Umbrella Companies or agencies just send me a message.