If we have to believe what Theresa May is saying, contracting will essentially be abolished from June 2017 onwards. What is going to happen isn’t 100% clear yet as Matthew Taylor is compiling a report on contractors and contracting which will be presented in June.  Matthew Taylor is a former head of the Downing Street policy unit under Tony Blair and now head of the Royal Society of Arts. Even though the report won’t be published until June (https://www.gov.uk/government/news/taylor-review-on-modern-employment-practices-launches), Government sources suggested that Mrs. May will back its recommendations.

What presumably will be in the report is to increase National Insurance for contractors, much stricter rules governing what self-employment is and that freelancers will no longer be able to do a job that a permanent person previously did. The report is basically going to say that companies are abusing the law by taking on supposedly self-employed workers for jobs that are normally done by permanent employees.

They say that the problems mainly arise in the IT and delivery sector, but it is spreading to other industries as well. New rules or abolishing contracting will affect the majority of IT contractors, as most of them are hired to work on projects alongside permanent staff doing similar work to them. From the interpretations that we have seen, with the new rules the Government will no longer allow this. In the future companies will no longer have control over the work done by what the Government sees as “genuine contractors”. A company won’t be allowed to monitor contractors’ progress on a weekly basis or understand their progress on a particular project or piece of work. Companies will be banned from imposing any control or sanction over workers who are classed as self-employed which is strange as the majority of the contractors normally perform similar work on a project as permanent staff. This is basically how most IT freelancers operate (90%) and it seems that the Government won’t let contactors do this in the future, which will abolish the contracting profession as we know it and leave only a small percentage of contractors to provide in many cases rare skills.

Allegedly companies take contractors on to do a permanent person’s work to avoid paying sickness benefit, holiday pay, pension contributions and maternity benefits. Additionally, other companies ask potential employees to incorporate themselves as sole traders rather than being taken on to the payroll to avoid these costs with Uber being a prime example. Matthew Taylor wants to provide the above-named state benefits to contractors. However, this part of the report is the part that seems to be the least likely to be implemented. Why? Because it costs money. The stricter measures that will be implemented is a second attempt to reform employment rules after the Government announced a U-turn on changes to national insurance contributions earlier this year.

The plan is that this report will provide a more clearly defined definition of self-employment, but it will also be much stricter. We await the outcome of Matthew Taylor’s report, but following the tax related changes to how contractors operate in the Public sector in April this year, we feel it will only lead to further restrictions and tax implications for all parties concerned.