As energy demands and prices recover from the pandemic, production pressure on the oil and gas industry has rapidly increased in 2021. Many companies are finding it difficult to recruit and, importantly, retain the talented professionals they rely on.
A recent survey by recruitment firm Brunel and oilandgasjobsearch.com has revealed that 43% of people working in the oil and gas sector are considering leaving the energy sector altogether in the next five years.
In the months to come, maintaining a flexible workforce and retaining talent will be imperative for success. Deloitte recently reported that workforce and talent retention/attraction will be one of the five key challenges faced by oil and gas companies in 2022.
One way that senior leaders can get ahead of this, and retain talent, is to ensure they have an effective contingent workforce strategy with a compliant and fair IR35 solution being at the heart of their organisation. Those who take the time to review their approach now can use it to their advantage, positioning themselves for growth in the next year.
The IR35 journey
The Government introduced the off-payroll working rules, known as IR35, as a more appropriate tax framework for the flexible workforce. As with any tax, this legislation has often been portrayed as negative and time consuming, however, there is an opportunity now to re-evaluate how IR35 can be used to unlock the potential of a flexible workforce.
In Brookson Legal’s “Reassessing IR35” report, 500 medium to large businesses were surveyed about how they have handled the implementation of the new rules in the private sector. This revealed that responsibility for IR35 rested with a variety of functions: finance (34%), HR (30%), procurement (21%) and legal (18%). Positively, CEOs have taken ultimate responsibility for IR35 in more than half (54%) of the businesses surveyed and the board in a quarter (25%).
Why is IR35 a strategic leadership issue?
For leaders to position their company to access the flexible resources needed for growth, they require a clear overview of their IR35 solution. Increased visibility of the flexible workforce offers the ability to shape it to specific requirements, while keeping a close eye on costs.
A good IR35 solution will also ensure businesses don’t pay employment taxes for genuinely self-employed contractors. This not only reduces resourcing costs but makes the business as attractive as possible to contractor talent. In a competitive hiring environment, this positions a company’s contractor offering ahead of the competition in the race to secure resources to deliver projects on time and, importantly, on budget.
It might be expected that HMRC liabilities would be top of the list of the risks businesses identify from a poor IR35 solution. However, of the decision makers surveyed, more recognised commercial risks, including contractor costs (53%), talent attraction (42%) and project delays (42%), as potential concerns over and above unforeseen tax bills (31%). This is a mature understanding of the challenges presented by IR35.
The road to a flexible workforce
Embedding IR35 into business as usual is the first strategic step on the journey toward a truly flexible workforce. In order for a business to evolve and progress, its IR35 solution must too. IR35 is an ongoing responsibility; it is important to frequently review your solution to make sure it is working effectively to support your business, whilst maintaining staff training and compliance with HMRC’s guidelines.
In conclusion, with the right leadership, IR35 can be an unspoken opportunity for growth. Given the potential risks and benefits, we would recommend that board members and senior management have complete oversight of this process, with professional advice from the right partner. Oil and gas businesses who manage this well will be in a strong position to retain their skilled contractors and unlock their full potential in 2022.
