How I prepared for IR35 in 2016

When I became a payroll manager in 1989, one of the first areas I got my head around was determining employment status. From then on, wherever I was, I made it my responsibility for the decisions regarding employment status - which is, potentially, one of the most complex areas of the payroll activity.

Starting point

In November 2016, I undertook a scoping exercise to see how many individuals could be affected by the changes taking place some five months later. I liaised with our accounts payable section who were responsible for paying our self-employed/partnerships/sole trader/limited companies by invoice - and who I would have had sign off for payment.

It took quite a while to determine who the potential individuals could be - I went back one year for all payments made that could be affected by the change, in the end we had about 300.

Senior support

In January 2017, I wrote a short paper for the executive staff drawing their attention to what was happening and highlighting the numbers of the individuals potentially affected, the problems that could occur and how I was going to manage it.

I was fortunate that they gave me their full support. We knew we would have retainment and recruitment issues, especially in our information systems department, so I was taking 100 percent ownership. It was made quite clear to me that the university needed to be seen to be adhering to the changes fully, and that my decision would be final.

This was excellent news as I had senior management buy-in. I had their total support - a major battle won.

Preparation

At the same time I wrote to the executive staff, I wrote to all the individuals who could be affected.

I advised them of the changes coming into force and asked them if they knew that they were going to be engaged by us from April 2017, they contact their line manager so an employment status assessment could be made in order to determine how they were going to be paid.

I began making assessments in partnership with the line managers for those roles that were the same within the organisation. This then made determining status easier and gave me an opportunity of doing some housekeeping with those individuals who were previously deemed self-employed, but were now going to be employees. Whilst they were not - strictly speaking - viewed as an intermediary, I took the opportunity to change their employment status. This meant there could be three outcomes: inside scope, outside scope or employee.

I drafted new procedures and held a number of presentations to all the stakeholders within the university, including senior staff, budget managers, administrators, finance and HR, to explain the changes and how we were going to assess individuals.

The assessments took place with line managers. I never involved the individual as it was too emotive of an issue, I simply did not trust what they would say.

To make a decision, I used the Check Employee Status Tool (CEST) and requested a brief of what the individual was doing from the line manager asking the usual criteria: integration, control, rate of pay, substitute and use of facilities.

However, the CEST tool was not ready until very close to April 6 2017 and it was then changed on a near daily basis to the point that I did not use it anymore - it was not user-friendly. But, in a short period of time, I found out that the number of individuals we were engaging outside of scope was a very small number - they were either inside scope or an employee.

During this process, I also liaised with the agencies that we engaged with - making it abundantly clear that I was responsible for making the decision on the status of the individual.

Today

We have made some changes to our payroll system to accommodate the new title of ‘off-payroll worker’, we pay the VAT where applicable and have informed our colleagues in finance.

Every year I also review who is classed as inside scope, to see if their status has changed and inevitably there are a few.

It’s been three years since IR35 was implemented in the public sector and no agency staff have been deemed outside of scope at the university.

Here are my key points for those now preparing for IR35 in the private sector:

• Executive paper: Promote awareness and get support;

• Ownership: Decide who will take responsibility and lead the project;

• Scope: Identify the individuals and the possible affects on the business;

• Communication: Write to all the stakeholders who might be affected and have procedures in place;

• Assess: Use role assessments, keep paperwork, an audit trail. The line manager has to be involved, not necessarily the supplier;

• Identify risks and costs: Assess the increase in payroll costs, problems with retainment, recruitment and projects delays;

• Review: Check and determine possible status changes each year.