Contrary to industry expectations, IR35 has not resulted in a "mass migration" of contractors to permanent employment, reports IT recruitment agency, Computer People.
The company, which places both permanent and contract IT workers, says that while it has recorded a 47 per cent increase in its permanent business this year, the shift is largely due to a "new breed of client", the internet start-up, rather than a result of the Government's tax laws.
According to the agency, of those contractors who this year made the switch to permanent status, almost half entered roles within pure internet start-ups, or "bricks and mortar" companies that are going on-line.
"IR35 has not forced people to permanent positions, (rather) I believe it is other market trends that have been the main influences," comments managing director, Peter Searle. "Contractors on Y2K projects returning to the permanent arena, and new internet businesses requiring a permanent headcount have had a great impact on the movement away from contracting."
"Both permanent workers and contractors recognise the opportunities within the e-commerce sector and those individuals with specialist, sought-after skills are in a position to reap the financial benefits of long-term contracts within budding internet businesses," he explains. "Start-ups, however, are interested in creating a strong company culture and this is best established through a foundation of loyal permanent workers."
Although Searle says the predicted backlash against IR35 hasn't happened, but he believes many of its rules are in need of amendment. "(In their current form) they are unnecessarily punitive and prevent an entrepreneurial spirit amongst IT personnel," he adds.
This was first published in December 2000