Our approach to IR35 and Children’s Services

Published 04 April, 2024

To date, the provision of children’s services social workers into Local Authorities to deliver managed services by private providers has been characterised by off-payroll working. However, the new IR35 legislation requires us, as the provider, to challenge that method of engagement. The responsibility to determine the status of the engagement sits with the service provider, who essentially must judge whether the characteristics of the relationship with the worker genuinely reflect an outsourced contract for services or whether that relationship should be deemed employment.

Our children’s services model is characterised by the provision of managed teams of social workers, who provide capacity to Local Authorities, either because there is a local deficit of available, employed social workers relative to the demand for services, or because they wish to create some space in the service to drive change and transformation. Either way, the Local Authority outsources a proportion of their caseload to us to manage for a defined period of time. As such, when completing our IR35 status determination for a typical children’s services contract, there are three principle tests:

1. Do we have supervision, direction and control over our team of social workers?

The simple answer is ‘yes’. We wouldn’t be able to deliver to our uncompromisingly high standards without exerting supervision, direction and control, and we don’t believe our Local Authority clients would want us to operate in any other way. Our Head of Service retains full oversight for all of our contracts’ delivery, direction, and performance to ensure safe and effective practice. This includes clear guidelines around how the work is completed at both a management and operational level. Additionally, all work is subject to internal audit and quality assurance to ensure it meets our quality thresholds.

2. Are social workers able to send a substitute to undertake work in their place?

For Xyla, the answer will always be ‘no’. Aside from the logistical challenges around vetting, IT access etc., fundamentally, we believe in continuity for the children and young people (and their families/carers) who form our caseload. It is poor practice to switch assigned social workers, and so the right of substitution for social workers in children’s services is not something we could accept within our service.

3. Is there a mutuality of obligation between us as the provider and the social worker?

We expect our children’s services social workers to commit to us and our contract for the duration of the assignment. We do not believe a portfolio approach provides the best service or outcomes for children and young people. As such, our social workers are paid by the hour rather than piecework and are expected to complete a 37-hour working week – both very much characteristics of employment.

It is clear from an examination of the characteristics that the worker engagement model is akin to employment, and our legal advice strongly supports this determination. The IR35 legislation seeks to ensure that workers are paying the right amount of tax relevant to their worker status, and thus with the responsibility to determine status sitting with us, we are committed to making an accurate determination, not seek out tenuous loopholes in legislation, and ultimately to operate within the law. There is a 12 month penalty holiday contained within the legislation to ensure businesses will “not have to pay penalties for inaccuracies in the first 12 months relating to the off-payroll working rules, regardless of when the inaccuracies are identified, unless there’s evidence of deliberate non-compliance”. For some organisations, this may be perceived as an opportunity to defer implementation for a further 12 months, but for us, the status determination is clear. As a provider of public services funded by the public purse, we believe we have an inherent duty to act responsibly.

This is not a difficult decision, but the consequences are challenging. Engaging social workers on inside IR35 terms means that their tax burden has increased and their take-home pay is reduced. Additionally, the way that they are able to treat the expenses they incur has changed, i.e. they cannot manage their travel and accommodation expenses through their limited company. Thus engaging workers on inside IR35 terms is less favourable to them, as their tax burden increases, but this is ultimately the purpose of the legislation for deemed employment.

At Xyla, we wanted to share this with you to give a provider perspective and explain how we as an organisation will interpret and implement the IR35 legislation. Should you choose to engage with us to support the provision of children’s services either now or in the future, we hope it is clear from this note that we are purpose-led, quality-focused, and that we are committed to operating in the right way.

If you have any questions or queries, please do not hesitate to contact us at info@xylaservices.com.

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Xyla is a trading name of ICS Operations Ltd (Registered No 4793945), Pulse Healthcare Limited (Registered No 3156103), Carehome Selection Limited (Registered No 3091598), Independent Clinical Services Limited (Registered No 4768329) and CHS Healthcare Software Limited (Registered No 11582111)