The government could see an exodus of IT contractors, as guidelines out next month will force freelancers earning more than £220 a day onto departmental payrolls.
News site Exaro has obtained a copy of draft “assurance guidance” being distributed throughout Whitehall, which details that contractors earning more than £220 or working longer than six months will have to go on departmental payrolls.
The move follows a crackdown on off-payroll work, but is likely to impact IT disproportionately as many are highly skilled and likely to earn more than £220 per day.
Department chiefs are worried about the effect this could have on IT projects. The government relies heavily on external IT expertise due to much of its in-house capability having been outsourced.
Howard Orme, finance director at the Department for Business, Innovation and Skills (BIS), expressed his concerns in a letter leaked to Exaro.
Orme wrote: “I have set up a separate review of ICT engagements across BIS and partner organisations. With significant change in motion, I want to ensure that this implementation does not become a barrier to change.”
We should treasure our skilled, flexible workforce in the public sector
Howard Orme, finance dirctor, BIS
Computer Weekly understands there are situations where specialist IT workers will find themselves unable to continue work as the agencies that employ them cannot pay them any other way than via a limited company, for liability reasons.
A spokesperson for freelancer association PCG said the moves could lead to contractors refusing public sector work: “The proposed new Whitehall rules attack legitimate contractors who have done nothing wrong and have paid tax. To many, the implementation of these rules will be seen as a war on freelancers and contractors working through their limited company in the public sector. Again, it should be emphasised, working lawfully and within tax guidelines.
“If the reality of these new rules is to remove public sector access to freelance expertise then the end result could well destabilise many public sector departments. We should treasure our skilled, flexible workforce in the public sector, it is a talent tap to be turned on when and where we need their expertise.”
More on government spending
Kevin Logan, director at IT recruitment specialists GCS, said £220 is not a huge amount of money considering that freelancers don’t get holiday or sick pay.
“This could be explosive to the whole [public sector] industry. It feels like they are using a sledgehammer to crack a nut and the public sector may suffer as a consequence.”
The Association of Professional Staffing Companies agreed. “The unintended consequences of proposed legislation would severely hamper the interim and senior flexible staffing industry, and UK plc’s ability to grow its way out of the current economic low,” it said in a statement.