The association surveyed some 1500 professional recruitment members to determine how their clients have been impacted by changes to off payroll IR35 legislation. The majority supply contractors into central and local government and non-medical, non-clinical healthcare.

The findings show that 45% have witnessed the costs of resourcing contractors increasing since the new rules were introduced. Of these, 46% reported that rate rises were in excess of 15%.

As well as increasing spend, public sector organisations are also having to contend with shrinking talent pools, with the majority (70%) of respondents reporting that contract numbers in the public sector have decreased since April 2017.

In April 2016, more than 50% of APSCo respondents said that over 75% of their public sector contractors were working through their own personal services company (PSC). By August 2017, this figure had dropped to 20%. In contrast, 82% of recruiters reported a rise in the use of contractors employed via umbrella companies.

When asked about their perceptions of how public sector organisations are managing changes, over half (51%) said that clients have not got access to the tools and expertise necessary to make the correct determination about their status under IR35, while 43% said that, in their opinion, the HMRC employment status tool does not generally produce reasonable status decisions.

Samantha Hurley, director of operations at APSCo, said: ‘As we feared, it seems that these changes have had an adverse effect on the supply of contractors to the public sector.

The increase in rates which has been noted can be attributed to two factors: the scarcity of resource created by candidates moving into the private sector and the market adjusting by passing on additional tax and NI costs to the public sector client.

‘As APSCo warned, it would appear that HMRC’s calculations of anticipated savings, which didn’t take into account additional expense to the public sector, will be over ambitious.’

Report by Pat Sweet