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29th March 2017

NEPO's Approach to IR35

Steven Sinclair, Head of Procurement at NEPO IR35 is also known as ‘intermediaries legislation’. It’s a set of rules that affect tax and National Insurance contributions for workers employed through an intermediary.

In 2016 Government announced that in the public sector IR35 status would be determined by the client rather than the contractor. This means that from April 2017 public sector bodies will be responsible for:

  1. Determining whether the rules apply;
  2. Calculating, reporting and paying relevant taxes if they apply; and
  3. Payment of any financial penalties in the event of non-compliance.

Clearly this presents the public sector with a challenge. Steven Sinclair, Head of Procurement at NEPO, describes the approach adopted by NEPO and its Member Authorities.

How did NEPO and its Member Authorities approach this issue?

NEPO adopted a proactive and collaborative approach to managing this legislative change by engaging with North East Regional Employers’ Organisation (NEREO), Association of Directors of Adult Social Services (ADASS) and Local Government Association (LGA) to ensure that all service areas across NEPO Member Authorities were informed and prepared.

What were the key challenges in determining NEPO’s approach?

There were two key challenges, the tight timescales involved and the uncertainty of how many current workers would be affected by the reform.

NEPO was able to work with its key suppliers to produce management information that gave the region a better understanding of the number of workers that would be in/out of scope of the legislative change. This strong contract management relationship enabled NEPO to consider the risks and manage our approach accordingly.

What changes have NEPO introduced?

Two of NEPO’s solutions are directly affected by IR35:

  • Specialist Professional Services (known as NEPRO)
  • Agency Staff

For Specialist Professional Services it was determined that from April 2017 no workers would be appointed on an interim/PAYE basis. This was relatively straightforward and in line with the practices that NEPO instilled into the solution when it was first introduced in 2012 – namely to focus on outcomes, rather than the individual.

For Agency Staff NEPO has instructed its neutral vendor de Poel that all existing and future appointments must be made via PAYE. Exceptions to this blanket approach can be made but must be communicated to de Poel by a Designated Individual within each NEPO Member Authority.

What are the benefits of NEPO’s approach?

This approach ensures compliance whilst also allowing an element of flexibility in terms of ‘exceptions’ which will be closely managed through a predetermined centralised process.

For NEPO’s Member Authorities there is a cost avoidance due to the reduced amount of resource required to assess the employment status of each individual worker (some estimates being as high as 45 minutes per worker). Furthermore, this streamlined approach provides clarity to the market as well as to colleagues working across NEPO Member Authorities.

Both solutions are available to the wider public sector via NEPO’s Associate Membership scheme, therefore the benefits of NEPO’s approach can be extended across and beyond the North East region.

What are the next steps?

There are some concerns nationally that the reform will make public sector assignments less attractive to interim workers, creating a deficit in staffing in key areas such as social work. NEPO is working closely with ADASS to look at practical steps to reduce this risk.

NEPO, through its membership of the LGA’s National Advisory Group will continue to provide feedback to HMRC on this issue.

Find out more: If you have any questions or comments on this article please do not hesitate to contact NEPO (enquiries@nepo.org). Alternatively, visit the NEPO website to find out more about NEPO’s solutions for Agency Staff and Specialist Professional Services.