[13th Sept – this post was edited to make it clear that the IR35 changes are in the past – it is the impact of the changes that are still being felt]
There are changes afoot. IR35 (also known as off-payroll) rules changed this year and it will affect people who have formed their own one-man bands to sell themselves to planning departments. The short version is that the employer now needs to decide whether a worker is “in” or “out” and there are tax implications (and potential back-tax implications) that flow from this.
This only the latest in a series of changes of this kind, and there is a broader debate about fairness that I’m not interested in right now. There is also the issue about overall Planning capacity that I’m not going to go into either. My point is – what will the impact of this change be on rates ?
Agency workers are humans, and it is a fact that no human likes to see their pay go down. It’s against nature – anyone who has ever tried to regrade someone knows how fundamentally and totally people resist it. And why not – people’s lives begin to reflect their take-home pay.
So, the conversation started a few months ago about who would take the pain of this change. The intention behind the legislation is pretty clear – this is a loophole that is being closed and the worker takes the pain. However the worker is a free agent, and is able to ask for an increase in rates to make up the difference. Perhaps there is a compromise somewhere in the middle ?
This discussion takes place in a market where some agency workers go on a little round-robin through departments, moving for a rate increase of a £5 there, followed by £3 somewhere else. Their phone rings with these offers, and it must be very difficult to resist.
Worryingly I’ve also detected a sense that money raised through planning performance agreements (known as PPAs) is a different sort of stuff. PPA money is used to employ specific people to carry schemes through to delivery. What matters is delivery, and so PPA people can command high rates. I think in some minds PPA money is passed-through from the developer, and so it doesn’t really matter that it is £50/hr because the source is external. Of course, though, these rates have an inflationary effect on all the others.
So, certainly in the usual employment hot-spots and where availability is low, the rates paid for workers are already extremely high and there is a risk of them becoming yet higher with IR35 changes. The risk is that a fee increase will not lead to a 20% increase in capacity because a chunk of it will get eaten by higher rates. And, in a final irony, these rates are bid up by councils competing with each other and they feel they cannot opt out.
I am reminded of the Brexit negotiations. It is clear that the result of leaving the union has to be less beneficial than belonging to it – otherwise what is the point of belonging ?
Similarly there are a group of councils who do not need to worry about all this rate inflation because they have employed all the workers they need. But to do so, they need to ensure that the work (and workplace) are more attractive than being an agency worker. This means that they have to be able to understand and respond to employment conditions through money and other non-financial considerations.
If councils want to reduce the hassle of employing agency workers they need to find a way of making “belonging” a better proposition than being an agency. I’m sure that this will require different approaches in different places, and that a distracted cash-strapped council is a tricky place to have a discussion about creative ways to get PPA money to enhance employee’s pay packets rather than getting agency workers. But it needs to happen because this problem is only going to get worse.
Tied cottages for planners, anyone ?