After a false start earlier this year, the new IR35 UK tax legislation concerning self-employed workers looks set to take effect from April 2021 – having been postponed more than once and this time due to the Coronavirus pandemic, look at the implications of IR35 for care homes in particular.
Given the substantial impact of IR35 for care homes, there is a great deal of concern throughout the sector about how much this change will increase the hourly cost of agency nurses, which could be as high as 30%.
The issue here is serious, since many care homes, and indeed many social care facilities, rely on contingency workers to cover staff shortages, vacancies, temporary cover and increased demand.
– So, what can we do about it?
Here, the OUTT team has clarified what IR35 means in practice, what quantifiable impacts it is likely to have, and how care home managers can prepare, and keep control of their staffing budgets.
Calculate your cost of IR35
What Does IR35 for Care Homes Mean to Staffing Budgets?
The crux of IR35 for care homes in particular, is that it sets out new rules under which professional workers can be classified as self-employed.
Other tests determine when those same workers must be treated as an employee – regardless of whether they carry out additional work, or wish to operate as a self-employed professional.
The number of registered nurses working via a staffing agency could be as many as 50%. What that means, is that many registered nurses currently working through agencies as limited company contractors may fall foul of these new rules, come next April, and be subject to tax and National Insurance deductions at source.
Not only does that affect the ability of an agency nurse to determine how they manage their shift work, with the flexibility to work across multiple agencies at the same time, but it means that payroll costs will soar for care homes.
Here’s what that looks like:
- A self-employed nurse is employed through an agency, and chooses which shifts they accept, with full control over their career.
- If they fall into the employment category, the care home (i.e. the end employer, not the agency) is required to pay them through PAYE payroll, applying all the on-costs that entails.
- Care home payroll costs could increase by as much as 30% per agency nurse – inclusive of holiday pay at 12.07%, employers National Insurance at 13.8%, pension auto-enrolment at 3%, and the apprenticeship levy at 0.5%.
While it seems clear that IR35 is intended to promote the right of regular casual workers to be entitled to all the employment benefits of a full-time member of staff, it conversely has a significantly negative impact on contingency workers who wish to remain so.
Care home managers now face the challenge of navigating increased demand and a higher staff to patient ratio, with potentially disastrous budget pressure when IR35 comes into force.
Which Social Care and Healthcare Facilities are Impacted by IR35?
There are rules around which employers are required to carry out the IR35 ‘tests’.
Each contingency member of professional staff should be assessed, with an immediate switch to PAYE payroll if the rules dictated by HMRC classify that worker as employed, rather than self-employed.
Exemptions apply as below:
- Turnover of less than £10.2 million per annum.
- Balance sheet value of under £5.1 million.
- Fewer than 50 employees.
Remember that these criteria apply to the end client, not the contractor or the agency, so these tests to establish eligibility apply to the care home or social care employer to whom the worker is dispatched.
The roles that are subject to IR35 assessments include registered nurses, and other professional roles – potentially inclusive of social workers and supply teachers depending on how the legislation is rolled out.
Ultimately, IR35 means that, without taking any action, care homes will need to find an additional 30% budget for agency nurses by next April, unless their agency is already billing this surplus cost.
What can Care Home Managers do Ahead of IR35 to Protect Their Staffing Budgets?
The first action is to ensure that you are only employing agency nurses, and any other healthcare or social care professionals, through a transparent and compliant staffing agency.
While umbrella companies and agencies are familiar throughout healthcare, it is imperative that you only hire through reputable agencies and perform routine audits, to avoid inadvertently breaching the new rules and potentially being subject to steep penalties.
OUTT believes that the correct interpretation of IR35 is that this applies to all registered nurses working within care homes – regardless of the size of that care home, or ownership group.
Your next step is to assess what payroll cost hikes you are facing and to determine whether reliance on your existing agency employment structure is likely to be cost-effective in the future.
And – if not? We have a solution.
- You could hire registered nurses; view all of their skills, experience and accreditations, through a registered agency that charges a fixed 10% fee?
- There was a fully transparent fee structure, so you’d always be aware of the cost of hiring temporary candidates, without any nasty surprises?
- Your agency of choice offered a completely digital interface, enabling you to vet applicants, make job offers, manage timesheet approvals, and request documentation, all from a few clicks of the mouse?
- You could work direct with the candidates of your choice, eliminating hearsay and third party conversations.
OUTT is proud to be disrupting the framework of hiring contingent staff in the social care and healthcare sectors.
It has long been time for a change, and we leverage digital technology, and contemporary working practises to make the lives of care home managers easier, and their budgets simpler to control.
As a service designed in response to the COVID-19 pandemic, and the urgent need for social care managers to have faster, more efficient access to qualified shift workers, OUTT is changing how agency staff work, for the better.
How do we work around the IR35 regulations? It’s straightforward:
- Staff are fully PAYE employed, by us, with the same access to benefits, entitlements and pay as you would expect in any permanent role.
- OUTT deals with the payroll, record keeping and timesheet approvals through our digital platform to save you the time, hassle and cost of doing so.
- We are partially funded by InnovateUK, and a registered and compliant employer thoroughly versed with the IR35 legislation, and our obligations.
- OUTT charges agency fees with absolute transparency and a fixed 10% cost.
How Much Could I Save on My Care Home Agency Fees for Temporary Workers?
When it comes to the crunch, IR35 is about two things – holding employers liable for providing full entitlements to their workers and collecting PAYE taxes directly from the source.
Even without the impact of IR35 for care homes, the sector is often dealing with budget pressures and staff shortages, and April 2021 looks set to cause enormous challenges for many managers.
By switching to OUTT, you have the assurance that your temporary staff are all employed, with full PAYE benefits, relieving you of any further obligation aside from concentrating on running your team.
Our new Temporary Agency Savings Calculator provides a fast, efficient way to see how much you could reduce your staffing budget by.
As an indicative example:
- You employ a Registered Nurse through an agency at £20 per hour pay rate. Inclusive of your agency fees, taxes and additions, your actual hourly cost is £30.72 – equating to £4.85 per hour agency fees, or 21.64% of the staffing cost.
- By switching to OUTT, you pay a fixed 10% agency rate – no quibble, no question. That makes an hourly saving of 11.64% – meaning you save a total of £2.61 for every hour you hire a temporary nurse through OUTT.
- Over a year, if you hire registered agency nurses for 40 hours per week, for 52 weeks of the year, your budget will reduce by a whopping £5,425.89 – without changing anything, but your staffing agency.
You can try out our calculator tool to see for yourself how much you could save.
Sounds too good to be true?
All we are doing at OUTT is taking best practise and tried and tested modern working methods, and applying them to the healthcare industry to demonstrate what responsible, forward-thinking and digitally enhanced agency employment should look like!
Take action today to ensure your temporary nursing requirements are booked and budgeted for, well in advance of IR35.