Managing a contractor to employee transition


How to ensure a smooth tech transition for contractors post-IR35

What is IR35?

IR35 is a UK tax legislation that aims to determine the employment status and tax obligations of individuals who work through an intermediary, such as a limited company or a personal services company.

IR35 rules are designed to combat ‘disguised employment’ and prevent individuals from avoiding tax and National Insurance contributions by working as independent contractors through an intermediary, while performing duties similar to those of an employee. It targets individuals who would be considered employees for tax purposes if not for the intermediary

The definition of a ‘disguised employee’ is, itself, obscure. But factors like exclusivity, integration and the level of control clients exert over a contractor’s work contribute.

In 2021 changes to these rules put the responsibility for assigning IR35 status on the business hiring contractors – you. Many firms are now employing these contractors under standard contracts to avoid legal risks.

However, if you don’t manage this transition smoothly, you might trade your hornet’s nest for a nice can of worms. It isn’t only employment contracts and tax arrangements that need to change as a result of IR35, but several data and technology related factors too.

Balancing comfort and control

Businesses now need to balance the needs of their (former) contractors with compliance responsibilities. To ensure a smooth transition post-IR35, leaders need to ask a few questions:

  • How will I control my data? By bringing these workers in-house, you control the intellectual property of what they produce. However, the new relationship does make you responsible for data security and GDPR compliance.
  • How will remote workers access our systems? One of the benefits of remote workers is that your talent pool is now worldwide. It may be impractical or unfeasible for you to bring these new employees into the office. Better access to internal systems, communication tools, and databases improves consistency but can lead to security challenges.
  • Can they use their own kit? These issues compound if you let contractors work from their own devices. Effectively, you’re stretching the border of your company’s cyber security defences.


Cloud: a solution which satisfies both sides

Cloud computer systems enabled workforces to stay online and work securely through rapid changes to working practices due to the pandemic.

They also make the transition of contractors to in-house employees as seamless as possible. You can improve collaboration, consistency and quality of these new employees’ work through standardisation.

A configured cloud environment has many benefits:

  • Secure data storage: A range of tools – data encryption, access controls, antivirus – help secure your data while letting former contractors keep their own devices. Hardware stays the same, but now you’re all working on the same secure system.
  • Standardised workflows: Virtual desktops help remote employees access tools, applications, and files as easily as they are in the office. Virtual environments also offer remote training and webinars to get these new workers up to speed on your processes.
  • Consistent branding: Onboarding new employees with a company email keeps a professional appearance in a device-agnostic way. It also offers access to templated documents and materials, so everything can be made to meet your standards.
  • Collaboration and communication: Platforms like Microsoft 365 have many apps and features for better cross-team working. Chat apps, video conferencing and real-time document editing all improve collaboration.

This won’t be a one-size-fits-all solution. A good expert partner or managed service provider will help you set up a sustainable system that meets your and your employees’ needs, without overcomplicating things.

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