Next week, as the new financial year kicks off on 6 April, tax reforms will come into effect that are set to shake up the recruitment marketplace for agency social workers.
Changes to so-called ‘IR35’ rules mean agency workers who had previously enjoyed the freedom to operate via their own limited companies, lowering their tax liabilities and enabling expenses to be offset against earnings, will instead mostly be taxed at source like their permanent colleagues.
Research published by Community Care last month found the number of social workers preferring locum work is on the increase. But councils are hoping the narrowing of the take-home pay gap between agency and staff jobs will help encourage social workers to rejoin their payrolls.
We spoke to 20 social workers at various stages in their careers, most of whom work in children’s services where demand for agency staff has been greatest, to find what the reforms will mean for them.
‘The money isn’t as fantastic as everyone thinks’
Every worker we interviewed said that despite agency pre-tax hourly rates remaining higher than for staffers, the incoming changes would have an appreciable impact on their personal situation.
“While on paper the money looks excellent compared to being permanent, it’s not actually as fantastic as everyone thinks once you factor in no holiday pay and no sick pay,” said one child protection manager who is shortly to take time out to deal with her own serious health issues.
She and others also pointed out that agency workers may spend hundreds or thousands annually on training and professional development.
People offered a range of motivations for sticking with agency work. Some had left permanent jobs as a reaction to stress or ill-health, poor management or bullying.
More than one of this group described being a locum as offering a mental ‘get-out-of-jail card’. This didn’t necessarily mean walking out of stressful or unpleasant placements, social workers said, but just knowing that it was their choice whether to extend them or not, and that they could take a break in between times. In some cases people said this had kept them in careers they might otherwise have left.
Others had financial reasons beyond the obvious ones; for example, because they had relied on the higher take-home pay as a means to manage debts or family outgoings, or to juggle work with carer’s responsibilities. Many cited the variety offered by agency work as its ongoing appeal, with several pointing out that this made them more rounded social workers, better equipped to solve problems because of knowledge picked up from doing the rounds.
“We bring a wealth of experience from working in many different local authorities and teams,” said one experienced children’s social worker. “We have the opportunity to see what works well and what doesn’t. We see situations with a clear, independent eye and are able to critique teams and share experiences.”
‘I’d rather sit in a typing pool than go permanent’
For some the prospect of returning to permanent employment is still tempting, especially younger workers on placements with employers they like.
“I’ve been fortunate to work in local authorities that have treated locums as equal to permanent staff; due to this I am now considering going permanent myself,” said one mother-of-two, who explained that benefiting from the tax breaks available so far to agency workers had meant the difference between getting on the property ladder or not.
But far more social workers said they had no intention of re-entering local authority employment and would be weighing up their options in light of the IR35 changes. A handful of older interviewees said they were now looking to bring their social work careers to a close, either to retire early or to look at alternative work.
“I will never return to permanent employment – I would rather sit in a typing pool with no stress,” said one social worker with 20 years’ experience.
Most people we spoke to, though, said they would be continuing, but would be cutting their cloth accordingly.
Five of the 20 interviewees said categorically that they would stop considering long-distance jobs, because they would no longer be able to set the expenses of travel or accommodation against their taxes. Some of these social workers had previously been travelling dozens or hundreds of miles to work, often to councils suffering severe staff shortages or Ofsted-related crises. One senior manager said she paid £500 a week in hotel expenses in order to work at the other end of the country.
“I certainly wouldn’t work far away from home again,” said another manager in her fifties working in a learning disability team. “[The changes] will be a big loss to the sector, as [needy] local authorities will lose a lot of experience – people who can go in and hit the ground running.”
‘Some councils will find this tough’
The picture of seasoned social workers potentially withdrawing or restricting their services was echoed by agency representatives we spoke to.
“Many of our locums have weighed their options due to the IR35 reforms, but we haven’t seen a notable increase in those deciding to take up permanent positions,” said Debbie Smith, chief executive of Caritas Recruitment.
“Rural-based local authorities will also certainly find it more challenging to attract locums, now contractors’ net earnings are decreasing and they’ll be unable to offset travel and accommodation expenses.”
Sarah Kay, director of recruitment at the Taylor Davenport agency, told Community Care the situation could become comparable to the crisis in the domiciliary adult care sector, where companies have handed back contracts because council fees have been too low.
“We predominantly work with local authorities in remote areas and under improvement – lots of our staff work all over the country,” she said. “Without being able to claim expenses they have said they will look for work closer to home.”
Kay added that her candidate numbers had dropped by about 10%, because many social workers are unhappy with local authorities applying a ‘blanket’ approach and placing their entire agency workforce within IR35.
In some cases such decisions contradict the results of an online tool developed by HMRC to act as a guide to individuals’ status, adding to people’s disillusionment. “Some workers are saying, ‘This won’t stick – it’s unlawful; unethical,’ and are taking a few months off to see what happens,” she said.
Kay and Smith said they could see regional memorandums capping agency pay becoming strained if shortages of experienced workers intensify. Both said they could foresee councils having to consider offering travel or accommodation funding as sweeteners. But, Kay added, the extreme budget pressures many councils find themselves under make such measures far less straightforward than they would have been a few years ago.
‘We anticipate changes in the pattern of agency work’
We contacted a number of local authorities to ask about their preparations for the IR35 changes, and whether they are looking at offering incentives to stop contractors leaving. A spokesperson for Northamptonshire council, which for the past two years of published statistics has relied on agency staff to fill half its social work posts, would only say that the authority is “currently looking at the impact of this legislation”.
Jo Davidson, workforce lead for the West Midlands Association of Directors of Children’s Services (ADCS), acknowledged that agency workers in the region had raised concerns about their ability to work at longer distances from their homes.
“We anticipate some changes in the pattern of agency work – more people working closer to home for example,” said Davidson, also the director for children’s wellbeing at Herefordshire council, which reduced its agency quota from 30% to 14% between 2015 and 2016.
“This may have a short-term impact, but the longer-term plan is to continue building the resilience of the permanent workforce and reduce the need for the scale of agency workers seen in recent years.”
Commenting on the possible national implications of the tax reforms, Rachael Wardell, chair of the ADCS workforce development policy committee, said many councils faced very different scenarios and so were making contingency plans to manage local impacts.
She added that she anticipated regional memorandums being updated to “mitigate any destabilising effect on the market, and to continue to bear down on costs”. Local authorities, said Wardell, are “not in a position to pay higher rates to compensate the loss of earnings some social workers may experience” as a result of IR35 changes.
Wardell agreed some workers may leave the profession altogether, but said she felt the narrowing of the pay gap between permanent and agency staff would ultimately lead more workers back into the local authority fold, at least in some regions.
“That being said, most social workers value the flexibility and work life balance offered through agency work over the money and we hope that committed social workers would remain in the profession despite these changes.”