IR35 changes having negative impact on contractor rates

(3 minutes to read)

IPSE: ‘Just as the rest of the economy is firing up and wages are rising across the employee job market, freelancers are having to slash their own day rates. Why? The contractors’ bugbear: IR35’.

Recent research has revealed that after a surge in contractors’ rates of pay at the start of the year, average quarterly earnings have now fallen by £2,100.

According to the IPSE’s (the Association of Independent Professionals and the Self-Employed) latest Confidence Index, the main factor behind this isn’t due to a drop in work, but because of contractor’s having to reduce their day rates.

This seems to be due to competing for fewer contracts, as work levels have still not returned to pre-pandemic figures.

Despite this, the survey revealed that in general, the self-employed are confident about the economy and their long-term prospects.

Derek Cribb, CEO of IPSE said, “After a surge in the first quarter of 2021, freelancers’ average quarterly earnings have now dropped by over £2,000. This is because, just as the rest of the economy is firing up and wages are rising across the employee job market, freelancers are having to slash their own day rates. Why? The contractors’ bugbear: IR35.”

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Cribb added, “It is now clear – as we feared – that the changes to IR35 were introduced into the private sector at the very worst time: just when they were most likely to hamstring the freelance recovery. Now just when there should be a surge in freelance work to support the wider economic recovery, many freelancers are finding themselves competitively slashing their day rates to fight it out over fewer contracts.

“It is not all bad news though: it is promising that there is so much optimism among freelancers about the economy and their businesses’ long-term prospects. Clearly, freelancers see a brighter future when the post-IR35 chaos settles. This also shows a path for government: stepping in to regulate umbrella companies and clear the mess after IR35 would not only boost the freelance sector, but also unleash its potential to drive a faster and fuller economic recovery.”

To find out more about contracting please contact Amelia on 01206 591 000 or email amelia.bowlez@contractorumbrella.com.

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