IR35 - all change please!

Changes to the off-payroll working rules (IR35) for private sector organisations arrived in April. A challenge for in-house teams is determining who takes responsibility – legal or HR? Kira Wilkinson explains how you can navigate the issues

6 April 2021 brought in changes to off-payroll working rules for private sector organisations engaging individuals (contractors) through personal service companies or other intermediaries.

The change moves responsibility for determining whether the off-payroll working rules (IR35) apply to those arrangements to the organisation receiving the individual’s services.

In-house legal teams, with responsibility for ensuring that the rule changes were successfully implemented within their organisation, may have felt a sense of déjà vu.

The IR35 changes have resurrected a familiar challenge for in-house lawyers, where ultimate responsibility for a project may sit with them but responsibility for progressing and implementing actions sits elsewhere.

Where does responsibility sit?

Depending on the angle you view it from, responsibility for implementing IR35 sits firmly with the legal team – it’s the law after all – or the HR function, with recruitment, retention and pay being their remit.

Herein lies the problem for in-house teams – who should take responsibility for the project?

This is much more than simply deciding which department’s name goes at the bottom of the policy document; resource allocation, training/process development, budget coding, internal queries, comms and a variety of other considerations flow from ‘owning’ the project, not to mention accountability to the board for ensuring its successful implementation.

Many private sector organisations have a policy of using an external law firm for their HR legal needs rather than their own in-house legal team, due to the potential for conflict given that the legal team are employees too.

This approach can work well, particularly in relation to individual employee matters where there are clear benefits to presenting an impartial opinion.

However, this can mean that the HR department is less engaged with the in-house legal team, leading to a lack of communication between the two.

In relation to project delivery, this lack of engagement can increase the potential for duplication of work, or, on the flipside, each department may incorrectly believe the other is the accountable department and neither team delivers the necessary outputs.

Resolving the issues

Good communication and project management are key to ensuring these issues do not arise or are swiftly resolved.

Collaboration between the relevant departments to map out the project, document action points and identify the most appropriate owner to progress each point will ensure that the project is delivered efficiently from a time and resource perspective. 

Whether the work is being carried out by an internal stakeholder, external law firm or other party, it is important that one department takes ownership of the project and oversees these workstreams to ensure that there is full visibility of work in progress, accountability to complete the work, and to reduce the likelihood of duplication.   

For a project, such as implementing the IR35 changes, there are often rapidly changing parameters such as changing government guidance and the technology intended to support the process not being available in its final format until a late stage in the project (I’m looking at you, CEST tool).

In these situations, an in-house team’s ability to mobilise, accommodate the change and adapt the planned strategy can be put under intense pressure.

When you consider that the in-house team will also have a very full workload to continue to manage, whilst trying to upskill to understand new legal frameworks and develop processes that align with them, it is easy to envisage the situation becoming a pinch point and, despite what internal client departments may think, the last thing any in-house legal team wants is to become a ‘blocker’.

This is the point where, if budget allows, smaller teams in particular will benefit from seeking support from external lawyers.

Using external resource

When used correctly, the external lawyer can be a valuable tool for an in-house legal team.

Seeking their assistance for discrete points in a project can be much more efficient then having valuable team time taken up with researching complex areas, particularly where the knowledge is of limited scope for use within the organisation.

External lawyers can provide comprehensive, accurate and concise advice on the legal concept, along with generic examples of best practice.

This then dovetails with the main strengths and assets of an in-house legal team – their in-depth knowledge of the organisation as a client enables them to quickly identify the solutions which are most relevant; they are immersed within the organisation, giving them the ability to oversee the project rollout in a meaningful way; and there is no need to socialise or redraft any documents, training or comms for internal circulation, as they are already written in the organisation’s tone and style.

For in-house lawyers working in organisations that don’t utilise contractors, IR35 presents an opportunity for them to demonstrate the value-add an in-house team can bring to an organisation.

Given the speed at which commercial strategy can change within most organisations, it would be a risky decision to not take the opportunity to futureproof contractor templates and create guidance notes to support the organisation to onboard in an IR35-compliant manner, should the need arise.

And if you’re wondering, the in-house team took ultimate responsibility for ensuring IR35 was correctly implemented in my organisation, adopting a project management role to ensure delivery of the action points, which were mostly fulfilled by the HR department with some support from external lawyers.

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