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Monsters Under the Bed — the IR35 Danger You Overlooked

Jonathan Winters
By Jonathan Winters
on August 23, 2019

Some time ago, you learnt that IR35 would apply to the private sector, and you immediately started preparing. You examined your contingent workforce, spoke to your suppliers, and built a framework to determine tax status repeatably and to a high standard.

I imagine you’re mostly prepared for April 2020. But there’s one area you may have overlooked: services procurement.

Problem #1: Getting Insight Into Services Procurement Isn’t Easy

Our research shows that statements of work (SOWs) are often just a fixed price for a block of workers for a block of time. They commonly contain contingent workers in disguise, and those workers may fall within the scope of IR35.

Can you guarantee that none of your SOWs contain day rates? Would you bet your personal savings that none of your SOWs contain worker titles?

Less than 20 percent of leaders we’ve spoken with are confident their statements of work are risk-free.

business meeting with two women and one man at a desk discussing IR35 in services procurement

Problem #2: The IR35 Clock Is Ticking

The only way to ensure IR35 compliance is to locate all your statements of work and examine them one by one.

You can assign a team to this project, but it will take months to complete. SOWs can comprise anywhere from a single page to a few hundred. Human workers can make only 40 hours a week of progress, and that’s if they never fall ill or miss work.

Problem #3: You Can’t Ensure Accuracy

Remember when I asked if you would bet your personal savings on your statements of work compliance? In this case, would you bet your personal savings that your human team didn’t miss one risk? I hope not.

Even the most exacting professionals get eye fatigue or temporarily lose focus. At the end of this painstaking, months-long process, you still can’t be sure if hidden risks remain.

Problem #4: You Won’t Have Time to Update Your SOWs

Until you’ve measured your “as-is risk”, you can’t build a tailored remediation and go-forward strategy. Let’s say that your team completes its analysis on time. Everything seems to be falling into place. Except that you now have only a few short months to act on the identified risks.

Business meeting with AGS consultants looking at statement of work to discover IR35 risksFirst, you’ll need to rewrite any non-compliant SOWs and reclassify associated workers. Second, you’ll need to develop a new vision for preventing non-compliant SOWs. You’ll need to enact new policies and gather new tools to implement that vision. Finally, you must train others to apply this vision to every RFx, contract, extension, and addendum.


The Solution: Let AGS Shine a Light Under the Bed

Now that you’re aware of the potential hidden risks in your statements of work, it’s time to act.

Taking it on yourself will be difficult, if not impossible. Working with a partner could help, but only if they have the right technology.

That’s why AGS’ solution builds IR35 thinking into the way that you procure services. We offer the three elements you need:

  1. Technology: Our proprietary system accepts SOWs in any form and analyzes them for more than 250 fields, including red flags such as worker titles, day rates, and start and end times.
  2. People: You’ll work directly with a dedicated team who have been in your shoes and know what you need.
  3. Process: Instead of designing and revising a plan, you can focus on deploying our customizable framework. 

IR35 in services procurement consultation with AGS procurement consultants
So, let AGS help you sleep soundly after April 2020 and, ahead of April 2020, let us help you stay focused on what your organization needs you to be doing: adding strategic sourcing value.

We will identify areas of risk across your SOWs in just four weeks. And we will help you mitigate those risks in just eight weeks.

Help me sleep better


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Jonathan Winters
Written by Jonathan Winters
Jonathan is a subject matter expert for Services Procurement – also known as Statement of Work (SOW) - for AGS in EMEA. This means he consults with companies on how they manage their Services Procurement business to help determine if there is a better solution to their current process. He is a regular speaker on HR procurement as his views are often sought by those in his specialism. Prior to joining AGS, Jonathan worked as Head of Procurement for both Bank of America Merril Lynch (BAML) and then at Close Brothers, where he was responsible for spend management, process redesign, change implementation and department restructuring.

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