Public bodies are raising their rates to incentivise some PSC contractors who will be caught by the new IR35 laws. The rise in rates is to encourage the contractors to stay with the public bodies.

The rates are typically used for PSCs who agree to instead work via umbrella companies; the increases have been designed to offset the extra tax that contractors will incur by switching to PAYE.

At an individual level, the increases will ensure that the client keeps the contractor’s skills in exchange for the contractor retaining their earning power or close to it without having to worry about IR35.

However, over twice as many have decided they do not wish to introduce such hikes in their rates, especially as 38 per cent of PSCs say that they will only accept contracts that are outside IR35.

One contractor who left her public sector client said, “I was sceptical, but I do think that rates at my former client – a central government department are now increasing.”

Another contractor reported that having switched to PAYE the increased rates he was receiving meant that his take home pay was no lower than before.