Tax changes coming into force next week risk triggering a shortage of agency social workers in parts of the country with councils in rural areas likely to struggle most, experts have told Community Care.
Changes to so-called ‘IR35’ rules from April 6 will bring most agency contractors’ tax affairs in line with permanent staff. Most will have income tax and National Insurance deducted at source as opposed to being able to claim lower tax rates by setting themselves up as limited companies, as many are now.
Agencies have claimed public sector contractors could see their take-home pay cut by up to 20% as a result of the reforms. The changes also mean agency staff will no longer be able to deduct expenses such as fuel and accommodation costs if they travel for work.
Councils hope the changes will encourage more agency staff to take up permanent roles by closing the gap between staff and agency earnings. But recruitment experts said councils in rural areas, or those seeking to draft in staff in the wake of a poor Ofsted judgment, could struggle to draft in temporary social workers from other areas.
“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, said 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.”
Community Care interviewed 20 agency social workers about the tax reforms. Five said they would stop considering long-distance jobs due to additional costs.
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 local authorities will lose a lot of experience – people who can go in and hit the ground running.”
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.”