Should you always use an outside IR35 contract template for your off-payroll workers?

Should you use an outside IR35 contract template for your off-payroll workers?
Whilst a template outside IR35 contract can be a good starting point, they should be used with caution and not on the basis that you have met your IR35 obligations, by issuing a contract that says the engagement is outside IR35. 

In this article we will explain the potential problems with  template outside IR35 contracts and how such issues can be mitigated. 

Contracts don’t always reflect contractors’ actual working conditions

Most IR35 contract templates are based upon the main worker classification considerations. However for the contract to stand, if ever challenged by HMRC, it is critical that it clearly reflects the services and the nature of the engagement. If the key aspects of the contract are proven to be too far removed from the nature of the services and working practices it will be considered a ‘sham’ contract. Therefore consideration should be given to the contact in light of the working relationship and practices. You will almost certainly need to adjust the Statement of Work / Assignment schedule for each contracting engagement and you may need to amend clause wording to ensure that what is stated in the contract is actually occurring in practice. 

Irrelevant clauses 

Template contracts can often cover a wider variety of points and eventualities. This is done in the best interest of the client, but can often lead to irrelevant clauses being included. A client may not fully understand the clause, but be apprehensive about removing it in the fear it could create exposure. Typically liability clauses can be long-winded and complex. 

The best contracts are clear and concise, leaving little room for ambiguity. 

Recruitment agencies aren’t legal experts nor do they oversee your engagement with contractors post-placement

Contractors are commonly engaged via a recruitment agency, meaning that you may not have a direct contract in place with the contractor, leading to you being unable to influence or understand the terms upon which the contractor is being engaged. 

You can request a copy of the contractor contract from the agency who should be able to provide you with a template copy. You can then review this contract to ensure that it is aligned with how your business operates and the general working practices of contractors. 

You should also have a contract in place with the recruitment agency, in which you specifically reference aspects of the working practices e.g. whether or not the contractor retains a right to substitute, the degree of control that will be exerted. Furthermore you should expressly state what clauses should be flowed down to the contractor and include a right to audit, allowing you to request actual contractor contractors and information to enable you to ensure compliance. 

How to approach creating a written contract for your contingent workers

Managing IR35 compliance can be challenging. It’s tough for decision makers in HR, finance and procurement to make calls on IR35 because it’s a complicated area entangled between tax and employment law.

CoComply’s experienced IR35 consultants work with businesses, charities, and public sector bodies to make sure you stay compliant. By helping organisations grasp the key components and requirements of the legislation, implementing a streamlined compliance process and ensuring accurate contracts are in place this makes your more attractive to specialised highly skilled contractors. 

Need to speak to an IR35 Compliance expert now?

And our Compliance experts will be in touch immediately.