IR35 private sector reforms: GSK gives contractors 'quit or go PAYE' ultimatum

GlaxoSmithKline (GSK) has told its limited company contractors they will need to re-engage with the organisation on Pay-As-You-Earn (PAYE) terms from early 2020 or quit, Computer Weekly can confirm.

The pharmaceutical giant is understood to have begun emailing the recruitment agencies it works with to say that it will start phasing out its use of limited company contractors in early 2020, in anticipation of the private sector IR35 reforms coming into force from April 2020.

As a result, contractors who engage with GSK via said recruitment agencies are being told they have until 31 January 2020 to decide if they want to remain at GSK on PAYE terms or cease working for the company altogether.

According to one such email, seen by Computer Weekly, individuals who decide they want to carry on working at GSK will be issued with a new PAYE contract at some point during the first quarter of 2020.

“This decision means GSK will not extend the contracts of any workers who operate through their own personal services company in the agency worker category beyond March 2020,” the email further states.

A GSK spokesperson confirmed to Computer Weekly the company will “engage agency workers on a PAYE-only basis from 2020 onwards” to ensure its compliance with the incoming IR35 private sector reforms. 

“GSK recognises the important contribution these workers make to the company. We are working with hiring managers and recruitment agencies to support our agency workers through this change,” the spokesperson added.

GSK is far from alone in responding to the looming onset of the IR35 reforms in this way, as a number of other private sector organisations, particularly within the financial services space, are known to have issued similar ultimatums to their contractors in recent months.

The reason for this is, from the 6 April 2020, medium-to-large private sector companies will assume responsibility for determining if the contractors they engage with should be taxed in the same way as off-payroll employees (outside IR35) or as salaried workers (inside IR35). At present, it is up to contractors to self-declare their status.

Therefore, rather than shoulder the additional administrative burden that will come from being handed these newfound responsibilities, some private sector organisations – who are heavily reliant on contractors – are seeking to sidestep the reforms by scaling back their use of off-payroll staff.

Computer Weekly further understands that any contractors that are already working for GSK on PAYE terms or via an umbrella company will not be affected by this ultimatum.

News of which comes several months after around 1,500 past and present GSK contractors received letters from HM Revenue & Customs (HMRC), urging them to retrospectively review the tax status of their engagements with the firm to ascertain whether they work they did means they should have been caught by IR35.