Contractors want employment rights if inside IR35

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For a long time, the majority of contractors have not shown any desire to gain employment rights. A survey conducted in 2016 showed that 80 per cent of contractors were content with working via their own PSCs without sick pay, holiday pay, paternity or maternity pay and pension contributions. For many self-employed people, such benefits would have gone against what it meant to be an independent worker.

Contractors were content to pay themselves in a tax-efficient way through a low salary with high dividends.

However, all that was to change with the reforms to the IR35 legislation. These changes have meant that contractors are more likely to be caught by the IR35 rules. Currently, this particularly applies to those working in the public sector, but it could also be true for those in the private sector in the near future.

The changes mean that those contractors working inside IR35 will be taxed at a level equivalent to that of an employee but with none of the employment rights that employees take for granted. Contractors who work in the private sector can claim back 5 per cent to cover the cost of running a company.

However, this is nothing when compared to the ability to pay themselves in a tax-efficient manner. For public sector contractors, this has been scrapped. It has led to some contractors now calling for employment rights for contractors if they are found to be inside IR35.

Which benefits do contractors see as most important? Given the choice, half would like to have paid holidays, 23 per cent would like pension contributions, 14 per cent would choose sick pay, and 12 per cent would like all the employment benefits. Only 1 per cent said that they would like maternity or paternity pay.