Following a tip-off back in October that GlaxoSmithKline was planning to blanket determine contractors as inside-IR35, Larsen Howie has received an email from an anonymous source confirming that the pharmaceutical corporation is doing exactly that. They’re offering their flexible workforce an ultimatum: go PAYE or terminate your contract.
GSK cites the IR35 reform as the reason for this contractor cull, stating that ‘in response to the change in off-payroll workers legislation that comes into effect in April…from 2020, UK agency workers will be engaged on a PAYE only basis.’
The email itself is a short communication put together by GSK and delivered by Lorien, a prominent UK contractor recruiter that specialises in tech. It offers little to no solid information, simply stating that current contractors will be pushed to PAYE or terminated from Q1 2020 – leaving just over a month to make their decision.
Despite GSK’s reassurances that they ‘consider agency workers to be a vital part of their workforce’ and that ‘the decision was made following a thorough assessment of work practices’, the pharma company issues an explicit ultimatum in the very next paragraph. The email reads:
‘This change means that those of you who work through a personal services company will have a choice to make over the coming weeks – to move to a PAYE contract and remain working with GSK, or to complete or terminate your existing contract.’
‘GSK has advised that they want you to have time to consider your options and have asked that you inform us [Lorien] by 31 January 2020 whether you want to remain working with GSK.
Should you wish to remain working with GSK you will be moved on to a PAYE contract in Q1 2020. Should you wish to leave GSK you can remain on your current contract until the current end date. GSK has requested that you inform them of your intention to leave by 31 January 2020.’
This push to PAYE comes after the mass HMRC IR35 'nudge' letters sent out late August targeting approximately 1,500 GSK contractors. These letters asked contractors currently engaged by GSK to check their IR35 employment status and to subsequently prove that they’re genuinely self-employed.
GSK has made the ‘safe’ decision to sidestep IR35 altogether, without waiting to receive any results from the letters and with no apparent effort made to review each contractor’s case individually. However, this route is not as risk-free as it may seem.
Larsen Howie’s Head of Tax, Andy Vessey ATT, has spoken out before on why blanket decisions are not just bad for contractors, but why ruling out a flexible, specialised workforce is also a bad business move for the companies that use them.
“This is a short-sighted, disappointing, and lazy attitude to take," Vessey says. "It is similar, however, to HSBC’s response to the IR35 reforms that were publicised earlier in the year. HSBC’s original communique was also badly worded and one they had to clarify.”
The likes of HSBC, Lloyds, Barclays - and now GSK - who’ve announced a limited company contractor cull could well be shooting themselves in the foot. By taking such a stance, they’re ultimately directing highly skilled contractors with detailed knowledge of systems and processes to competitors who are willing to embrace the IR35 reform. The medium-large companies that are willing to work with contractors to legitimately preserve their self-employed status will enjoy the cream of the crop with little competition, resulting in coups that could prove business-defining for certain underdogs in the financial and pharma world.
Original source Larsen Howie