Bloom Services on IR35 and Contracting With Consultants for Outcomes & Deliverables

We have now read much of the Taylor review “Good Work” which discusses the employment market and new ways of working. There is a lot to digest, and at times it does read more like an academic study than a document that is going to lead to real government actions and even new laws. We can see how those on the right, free-market side might dislike it for its suggestions that more intervention is needed. Equally, those on the left might laugh ironically at the suggestion that companies can be made to behave better by a bit of peer or customer pressure.

One of the central issues here is the definitions around employment, self-employment and the intermediate status of “worker” or “dependent contractor” as Taylor would like to call it. That has many implications, not least the taxation treatment of individuals and their employers. In the UK, we have seen a lot of confusion in this area, with the famous IR35 legislation trying to define the difference between someone who is genuinely working as a self-employed contractor and those who are really working as employees.

The UK government has had a couple of major crack-downs on its own organisations, which have caused confusion and additional work for many. But maybe there is a silver lining to this cloud, as a new article from Rob Levene, MD of Bloom Services explains here on the firm’s website. It’s titled IR35 applied: zero shades of grey and is well worth reading for anyone interested in the topic. It looks at the silver linings around the IR35 developments and also the responses to the legislation from hiring organisations, some of whom appear to be getting a little confused between contractors, consultants, service deliverers …

Many individuals or even teams working for public sector bodies over the years have been positioned as self-employed contractors or even as “consultants”, but in reality were working as what would be better described as “staff substitution”. So they were working under day-to-day direction from the organisation’s own employees (or in the worst cases, under the direction of different consultants!). They were also employed in most cases under what we would classically call “time and materials” contracts, being paid basically for just turning up.

Back in 2010, I wrote Buying Professional Services (co-authored by Fiona Czerniawska), and looked in some detail at the different routes for engaging consultants. Time and materials based contracts have their place; but it is a pretty limited one. In the vast majority of cases it is not the best commercial route for engagement. So when we first got to grips with the Bloom business model that Levene describes briefly in his article, we were pleased to see their focus on true “statement of works” and deliverables / outcomes based approaches to engaging contractors and consultants.

Now, with Taylor and greater scrutiny of IR35, it looks like good timing for the Bloom approach. The firm pushes clients whenever possible to make sure every assignment is defined in terms of those deliverables, not simply having a person or a number of people rolling up to the office every day and waiting to be told to do something. This outcome-based approach has the beauty of both being the right “business” thing to do, plus makes the employer far less likely to get caught up in any debate around dependent contractors or IR35 rules. Going further, Levene talks about “service catalogues”, which we will look at in more detail separately; it is another interesting approach to this subject.

As you probably know if you have got this far, Bloom are now working with us as a sponsor. But we can assure you that we are writing here from an independent perspective. Time and materials consulting contracts, with no clear outputs, outcomes or deliverables very rarely work well. If Bloom can push and persuade their clients into a better way of working, those clients (public or private sector) will undoubtedly get better value for money from their consulting expenditure. Do read their article here.

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