Can contractors offset IR35 reform’s impact with an increased income?

Where IR35 is applied to a contract, it is more than likely that contractors will find themselves less well-paid due to how the rules are applied and their ability to manage tax liabilities.

As a result, in order to enjoy the same standard of living, contractors may have to seek an increase in their income when they take on work.

However, it may be a challenge for contractors to request 20 per cent more because tax reforms from April 2020 will increase costs by at least 15 per cent and up to 20 per cent, according to some estimates.

It is important that they approach the project sensibly with engagers and agencies to ensure they obtain the right amount at the start or during an ongoing contract.

Everything is likely to come down to supply and demand. If some contractors are prepared to work for less, then competition will become fierce and it may be difficult to negotiate improved pay.

It will be the contractors who are able to sell themselves effectively and justify their rates that will minimise the impact of the new IR35 landscape by obtaining an increase. The strength of a pitch and an ability to demonstrate added value to a client will be key.

This is why it is important that contractors act now to increase the focus on ‘selling themselves’ as the best, most cost-effective candidate.

Paramount to this is using networking skills to develop relationships with relevant stakeholders and decision-makers. This means connecting online and offline through regular communication so you remain visible to engagers.

Contractors should also look to set out a list of business benefits delivered to previous clients and present this to potential engagers. This is about demonstrating value to businesses and why service costs can be justified. It is outcomes like this that will drive the value of a contractor’s work.

Having strong negotiating skills is very useful if a person is to succeed in the contractor market. Negotiations tend to focus on who has the most to lose if the other side walks away.

When it comes to face-to-face negotiations, contractors should be prepared and have evidence at hand. Creating a ‘career autobiography’ beyond just a standard CV is a great way to achieve this.

Contractors should prepare a negotiating strategy and know what they want, but they shouldn’t be afraid to walk away. There is no point being stuck in a contract that doesn’t pay sufficiently when a contractor could be working on a more profitable project.

Too many people simply ask for more money and fail to justify why it is deserved. During these difficult times, it will be possible to secure a more lucrative contract if it is deserved.