We previously reported on HSBC’s ultimatum to contractors to “quit or go perm” and now another banking behemoth is following suit.
In what will come as a further blow to banking and IT contractors, Morgan Stanley have made the decision not to take on any more contractors from October 2019, ahead of the expected IR35 changes in the private sector from April 2020.
Options for existing Morgan Stanley contractors
Workers who are already on contract with Morgan Stanley have 3 options:
- Leave straight away
- Accept a contract that is inside IR35
- After 22 months of being on an IR35-caught contract, they must become a permanent employee of the bank.
A sign of what’s to come?
The assumption is that the majority of Morgan Stanley contractors will be looking for other contracts. However, they may find that other major banks announce similar measures ahead of the off-payroll reforms in April 2020, meaning more competition for fewer contract jobs.
Indeed, the trend may extend well beyond the banking sector. In a recent survey, 59% of companies said they were considering a similar approach.
This could be extremely disruptive to the UK contractor market. Contractors are already saying that they will have to raise their rates to compensate for the resulting drop in income from IR35-caught contracts.
But conversely, if the number of contract jobs falls, and there are the same number of contractors going after them, rates will plummet.
Accountant Alam Broome of Broome Affinity Group gave his perspective on the potential impact, if more private sector engagers follow Morgan Stanley and HSBC’s lead on IR35:
“What this means long term I have no idea, but short term it will mean a lot of pain as the contractors and the clients find their level. Ideally, everyone in the hiring chain should be sitting down and hammering out new terms of engagement but I see little evidence of this.”
At Liquid Friday, our in-house experts are fluent in all things related to IR35.
We are on the frontline to help agencies and their clients fully get to grips with the IR35 legislation and what they have to do to ahead of April 2020.
We’ve been here before, having helped hundreds of recruiters and engagers when the off-payroll changes hit the public sector.
To discuss how we can facilitate IR35 planning for your business, including advice on feepayer and deemed payment solutions, please call 02392 883300 or email [email protected] and we’ll do all we can to help.