IR35: Fallout from public-private sector reforms still being felt by IT contractors

When IT contractors are considering their next role, IR35 status remains a significant concern. However, research from accounting consultancy Sapphire Contracting suggests that this concern is less prominent for off-payroll workers in other industries.

For its Contractor census 2024 research, the company surveyed 2,300 contractors to understand their views on the contracting market and what factors influence their decision to take on a particular role. The top three factors that generally influence a contractor’s decision include pay rate (87%), location (78%), and the assignment’s longevity (47%). Interestingly, IR35 status ranks at the bottom of the list with only 16% of the general vote, but this number increases to 31% among IT contractors.

Alex Moore, business development director at Sapphire, noted that the impact of IR35 reforms continues to be felt by the IT contractor community more than other industries. He emphasized the importance for contractors to stay informed due to the significant financial implications of being classified inside IR35.

While sectors like construction, engineering, public sector, and health and social care are described as positive, IT contractors face challenges. The report highlighted a lack of growth in IT skills demand since August 2023, with a decline for the ninth consecutive month in May.

Despite these challenges, there are opportunities for growth as businesses in the UK look to outsource IT services to reduce costs and focus on core competencies. However, to attract skilled IT contractors, end-hirers must address concerns around IR35, offer competitive pay rates, and provide stable contract terms.

Moore emphasized the importance of understanding the specific needs of IT contractors in a market that’s becoming more selective due to economic pressures and disruptive technologies like AI.