Public sector facing pain – but there are still opportunities for contractors

By Ben Pindar, PR


The public sector has been under the cosh of Draconian government cuts for several years now and many have turned to freelance expertise from contractors to continue to deliver their services in an age of austerity.

By drawing on the UK’s flexible workforce as and when they need it, the public sector has been able to access the skills and insights it needs in an affordable way.

But the public sector now faces even greater challenges; new IR35 rules for contractors next month,  and a potential ‘hard’ Brexit threaten to stem the tide of freelance skills.

However, despite the sweeping changes, we believe there are still some good opportunities for contractors who can investigate different ways of working in the public sector.

Why have public sector contractors been targeted?

There has been a string of high-profile headlines in recent years about “tax avoidance” in the public sector – many of them centred around celebrities.

These headlines have resulted in HMRC having to commit considerable resources to policing the public sector but, despite a range of initiatives that appear to have had success, the taxman is claiming that only 10 per cent of public sector contractors are paying the correct tax.

As a result, we have seen this new crackdown that will take the responsibility of making a decision on IR35 out of the contractors’ hands and place it on the public sector authority. HMRC is hoping to make the public sector organisations the regulators, freeing up critical resources for them to police the private sector.

The big risk is that many public sector organisations are going to be highly risk averse and will simply rule that contractors are inside IR35 to be safe.

This crackdown will inevitably cause contractors to consider private sector opportunities and this could cause a severe shortage of skills in critical public sector services.

How will public sector contractors be assessed?

To support public sector bodies, HMRC has developed an online tool. The long-awaited Employment Status Service (ESS) tool, which is intended to help establish IR35 status, is finally available.

HMRC state that the digital tool will provide some clarity to agencies and end-clients in making IR35 determinations, although use of the tool is optional. The jury is still out regarding its effectiveness, but you can try it for yourself here.

Brexit could increase burden on public sector

The looming threat of a ‘hard’ Brexit also presents a challenge for public sector organisations. Businesses are already starting to show signs of concern and any uncertainty slows spending. As we saw in the last recession, when businesses put a brake on spending, demand for flexible workers increases as it limits their risk and lowers the burden.

This spike in demand will increase competition for talent for the public sector and they could face further headaches in accessing overseas workers if new immigration controls are put in place, further heaping pressure on a stretched sector.

What is the scope of the new rules? Will they be rolled out to the private sector?

HMRC’s official line is that they have no plans to roll this out into the private sector, and mention of reform to the private sector was notably absent from Hammond’s Spring Budget. However, the general consensus is that they probably will, although we don’t know when.

Initially the scope will target any organisation covered by the Freedom of Information Act. This is a wider net than the current assurance process, and will include publicly owned bodies like the BBC and Channel 4.

What are the opportunities for public sector contractors?

Despite all this doom and gloom, the public sector will still offer some fantastic opportunities for contractors and they should still be considered.

The potential mass migration from the public sector could lead to rate rises and many organisations will be happy to renegotiate contracts as they grapple to hold on to the talent they need.

Additionally, contractors are set to benefit from the £23 billion of infrastructure and innovation investment outlined by Philip Hammond’s Spring Budget.  This includes a £270 million investment in “disruptive technologies”, as well as transport funding to alleviate pinch-points in the North and the Midlands.

The key element in making the most of these opportunities is to make sure you are working in the most efficient way possible, whether that is through your own limited company or by using an Employment Business (Umbrella).

The Employment Business route gives you access to key employee benefits like sick pay, holiday pay and pension contributions but also allows you to continue making the most of your flexibility as a freelance worker.


Confused by Off-Payroll working in the public sector? Take a look at our FAQs.

If you’d like advice on what your options are for working in the Public Sector, call us on 0800 731 3178.


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