Red tape-free, with minimal administration. And in the course of the last ten years, it’s a set-up that many SMEs have come to rely upon. But when it comes to growing into a medium-sized business, IR35 has changed it all. Successful startups ready to take the next step have a whole new set of legislation to navigate, including contracts, worker rights, and taxes. For many growing startups, the prospect is a daunting one. They have neither the resources nor the expertise to handle that transition. So, what’s the solution?

What are the options for growing startups navigating IR35?

There are three main pathways that businesses can take when they have grown to a level whereby they are now affected by the changes to IR35 legislation. The first is to try to make do with existing in-house talent, taking on additional permanent staff as funds allow. The problem with this is that it can stifle growth, and put a strain on team members.

The second is to invest in ensuring that HR, recruiting, and accounting teams are fully au fait with the new legislation, and understand exactly what they need to do to prevent your business from falling foul of IR35.

The third is to find an established compliant umbrella company to work with. And find ways to make your business as attractive to contract workers as possible.

What do umbrella company solutions mean for medium-sized startups?

In very basic terms, umbrella companies take on the role of intermediary between businesses and contractors. Contract workers offer their services through the umbrella company. Businesses approach the umbrella company searching for the talent their business requires. Once the business has found the contractor they need, they will pay the umbrella company the contractor’s agreed fees, which the umbrella company will hold until the relevant work has been completed.

So far, so familiar. But the difference is that the umbrella company will handle all of the admin. Making sure that contracts are signed, the right tax is paid, that the contractor’s rights – sickness, holidays for longer term jobs – are observed, and that every letter of the legislation is adhered to.

It simplifies processes for both businesses and the contractors they work with. Allowing both to focus on the things they’re good at, while someone else takes care of the red tape. But it still leaves the matter of finding ways to attract contractors to work with you.

How to attract and retain top talent in your contracting pool

Right now, there’s a lot of competition for experienced contract workers. Facing an initial reduction in work following the implementation of IR35, many contractors found new ways of working. Seeking contracts with overseas businesses, or taking on permanent work. This makes it more important to turn your business into an attractive proposition for contractors. But you can do this fairly easily:

• Provide clear briefs and realistic deadlines.
• Ensure that payment is fair and prompt – something that an umbrella company can help you with.
• Make sure that all interactions are professional, courteous, and polite. Providing channels for open communication, and letting your company culture shine through.
• Show appreciation. All contractors work for money. But their work will turn into their best work if they like you and feel that they are appreciated.

IR35 has hit both startups that are growing to the next level and contractors hard. It has meant an entirely new way of working for some. And significant changes for most. But the challenges presented are not insurmountable. And with the right processes and the right support, the new legislation needn’t be any more than a temporary stumbling block.