Public sector departments losing top talent due to IR35 changes

07 September 2017

April’s IR35 tax reform is reportedly causing a mass exodus of public sector contractor talent and delays to projects agencies are recruiting for, according to research from contracting site ContractorCalculator.

Recruiter has reported that the findings of a survey from ContractorCalculator of 1,500 contractors, reveals 76% of public sector departments have lost top talent due to the reforms, with the talent drain causing 71% of projects to be delayed or cancelled.

The research, which follows on from anecdotal evidence that contractors had been leaving the public sector in droves in the month after the introduction of the new rules, also shows:

  • 27% of public sector contractors surveyed have left the public sector
  • 47% of public sector projects lost at least a quarter of their contractors
  • 61% of contractors left due to their refusal to work under new IR35 rules
  • 52% of contractors of those leaving the public sector are yet to be replaced
  • 50% of contractors say they will now never work in the public sector if caught by IR35 and 46% will only do so if the government effectively pays the extra tax

With regards to public sector IT projects and the NHS in particular, the research found:

  • 79% claim IT projects they have been working on suffered delays as departments couldn’t draft in replacements, with 37% of IT contractors abandoning public sector in the wake of the reforms
  • 25% of NHS departments have lost 50% or more of their flexible workforce
  • 63% of NHS contractors are thinking about a new career entirely, with 40% indicating they may quit contracting altogether

And public sector recruiters are witnessing this outgoing talent affecting projects they are recruiting for.

Dave Chaplin, CEO and founder of ContractorCalculator, said HMRC was warned this would happen and cautioned against a roll-out of the rules to the private sector.

However, according to the report by Recruiter, in a statement an HMRC spokesperson claimed ContractorCalculator's findings were based on an “unrepresentative” sample.

Read the full press release here